Is Meta Stock a Strategic Buy in 2026 Amid AI-Driven Growth and Heavy Capital Spending?

Meta Platforms (META) stands at a crossroads in 2026, balancing its historic dominance in digital advertising with a high-stakes bet on artificial intelligence (AI). The company's aggressive capital expenditures- projected to reach $70–72 billion in 2025 and likely higher in 2026-underscore its ambition to lead the AI revolution. Yet, this strategy raises critical questions: Can Meta's AI investments generate sufficient returns to justify their costs? How does its core advertising business, which accounts for 98% of revenue, interact with these long-term bets? And what risks does this dual-track approach pose for investors?

AI as a Growth Engine: Promise and Peril

Meta's AI strategy is anchored in infrastructure and monetization. The company has allocated billions to build data centers, secure computing power, and acquire talent, including a $15 billion stake in Scale AI and the recruitment of its founder to lead a "superintelligence" unit. These moves aim to accelerate development of large language models (LLMs) like Mango and Avocado, slated for 2026 release.

The potential payoff is significant. AI-powered tools such as Advantage+ have already generated a $60 billion annualized revenue run rate, with advertisers reporting a $4.52 return per dollar spent. Additionally, AI-enhanced ad targeting contributed to a 26% year-over-year revenue increase in Q3 2025. Meta is also expanding monetization into WhatsApp, leveraging ads in Status updates and Channels-a move analysts estimate could unlock multi-billion-dollar revenue streams.

However, the costs are staggering. Meta's 2025 capital expenditure guidance rose to $70–72 billion, with 2026 expected to see even higher outlays. A $27 billion AI data center in Louisiana, financed through a joint venture with Blue Owl Capital, is structured as a variable interest entity (VIE), raising concerns about transparency. Critics argue that such off-balance-sheet accounting obscures the true financial burden of Meta's AI ambitions.

Core Advertising: A Stabilizing Force

While AI investments dominate headlines, Meta's advertising business remains its financial bedrock. In Q3 2025, ad revenue surged 26% year-over-year, driven by a 14% increase in ad impressions and a 10% rise in average price per ad. Instagram Reels, bolstered by AI-driven ad tools, now generates over $50 billion in annualized revenue. This resilience highlights the enduring value of Meta's platform, which commands 67.3% of global social media ad spend.

The company's pivot to AI wearables, such as Ray-Ban smart glasses, further illustrates its strategic flexibility. After shifting resources from the loss-making Reality Labs division-which posted a $4.4 billion operating loss in Q3 2025-Meta has seen smart glass sales triple in 2025, with 4 million units projected for shipment in the same year. This reallocation of capital signals a pragmatic approach to balancing innovation with profitability.

Risk-Reward Dynamics: A Tug-of-War

Meta's AI-driven growth narrative is compelling, but its risks are equally pronounced. The company's 2025 earnings were marred by an 83% profit drop due to a $15.9 billion non-cash tax charge, underscoring the volatility of its financials. Meanwhile, its forward P/E of 22 and projected 18% revenue growth for 2026 suggest a stock priced for optimism, yet investors must weigh this against the high costs of AI infrastructure and regulatory and economic headwinds.

Competitors like Alphabet and Amazon offer contrasting models. Google, for instance, has seen a 25% increase in earnings per share in 2025's first nine months, despite ramping up AI spending. Meta, by contrast, has experienced a 19% decline in earnings per share over the same period, highlighting the divergent risk profiles of AI strategies. While Meta's aggressive approach could yield outsized rewards, it also exposes the company to overvaluation risks and operational volatility.

The Verdict: Strategic Buy or Speculative Bet?

Meta's 2026 outlook hinges on its ability to monetize AI investments while sustaining core advertising growth. The company's AI-powered ad tools and WhatsApp monetization strategies demonstrate tangible value creation, but its capital intensity and off-balance-sheet risks remain red flags. Competitors like Google may offer more conservative, yet equally viable, paths to AI-driven growth.

For investors, the decision to buy Meta stock in 2026 depends on risk tolerance. Those who believe in the long-term payoff of AI infrastructure and Meta's execution prowess may find the stock attractive, given its projected revenue growth and dominant ad market position. However, the high costs and uncertain ROI of AI projects-coupled with regulatory and economic headwinds-warrant caution. As the AI landscape evolves, Meta's ability to balance innovation with profitability will be the defining factor in its investment thesis.