Shares of Meta Platforms (NASDAQ: META) have dropped over 11% following the release of their Q3 2025 earnings report. The decline continued, with shares down 19% since the report. Concerns over ad growth and AI-related expenses are impacting the stock, but the risk-reward profile suggests potential upside.

Meta’s strategic focus on AI is yielding positive results in advertising revenue growth and user engagement on platforms like Facebook and Instagram. Although AI investments in Reality Labs have yet to translate into consistent revenue growth, partnerships with companies like EssilorLuxottica show promise for future growth in AI glasses revenue.

While Meta’s AI investments come with significant costs, such as exceeding $100 billion in CapEx for 2026, historical performance suggests the company can rebound after 2026. Despite the decline in stock value, Meta’s forward P/E ratio is lower compared to other tech stocks like Alphabet and the S&P 500, indicating potential undervaluation and upside potential.

Analysts have set price targets well above Meta’s current stock price, implying around 36% upside potential. Despite concerns over increased AI spending, Meta’s strong history of generating free cash flow and the company’s valuation suggest a favorable risk-reward profile for investors.

Read more at Nasdaq: Meta’s Pain May Be Your Gain: Is This a Rare Buying Window?