Advertising remains strong, but infrastructure and AI staffing costs are growing faster. I expect the next spending outlook to pull attention back from product launches to cash returns, supporting a twelve-month target of $615.57.
Key points
- $615.57 a share is my twelve-month target, reflecting persistent pressure on cash returns.
- 42% expense growth in Q2 2026 remains after excluding legal charges and severance.
- 18% revenue growth in FY2027 should still trail my forecast increase in running costs.
The call
The market looks too optimistic about the spending payoff. At 20 times FY2027 earnings, today's price requires a 38% operating margin, the share of sales left after running costs. My forecast is 33%; accepting my profit estimate instead requires paying 23 times earnings despite weak cash conversion.
Where the cash goes ($ billions)- H1 2025 reported
- H1 2026 reported
Meta June 30, 2026 10-Q, filed July 29; six-month cash flows, rounded.
Spending should outrun sales again. I forecast FY2027 revenue growth of 18%, but costs rise 21% as equipment wear, cloud bills and expensive AI hires feed through. New agents get no separate profit premium without disclosed paying-customer economics. The FY2027 spending outlook should shift attention from launches to cash returns.
Valuation
| My estimate or assumption | Value |
|---|
| FY2027 revenue | $300 billion |
| FY2027 total expenses | $202 billion |
| FY2027 operating profit | $98 billion |
| FY2027 diluted earnings | $30.78 a share |
| Twelve-month earnings multiple | 20 times |
| Twelve-month target | $615.57 a share |
Earnings include a 16% tax rate, $2 billion of net non-operating expense and 2.62 billion diluted shares across both share classes. Twenty times recognizes advertising strength but discounts weak cash conversion, dilution and expensive financing. Faster monetization could lift the multiple, but spending disappointments offer greater downside than my base case.
Higher running costs cut the twelve-month targetAnalyst scenarios: FY2027 revenue $300 billion; 20 times earnings; October 8, 2026.
Risks
- Advertising could sustain exceptional growth; watch whether impressions and ad prices keep rising together without faster costs.
- Infrastructure could deliver profits sooner; watch recognized agent revenue and margins, not registrations or subscription trials.
- Spending restraint could restore cash returns; watch equipment purchases, lease payments and whether share repurchases resume.
What would change my mind
Two consecutive reported quarters with operating margins above 38% and rising cash left after equipment purchases and finance-lease payments would overturn my spending thesis.