Meta Platforms is doubling down on its artificial intelligence infrastructure, committing to years of heavy spending on data centers and chips. But the payoff from that investment remains uncertain, and analysts are starting to adjust their expectations accordingly.
Wedbush Securities, a well-known research firm, has raised its capital expenditure forecasts for Meta for 2026 through 2028, while simultaneously cutting its price target on the stock to $595. The move reflects a growing tension in the market: Meta is building massive computing capacity to train and run AI models, but the revenue from those efforts may take years to materialize.
What Wedbush now expects
Wedbush now projects Meta will spend $145 billion on capital expenditures in 2026, $210 billion in 2027, and $245 billion in 2028. All of those figures are higher than the firm's previous estimates. Capital expenditures, or capex, refer to money spent on long-term physical assets like servers, data centers, and networking equipment.
That kind of spending trajectory can squeeze free cash flow — the cash a company has left after covering its operating expenses and capital investments. Free cash flow is a key metric for investors because it can be used for dividends, share buybacks, or reinvestment. When a company spends heavily on infrastructure, free cash flow often shrinks in the short term.
Meta has signaled that it sees AI as a transformative opportunity, but the company has also acknowledged that monetizing those investments will take time. Unlike its core advertising business, which generates steady revenue, AI products may need to find their footing before they contribute meaningfully to the bottom line.
Why this matters for investors
For everyday investors, the key question is whether Meta's AI spending will eventually pay off. The company has a strong track record of turning big bets into profits — its massive investment in Reels and short-form video eventually boosted ad revenue. But AI infrastructure is a different kind of bet, with costs that are front-loaded and uncertain returns.
Wedbush's decision to cut its price target even while raising capex estimates suggests the firm sees higher costs as a near-term drag on the stock's value. A lower price target typically means the analyst expects less upside from the current share price.
Meta is not alone in this position. Across the tech sector, companies like Microsoft and Google are also spending heavily on AI data centers. Microsoft's recent comments helped ease some AI spending fears, but the broader pattern remains: big tech is investing billions now in hopes of capturing future AI revenue.
Investors should watch for signs that Meta's AI investments are translating into new products or revenue streams. The company has pointed to areas beyond advertising — such as AI-powered business tools, virtual assistants, and enterprise services — as potential sources of returns. But those are still in early stages.
What to watch next
Meta's next earnings report will be closely scrutinized for updates on AI spending and any hints about when new revenue might appear. The company's free cash flow numbers will also be a focus, as they will show how much the capex ramp is eating into cash reserves.
Another factor to consider is the broader economic backdrop. If interest rates remain high or the economy slows, companies may face pressure to cut spending. But Meta has signaled it sees AI as a long-term priority, not a short-term experiment.
For now, the story is one of patience. Meta is building the infrastructure for what it hopes will be the next big growth engine. Whether that bet pays off — and when — will determine how the stock performs in the years ahead.
