Meta Platforms Stock Will Beat the Market. Here's Why.

Halfway through 2025, one thing is clear: It's been another excellent stretch for Meta Platforms' (NASDAQ: META) stock. As of this writing, Meta shares are up 25% year to date, easily besting the benchmark S&P 500's total return of 6% and making Meta the top-performing stock among the Magnificent Seven.

So, will this trend continue? Let's dig into the details for an answer.

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Meta Platforms' business model is firing on all cylinders

First, let's examine Meta's core business model and how it functions. Meta operates several enormous social media platforms (Facebook, Instagram, WhatsApp) that collectively have more than 3.4 billion daily average users (DAUs). Because of this massive reach, Meta is one of the two leading platforms globally when it comes to digital advertising (the other being Alphabet, thanks to its lucrative Google search engine).

Over the past 12 months, Meta has generated $170 billion in revenue, $67 billion in net income, and $52 billion in free cash flow. Those staggering totals dwarf all but the largest companies on Earth. For example, Meta's net income of $67 billion is more than the net incomes of Goldman Sachs, Coca-Cola, and ExxonMobil -- combined.

What's more, Meta's growth rates for some key financial metrics are eye-popping, given their already enormous totals. According to consensus estimates compiled by Yahoo! Finance, sell-side analysts expect Meta's revenue to increase by 14% this year to $188 billion. By 2026, estimates place Meta's revenue at $213 billion.

Opportunities and risks ahead for Meta

Turning to the future, Meta stands to benefit from an enormous secular trend: the AI revolution. Granted, Meta has spent heavily on AI, with little tangible benefit thus far. However, that seems to be changing. The company recently announced plans to integrate AI-generated ads across its platforms, allowing brands to tailor their ad messages using AI tools.

This could represent the start of a sea change in how advertising works. If Meta's AI tools are effective, brands may begin to pull back from traditional ad agencies and instead allow Meta to produce personalized ads using AI. The company also recently announced plans to roll out advertising on its WhatsApp platform, a move that should further boost ad revenue for Meta, which generates about 97% of all its revenue from digital advertising.

All that said, Meta stock still has its risks. First, the company continues to invest heavily in AI infrastructure. Capital expenditures for the past 12 months have risen to an astronomical $44 billion, as Meta continues to load up on expensive AI hardware.

Finally, with nearly half the world's population on its platforms, legal and regulatory risks could become a growing concern for the company. Some U.S. lawmakers have questioned Meta's business practices and demanded greater insight into the company's decision-making process on sensitive issues like content moderation, human rights, and user privacy.

Is Meta stock a buy now?

In my view, yes -- Meta remains a solid buy right now. In addition to the bullish reasons noted above, Meta shares remain reasonably priced. Shares trade at a price-to-earnings multiple of just 29. That's actually below the company's 10-year average of 34. Moreover, if the company can successfully integrate AI advertising features -- as I believe it will -- its stock should get a boost as analysts revise the company's earnings potential upward. Meta remains a stock that is likely to continue beating the market for years to come.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jake Lerch has positions in Alphabet, Coca-Cola, and ExxonMobil. The Motley Fool has positions in and recommends Alphabet, Goldman Sachs Group, and Meta Platforms. The Motley Fool has a disclosure policy.