Meta Platforms delivered better-than-expected third-quarter revenue, and analysts at Bank of America Securities say the results make the company's artificial-intelligence ambitions easier to put a number on — even as spending keeps climbing.
In a note to clients, BofA argued that Meta's AI story is shifting from promise to roadmap. The bank highlighted Muse, Meta's AI creation platform, where the company has set a bold milestone: reaching 1 billion users. Meta also plans to add features, expand internationally, and lower computing costs over time.
Higher revenue, but also higher costs
The near-term trade-off is a bigger bill. BofA expects Meta's 2027 expenses to jump 30% year-over-year to about $215 billion, excluding a one-time legal charge. The bank cautioned that renting extra data-center capacity could push that figure even higher.
In the same model, BofA nudged its 2027 revenue forecast up 1.3% to $319 billion, yet trimmed its 2027 earnings per share by $0.24 to $34. That reflects thinner margins while the company builds out its AI infrastructure.
That mix — higher revenue estimates but lower profit per share — helps explain why this is as much a “valuation” call as an “earnings” call.
Why the price target went up
BofA set a price target of $845 on Meta's stock, implying a richer valuation even with $34 of 2027 earnings per share. Raising a price target while cutting a longer-term earnings forecast signals that BofA thinks investors may pay a higher multiple for Meta's profits, largely because clearer AI milestones can make people more willing to look past near-term margin pressure.
In other words, the stock's story depends less on what 2027 earnings are today and more on whether AI spending is laying the groundwork for scalable new revenue.
What it means for investors
For everyday investors, this is a reminder that a company's stock price can be driven by expectations as much as by current profits. When a stock is supported by a higher valuation multiple, it can swing more on evidence that spending is paying off. Strong signals that products like Muse are gaining traction and monetizing can reinforce that re-rating, while signs that compute and capacity rental costs are becoming structural could pull the multiple back down.
Meta's situation is not unique. Many large tech companies are pouring billions into AI, and investors are trying to figure out which ones will see a payoff. The broader market has been watching AI companies like Anthropic face similar cost pressures even as revenue grows.
For Meta, the key question is whether its AI investments — including Muse — can turn into a meaningful revenue stream. The company has a history of monetizing its massive user base, and its core advertising business remains strong. But the cost of building and running AI systems is real, and it will weigh on margins for some time.
Investors should also keep an eye on Meta's capital spending plans. If the company decides to rent more data-center capacity, that could push expenses even higher than BofA's current estimate. On the other hand, if Meta can lower computing costs over time, that could help protect profits.
BofA's note is just one analyst's view, but it captures the central tension in Meta's stock right now: the promise of AI-driven growth versus the reality of rising costs. For now, the market seems willing to give Meta the benefit of the doubt, but that could change quickly if spending gets out of hand or if AI products fail to gain traction.
As always, it's worth remembering that analyst price targets are not guarantees. They are educated guesses based on a set of assumptions, and those assumptions can change. For investors, the takeaway is to understand what is driving a stock's valuation and to be prepared for volatility when that driver is based on future expectations rather than current earnings.
