Meta's AI-Driven Turnaround: Is 2026 the Year Wall Street Forgives Zuckerberg?

Meta Platforms (META) has long been a polarizing stock for investors, oscillating between skepticism and optimism as it navigates the challenges of post-Facebook growth. In 2025, the company's aggressive pivot to artificial intelligence (AI) has reignited debates about its long-term viability. With capital expenditures projected to reach $70–$72 billion in 2025 and further increases expected in 2026, Meta is betting heavily on AI as the linchpin of its turnaround strategy. The question now is whether these investments will translate into sustainable monetization and investor trust by the end of the year.

Strategic Reallocation: From Metaverse to AI

Meta's capital reallocation strategy has shifted dramatically since 2023, with the metaverse-a once-vaunted ambition-now yielding to AI as the company's primary growth engine. According to a Bloomberg report, Meta has redirected billions in funding from underperforming metaverse projects to AI infrastructure, including data centers, GPU clusters, and talent acquisition. This shift is not merely symbolic: the company's 2026 budget planning includes a reduction in metaverse spending that could add approximately $2 per share to its earnings per share (EPS).

However, the transition has come at a cost. Meta's 2025 capital expenditures surged to $70–$72 billion, up from $39 billion in 2024. For context, the company spent $17.01 billion in the second quarter of 2025 alone according to investor reports. These figures underscore the scale of Meta's commitment to AI, even as they raise concerns about margin compression. Analysts at Baptist Research note that while metaverse budget cuts have theoretically improved 2026 EPS, the market has yet to price in these benefits, with shares trading at a discount to fundamentals.

AI Monetization: From Infrastructure to Revenue Streams

The success of Meta's AI strategy hinges on its ability to convert infrastructure investments into tangible revenue. In 2025, the company's third-quarter results highlighted early signs of progress: revenue hit $51.24 billion, a 26% year-over-year increase, driven by AI-powered ad optimization and user engagement tools. Mark Zuckerberg has emphasized AI as the "central driver of growth," with initiatives like AI chat-driven personalization slated for late 2025.

Looking ahead, Meta's monetization playbook includes several high-potential avenues. The company's Meta Business AI platform, designed to help brands automate content creation and ad targeting, is projected to generate revenue by 2026 or 2027. Additionally, AI-powered tools on WhatsApp and Instagram are enabling real-time ad optimization, reinforcing Meta's dominance in digital advertising. Analysts at Gurufocus estimate that AI-driven ad tools could contribute significantly to Meta's 2026 revenue, which is forecasted to reach $235.74 billion-a 18% increase from 2025.

Yet, the monetization path remains opaque in some areas. While Meta has raised its 2025 capex guidance to $70–$72 billion, the company has yet to clarify how its AI investments will yield returns beyond advertising. For instance, its "Vibes" platform-a new AI assistant-has not yet demonstrated a clear revenue model according to Baptist Research. This ambiguity has led to investor caution, with some analysts warning that Meta's AI spending spree could strain profitability if monetization lags expectations.

Wall Street's Mixed Signals

Investor sentiment toward Meta's AI strategy is split. On one hand, Morgan Stanley has maintained an "Overweight" rating for the stock, citing three key catalysts for a 2026 re-rating: revenue revisions, clearer operating expense guidance, and breakthroughs from the Superintelligence team. The firm has set a price target of $750, with a bullish case reaching $1,000. Similarly, William Blair has highlighted Meta as a top 2026 pick, projecting 30–35% upside using a 14x EBITDA multiple.

On the other hand, concerns persist. A report by Market Minute notes that Meta's stock has entered a bear market as investors grapple with rising capital expenditures and uncertainty around revenue durability. The company's Llama models, a cornerstone of its open-source AI strategy, have faced criticism for underperforming relative to competitors like OpenAI and Google. Additionally, Meta's 2026 capex projections-expected to exceed $72 billion-have raised eyebrows about short-term profitability.

The 2026 Inflection Point

For Wall Street to fully embrace Meta's AI-driven turnaround, the company must deliver on two fronts: execution and monetization. Execution risks include delays in AI model development, regulatory hurdles, and competition from rivals like Microsoft and Google. Monetization risks center on the ability to convert AI tools into recurring revenue streams, particularly in enterprise solutions and subscription-based services.

If Meta succeeds, the rewards could be transformative. With global AI spending projected to surpass $2 trillion in 2026, Meta's unique advantages-its vast user base, data assets, and distribution networks-position it to capture a significant share of the market. However, as SimplyWall St. cautions, "It's too late to consider Meta after its AI-fueled rally" if the company fails to demonstrate a clear path to profitability.

Conclusion

Meta's 2026 will be a make-or-break year for its AI strategy. The company has already committed to a multiyear capital reallocation, with AI infrastructure and talent acquisition as top priorities. While early signs of monetization-such as AI-driven ad tools and enterprise platforms-are promising, the road to profitability remains uncertain. Wall Street's mixed signals reflect this duality: optimism about long-term potential coexists with skepticism about near-term execution.

For investors, the key question is whether Meta can balance its aggressive AI investments with disciplined monetization. If the company can demonstrate that its AI-driven initiatives are not just cost centers but revenue generators, 2026 could indeed be the year Wall Street forgives Zuckerberg.