Metaplatform’s stock price is recovering from a slump earlier this year, when investors shied away from the social media giant’s big bet on artificial intelligence. Wednesday’s results will determine whether this recovery continues. The stakes are high. The meta is in the midst of the most aggressive AI augmentation of all megacaps. In recent weeks, the parent company of Facebook and Instagram has made major computing commitments, planning investments across cloud infrastructure and custom chips. It’s all part of the company’s plan to spend up to $169 billion this year, most of which will go toward artificial intelligence. Investors are increasingly focused on whether all that spending is still paying off. So far, the market isn’t quite sure how to digest Mehta’s ambitious plans. The stock initially soared after the Jan. 28 quarter, when management expected 2026 operating and capital spending to be significantly higher than expected and account for nearly all of the company’s 2026 productivity and revenue growth. Investors instantly cheered, and the stock closed at $738. After that, the market cooled down. The stock price fell about 29% in two months, hitting $525 in late March. But the stock has since risen 28%, closing at $671 on Tuesday. Part of this rally was driven by the overall market’s recovery from the March 30th Iran war nadir, but investors also appeared optimistic about a series of investment announcements aimed at increasing Meta’s computing capabilities. The release of new AI models also contributed to sentiment. The stock price has increased about 2% since the beginning of the year. On Friday, Meta announced a multibillion-dollar partnership with Amazon Web Services to deploy AWS Graviton processors at scale, making Meta one of the world’s largest customers for Amazon’s homegrown chips. These processors support workloads related to powering your core advertising business. Earlier this month, Meta committed $21 billion to AI cloud infrastructure company Coreweave, adding to its previous $14.2 billion commitment. In March, the company signed a deal worth up to $27 billion with Dutch cloud provider Nebius. The company also plans to expand its partnership to buy Broadcom’s next-generation AI chips, as well as four silicon options for its own customers. META YTD Mountain 2026 Meta stock performance. In a well-timed note dated March 29, Morgan Stanley analysts argued that the market is too focused on AI costs and not enough on returns, noting that Meta’s business is still growing strongly despite the cheap stock price. “We believe engagement (time spent) is accelerating (from the big numbers), which gives META more time and engagement to monetize, while we believe the increase in time spent is both high quality and monetizable given the proliferation of video-based content,” analysts wrote at the time. Jim Cramer struck a similar tone at his monthly meeting in April, telling members, “I don’t like betting on Mark (Zuckerberg) when it comes to money.” He added: “It’s a recognition of the incredible talent that Mr. Zuckerberg has acquired. We used to think that was a negative. We no longer attribute that to this Muse Spark, the company’s new flagship model designed for personal intelligence.” Heading into this quarter, investors want to see further evidence that this strategy is leading to strong growth in the advertising business, better products, and higher profits. The majority of Meta’s revenue comes from advertising. Investors, including our club, will want to learn more about the effectiveness of Meta’s AI-powered advertising tools, including Advantage+, AI-generated ads, and automation. These have so far been a game changer in improving ad performance, with Reels being a big beneficiary. Last quarter, Instagram Reels watch time grew 30% year-over-year in the US, and Facebook video watch time grew by double digits. Muse Spark, Meta’s first project from the newly formed Meta Superintelligence Labs, could be the next chapter in the company’s advertising growth story and help maintain the stock’s momentum. Investors liked what they saw at first. After Meta released Muse Spark on April 8, Meta’s stock closed 6.5% higher on enthusiasm that it could improve its core advertising model and justify all its AI spending. For Meta, the LLM is at the core of its advertising growth strategy. Because AI models predict what kind of content people want to see and what products they’re interested in. LLM is an AI system trained on large amounts of data to understand language, recognize patterns, reason through prompts, and generate responses. Muse Spark is a multimodal inference model that processes text, images, and audio, and is designed for use with Facebook, Instagram, WhatsApp, Threads, and business tools. This should make Meta’s apps more appealing, advertising more effective, and accelerate the company’s revenue growth. Meta has other models that offer recommendation engines, and the company is working on integrating them. The goal is the same. Advertisers are willing to spend more if Meta serves ads that are most likely to lead users to take action, such as purchasing a product. Case in point: Threads, a text-based app linked to Instagram launched in July 2023, saw a 20% increase in time spent last quarter due to recommendation optimization. Muse Spark was founded after Meta reorganized its AI efforts under new AI chief executive Alexandr Wang, the former CEO of Scale AI. Wang is one of the AI researchers Meta hired as part of a major hiring spree last year. Spark also gives Meta an opportunity to compete with AI leaders like OpenAI and Google. Analysts at Cantor Fitzgerald argue that Meta is still in the early stages of extracting value from LLM. “Over the coming quarters, we expect META to leverage Muse Spark to deploy LLM’s inference capabilities to improve platform engagement and monetization across a variety of apps and services,” analysts said in an April 11 research note. Morgan Stanley said Meta’s “prospects for future growth from its core investments remain strong” and argued that “one of the next big unlocks is likely to be the use of LLM to analyze Meta’s key data” in 2027. Although unproven, Muse Spark has the potential to further improve Meta’s ad performance as a consumer-facing company with experience deploying LLM. The real opportunity for AI monetization through Muse Spark is getting enterprise customers to adopt LLM. Moffett-Nathanson said Meta’s move into enterprise is “uncertain and almost utopian” at this stage, but he sees enterprise as one of the clearest paths to monetizing Meta’s large AI investment through areas such as subscriptions, agents, API access and cloud services. OpenAI and Anthropic have already captured significant market share in this space, but competition to date has not prevented Meta from pursuing larger opportunities. The company needs to prove how it can translate Muse Spark’s frontier model into a reliable enterprise business. Meanwhile, another factor for Meta’s stock price is how it manages rising costs. Meta is trying to fund infrastructure construction with fewer people. Last Thursday, the company announced that it plans to cut about 8,000 jobs, or about 10% of its workforce, starting in May. Additionally, 6,000 outstanding roles will be eliminated as resources are reallocated to AI. Meta is cutting labor costs starting in the second half of 2022 in order to allocate resources to AI-related investments. “We are doing this as part of our continued efforts to help us run the company more efficiently and offset other investments we are making,” Janelle Gale, Meta’s chief human resources officer, said in a memo announcing the news to staff. While layoffs are never welcome news, Morgan Stanley called them a “bullish development” based on math. A potential 20% reduction in the workforce could save the company between $3 billion and $10 billion a year, or add $1 to the company’s 2027 earnings per share. (Jim Cramer’s Charitable Trust is a long META. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
