Meta Platforms META is set to release its first-quarter 2026 earnings report on April 29. Here’s Morningstar’s take on what to look for in Meta’s earnings and the outlook for its stock.

Key Morningstar metrics for Meta Platforms

  • Fair Value Estimate: $850.00
  • Morningstar Ratings: ★★★★
  • Morningstar Economic Moat Rating: Wide
  • Morningstar Uncertainty Rating: High

Meta Platforms earnings release date

  • Wednesday, April 29, after the close of trading

What to watch for in Meta Platforms’ Q1 earnings

  • We think this will be yet another impressive quarter for advertising, with growth near 30%. According to industry researchers, 2026 may be the first year when Meta’s ad sales exceed those of Alphabet GOOGL on a net basis. 
  • We look forward to more data points on the firm’s artificial intelligence strategy and investments. We think investors should look for a clear articulation of how AI benefits the broader advertising business, whether through ad targeting, content recommendations, and/or providing tools for creatives.
  • We are also keeping a keen eye on commentary on how Muse Spark usage has tracked so far, as well as any timeline on further Muse-class models. Regarding AI, we are expecting more commentary on the firm’s custom silicon plans and their role in Meta’s overall compute fleet.
  • We think Meta stock is undervalued and see upside for investors. We see the firm as competitively well-positioned, especially as it continues to scale its AI investments to support its ads business.

Fair Value Estimate for Meta Platforms

With its 4-star rating, we believe Meta’s stock is moderately undervalued compared with our long-term fair value estimate of $850 per share, implying a 2026 adjusted price/earnings multiple of 30 times and an enterprise value/adjusted EBITDA multiple of 14 times. We forecast Meta’s sales growing at a 18% compound annual growth rate for the next five years, spearheaded primarily by an increase in average revenue per user, with user growth also chipping in.

Economic Moat Rating

We believe Meta merits a wide economic moat, due to the firm’s intangible assets and the potent network effect around its Family of Apps business. We assign a wide moat rating to this segment, which includes Facebook, Instagram, WhatsApp, and Messenger, due to its competitive advantage in data collection and advertising technology. We believe Meta’s Reality Labs business merits no moat, as the segment continues to burn capital. Still, FoA’s strong competitive advantages will likely let the firm generate returns in excess of its cost of capital over the next two decades.

Financial strength

We view Meta’s financial position as rock solid. The firm closed out fiscal 2025 with cash and cash equivalents of $82 billion, more than offsetting its debt balance of $59 billion. While the firm’s investments in AI stand to increase its capital expenditure considerably over the next few years, the firm’s advertising business remains a cash-generating machine, churning out tens of billions of dollars of free cash flow on an annual cadence.

Risk and uncertainty

We assign Meta an Uncertainty Rating of High. This reflects our belief that Meta’s investments in unprofitable ventures such as generative AI and Reality Labs add a layer of uncertainty around its business, even as its large and stable advertising business continues to generate substantial cash flows in our forecast.

We believe Meta’s considerable scale and intangible assets, such as its ad-targeting algorithms, will most likely enable the firm to maintain its dominance in the social media space. However, the firm’s high dependence on user behavior data represents an environmental, social, and governance risk if it fails to maintain adequate data privacy and security. Another pertinent ESG risk is bipartisan support in the US for increased regulation of social media platforms due to their impact on users’ mental health.

META bulls say

  • Meta’s core advertising business has benefited greatly through improved ad targeting and content recommendation algorithms, as well as a secular increase in digital advertising spending.
  • Meta’s scale, with the majority of the world’s internet-connected users accessing its applications, allows it access to high-quality user data, which it can package and sell to advertisers.
  • The firm has an opportunity to drive ad inventory growth, leveraging new products such as Threads while improving its monetization of ads on nascent features like Stories and Reels.

META bears say

  • Meta’s investments in Reality Labs and generative AI stand to cost the firm billions annually, taking some of the shine off its overall business.
  • Meta has disproportionately benefited from increased ad spending by Chinese retailers, including Temu and Shein. A slowdown in spending by these firms could hit Meta’s growth.