Is Meta Platforms (META) a Buy at Current Levels Amid Heavy AI Spending?

In the ever-evolving landscape of high-growth tech stocks, identifying value-at-a-dip opportunities requires a nuanced understanding of both financial fundamentals and strategic positioning. Meta Platforms (META), the parent company of Facebook, Instagram, and WhatsApp, has emerged as a focal point for investors weighing the merits of its aggressive AI investments against its current valuation. With a 26% year-over-year revenue surge in Q3 2025 to $51.24 billion-exceeding analyst estimates-Meta's financial performance appears robust, yet its profitability is under pressure from soaring costs and capital expenditures tied to AI infrastructure. This article evaluates whether Meta represents a compelling value-at-a-dip opportunity, dissecting its financials, AI-driven growth strategy, and competitive positioning.

Financial Performance: Growth vs. Profitability Pressures

Meta's Q3 2025 results underscored a classic tension between top-line momentum and bottom-line sustainability. Revenue growth of 26% was driven by a 14% increase in ad impressions and a 10% rise in average ad pricing, metrics directly tied to AI-powered ad targeting improvements. However, costs and expenses rose 32% year-over-year to $30.71 billion, including a one-time $15.93 billion tax charge. The CFO attributed the bulk of the expense growth to legal costs, AI talent acquisition, and infrastructure spending.

While Meta's operating margin dipped to 20.9% in Q3 2025 from 24.5% in Q3 2024, the company's EBITDA of $22.52 billion remains well above the Interactive Media & Services industry average. This suggests that despite rising costs, Meta's core business retains strong profitability. However, analysts caution that the $70–72 billion capital expenditure forecast for 2025-up from prior estimates-could further strain margins, particularly if AI monetization lags expectations.

Valuation Metrics: Undervaluation or Caution?

Meta's current P/E ratio of 25.78 is significantly below the industry average of 38.43, historically placing it within its 25–28 range. This discrepancy hints at potential undervaluation relative to earnings, especially given its 16.07% revenue growth in 2025 compared to peers. Analysts have assigned a wide fair value range of $538.09 to $1,102.77, with the current price of $750.82 sitting above the bear case but below the top estimates.

The stock's Price-to-Sales (P/S) ratio of 8.2x, however, exceeds the industry average of 5.1x, reflecting a premium on revenue growth expectations. This duality-undervalued earnings versus overvalued sales-highlights the market's skepticism about Meta's ability to convert AI investments into sustainable cash flows. Truist and UBS have upgraded their ratings, citing AI-driven ad performance and user engagement, while Oppenheimer and RBC have downgraded, emphasizing the risk of a prolonged monetization lag.

AI Strategy: A Long-Term Bet or a Metaverse Repeat?

Meta's AI investments are central to its vision of "personal superintelligence," with CEO Mark Zuckerberg advocating for frontloading infrastructure to secure first-mover advantages. The company's AI initiatives have already yielded tangible benefits: generative AI features on Instagram and WhatsApp have boosted user engagement, while AI-driven ad recommendations have improved targeting efficiency.

Yet, the specter of the metaverse looms large. Meta's $50 billion investment in metaverse infrastructure over three years yielded minimal revenue, prompting investor backlash. Critics argue that AI spending could follow a similar trajectory, with high upfront costs and uncertain returns. However, Meta's CFO has emphasized that excess computing capacity could be repurposed to enhance core operations, mitigating some of the risk.

Competitive Positioning: Leading in AI, but at What Cost?

Meta's financials paint a picture of a company outperforming peers in key metrics. Its Return on Equity (ROE) of 9.05% dwarfs the industry average of 1.39%, while its EBITDA of $22.52 billion and gross profit of $42.04 billion are far above competitors. These figures underscore Meta's ability to scale efficiently despite rising costs.

However, its Price-to-Book (P/B) ratio of 6.8x and P/S ratio of 8.2x are higher than those of peers, indicating a premium on assets and sales growth. This premium is justified by Meta's aggressive AI roadmap, but it also amplifies downside risk if execution falters. The company's lower debt-to-equity ratio (0.26) compared to competitors provides a buffer, but it remains to be seen whether this financial flexibility will offset potential AI monetization delays.

Conclusion: A Calculated Bet for Patient Investors

Meta's AI strategy is a long-term play, and its competitive advantages in ad tech and user engagement provide a foundation for future gains. Investors willing to tolerate short-term margin pressures for potential long-term rewards may find META compelling at current levels. Yet, the stock's success will hinge on whether Zuckerberg's "superintelligence" vision can replicate the ad-driven dominance of the past.