Down About 29%, Is Meta Stock a Buy, Sell, or Hold?

Meta Platforms (NASDAQ: META) is growing faster than it has in more than a year -- yet its stock has gone the other way, sliding about 29% from the high near $795 it set last August to about $565 as of this writing. For a company still worth around $1.4 trillion, that is a few hundred billion dollars of market value gone while the business behind it was, if anything, picking up speed. So is the stock a buy, a sell, or a hold?

To better understand the stock -- and the underlying business -- let's start with what's working, then get to what isn't.

Image source: Getty Images.

The business is accelerating

Meta's revenue rose 33% year over year in the first quarter of 2026, to $56.3 billion. That's an acceleration from 24% growth in the fourth quarter of 2025, and the company's fastest top-line growth in more than a year.

Two forces drove it. The number of ads Meta served across Facebook, Instagram, and its other apps rose 19% year over year, and the average price per ad rose 12%. Engagement is still expanding, too, with 3.56 billion people using at least one of the company's apps every day in March, up 4% from a year earlier.

And Meta's profitability improved nicely, too. Income from operations grew 30% to $22.9 billion, and the operating margin held at an impressive 41%. And the same artificial intelligence (AI) spending that has the market worried is part of what's lifting those ad numbers -- sharper targeting and ranking keep users engaged and let Meta charge advertisers more.

So if the business is doing this well, why is the stock down about 30%?

The spending keeps climbing

The answer is on the cost side, and it is climbing fast. Meta now expects to spend $125 billion to $145 billion on capital expenditures in 2026 -- a range it raised from $115 billion to $135 billion just a quarter earlier. Zoom out and the ramp is steeper still: capital spending was about $39 billion in 2024 and about $72 billion in 2025, which puts this year's budget on track to nearly double again.

And these capital expenditures are largely intended to support AI efforts -- the data centers, chips, and power needed to train and run the social media company's models.

Additionally, total expenses for 2026 are now guided at a staggering $162 billion to $169 billion.

"Our experience so far has been that we have continued to underestimate our compute needs even as we have been ramping capacity significantly," Meta chief financial officer Susan Li said on the company's first-quarter earnings call.

That is the heart of the risk. Spending on this scale only pays off if it eventually translates into faster growth or wider margins -- and that return is still unproven. Much of the money will also reach the income statement later as depreciation, a cost that can weigh on profits for years after the data centers go up.

Management has left itself some room, though. Li said the company is building with flexibility and could bring capacity online more slowly or cut spending in later years if demand doesn't materialize.

But so far the pattern has been to raise the budget, not trim it.

What keeps the stock interesting after a drop like this is that none of it looks expensive. Meta's forward price-to-earnings ratio sits at about 17, measured against analysts' consensus estimate for its earnings over the coming year (Note that I lean on the forward figure because one-time tax items have distorted Meta's reported earnings over the past year, leaving the trailing multiple less representative of the valuation of the company's regular operations). For a company growing revenue better than 30%, that is a modest price.

So, buy, sell, or hold? I'd call Meta a buy -- but a measured one. The ad business is growing fast, and the stock isn't priced for much, which makes the sell-off look more like a discount than a warning. But what keeps me from buying more aggressively is the spending: a bet this large on an uncertain payoff can punish the stock if returns disappoint or the budget climbs yet again. So I'd start small and let Meta earn a bigger position over time. The thing I'm watching is whether all this AI investment starts to show up as faster profit growth -- or just a bigger bill.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.