Meta Platforms (META) reported strong Q2 earnings with sales up 22% to $47.5 billion and operating margins rising to 43%. Capital expenditures for 2025 are expected to reach $69 billion. The firm’s ad business continues to generate billions in free cash flow, supporting its AI ambitions. Fair value estimate raised to $850.

Investors remain confident in Meta’s ad business resilience despite macro headwinds. AI tools drive higher engagement and monetization on platforms like Instagram and Facebook. Meta’s strategic use of AI tools has led to increased time spent on platforms and higher conversion rates for advertisers. Shares are viewed as marginally undervalued.

Meta’s expansion into Threads and WhatsApp for ads aims to boost sales. Fair value estimate for Meta stock is $850 per share with a 14% sales growth forecast. Strong monetization potential in Asia and other regions. Reality Labs sales expected to grow, but ad business remains the primary driver of intrinsic value.

Meta’s economic moat is rated wide due to intangible assets and network effect. Financially strong with $78 billion in cash and cash equivalents. Uncertainty rating is high due to investments in unprofitable ventures. Regulatory risks and ESG concerns related to data privacy and mental health impact are noted.

Bulls praise Meta’s advertising business growth, improved algorithms, and access to high-quality user data. Opportunity for ad inventory growth and monetization on new features like Threads and Stories. Bears caution about high investments in AI, regulatory risks, and dependency on Chinese ad spending.

Read more at Morningstar: After Earnings, Is Meta Stock a Buy, a Sell, or Fairly Valued?