1 Thing Investors Should Know About Meta's New Subscription Strategy
Key Points
Meta raised its AI spending guidance to as high as $145 billion this year.
The company recently laid off 8,000 workers due to AI costs.
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Investors are increasingly anxious about the heavy capital expenditures (capex) required for artificial intelligence (AI) infrastructure, and rightfully so. It's estimated that among tech giants, AI capex will reach $765 billion this year and grow to $1.6 trillion by 2031. Meta Platforms (NASDAQ: META) is trying to calm those nerves by launching Meta One, a tiered subscription program specifically geared toward creators and businesses that frequently use Meta AI. The move is a significant shift toward recurring revenue streams for the social media company.
One thing investors should know about this subscription strategy is that Meta is betting this will help offset hundreds of billions of dollars in planned artificial intelligence investments. Still, the math is daunting.
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Meta raised its full-year 2026 capex guidance to an astounding $125 billion to $145 billion. Revenue from Meta One could range from $4 billion to $12 billion, depending on which subscription plan users prefer. While the revenue is meaningful, it will take years to really move the needle compared to what the company plans to spend.
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Analysts from J.P. Morgan downgraded Meta to neutral due to its spending. Yes, Meta One is a smart strategy to diversify revenue, but don't expect it to fully ease pressure on the balance sheet or investor sentiment anytime soon.
Meta stock has stumbled so far this year, down more than 3% since January. Among the "Magnificent Seven" stocks, only Microsoft has underperformed Meta year to date. If the company's AI investments prove worthwhile, the stock is arguably trading at a very reasonable price for investors with a long time horizon.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy.
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