Meta's Regulatory Risks and Market Resilience Amid Italy's Expanded Antitrust Probe

The Italian antitrust authority's expanded investigation into Meta Platforms Inc. has reignited debates about the company's ability to navigate regulatory headwinds while advancing its AI-driven ambitions. The probe, which focuses on allegations that Meta abused its dominance by integrating AI tools into WhatsApp and altering business terms for WhatsApp Business Solutions, reflects a broader global trend of intensified scrutiny of tech giants. This case is not an isolated incident but part of a pattern where regulators are increasingly applying traditional antitrust frameworks to rapidly evolving AI markets, creating both risks and opportunities for Meta's long-term strategy.

Regulatory Scrutiny and Strategic Constraints

Italy's Autorità Garante della Concorrenza e del Mercato (AGCM) is examining whether Meta's AI integration-such as embedding an AI assistant into WhatsApp-restricts competition in the AI chatbot services market. The regulator has opened a procedure for interim measures, which could force Meta to modify its business terms or AI implementation for enterprise users. If the investigation concludes that Meta violated Article 102 of the EU's Treaty on the Functioning of the European Union, the company could face behavioral remedies or financial penalties.

This probe mirrors Meta's recent legal battles in the U.S., where a federal court dismissed the FTC's antitrust case in November 2025, ruling that Meta no longer holds a monopoly in the social networking market. The court emphasized the dynamic nature of digital markets, noting that platforms like TikTok and YouTube have reshaped user behavior. While this victory provided a temporary reprieve, it also highlighted the challenges regulators face in defining market boundaries in AI-driven ecosystems.

AI Strategy: Growth vs. Cost

Meta's AI strategy remains a double-edged sword. On one hand, analysts like those at Bernstein and Goldman Sachs argue that AI is already boosting ad revenue and user engagement, with price targets reflecting optimism about long-term growth. On the other, bearish voices caution that Meta's aggressive investments in AI infrastructure-particularly data centers and research-could strain its finances. The company's Q3 2025 earnings, for instance, revealed a 26% revenue increase but also a 11% stock price drop, partly due to concerns over rising capital expenditures. CFO David Wehner has acknowledged that 2026 capex will exceed 2025 levels, underscoring the scale of Meta's AI ambitions.

The tension between innovation and cost is further complicated by regulatory uncertainty. The EU's Digital Services Act (DSA) and Digital Markets Act (DMA) could impose additional constraints on WhatsApp's AI-powered features, such as its Channels service. Meanwhile, the Italian probe adds another layer of risk, particularly if interim measures disrupt Meta's ability to monetize its AI tools for businesses.

Historical Precedents and Market Resilience

Meta's track record in regulatory battles offers a mixed outlook. The FTC's defeat in November 2025 demonstrated the company's ability to leverage judicial skepticism of static market definitions. Similarly, a July 2025 copyright ruling in favor of Meta-allowing the use of copyrighted books to train AI models-reinforced its legal defenses in AI-related disputes. These victories suggest that courts may be more receptive to arguments emphasizing the transformative potential of AI, even as regulators push for stricter oversight.

However, historical precedents also highlight the unpredictability of outcomes. Google's recent antitrust win, which averted the forced sale of Chrome, led to a sharp stock rally. Conversely, the EU's DMA has been criticized for stifling innovation, serving as a cautionary tale for overly rigid regulations. For Meta, the key will be balancing compliance with regulatory demands while maintaining the agility needed to outpace competitors in AI development.

Valuation Implications and Investor Outlook

Analysts remain divided on whether Meta's AI investments justify its valuation. Bullish reports from Piper Sandler and Mizuho highlight the company's "tangible results" in AI execution, while bearish firms like RBC Capital warn of delayed returns until 2027. The stock's recent volatility-driven by concerns over capex and a $15.9 billion non-cash tax charge-reflects this uncertainty.

Long-term investors must weigh these factors against broader trends. The Italian probe, while significant, is part of a global regulatory landscape that is still evolving. Meta's ability to adapt-whether through legal defenses, strategic pivots, or technological differentiation-will determine whether regulatory risks become existential threats or manageable hurdles. For now, the company's resilience in past cases and its dominant position in AI innovation suggest that its valuation, while volatile, remains anchored in its potential to redefine digital markets.