Meta July 24

Rating Company Date 24 July 2026 Buy Meta North America Reuters Bloomberg Rating Buy META.OQ META US Price target (USD) 800.00 United States Price at 23 Jul -week range 789.46 – 525.72 TMT Internet Valuation & Risks

Meta Ambitions Need Meta Scale Benjamin Black, CFA We expect Meta to deliver another strong quarter, with advertising revenue likely Research Analyst approaching the high end of guidance as improving return on ad spend continues to attract incremental budget share. Our ad checks were overwhelmingly positive, Kunal Madhukar, CFA highlighting stronger conversion performance, growing advertiser ROI, and Research Analyst sustained benefits from Meta’s AI-driven ranking, retrieval, and campaign automation investments. The macro environment also appears to have improved Benjamin Hui, Esq. from the weakness embedded in the original outlook, supporting our expectation Research Associate for revenue of approximately $60.5bn, modestly above consensus and close to current buy-side expectations which are approaching the high-$61bn range. We think Alphabet's 2Q26 results (link), especially the steady q/q growth in Search Raymond Wong Research Associate revenue and accelerating YouTube revenue, are a positive read-through for Meta.

The setup for 3Q is similarly constructive. Our investor conversations suggest the buy-side is looking for the high end of guidance to reach approximately $64bn. We think that bar is achievable if Meta sustains the recent magnitude of Key changes outperformance relative to its initial guidance, supported by improving ad Price target (USD) 810 800 -1% efficiency, continued engagement growth, with growing contributions from Source: Deutsche Bank business messaging. The broader implication is that the core business is producing sufficient growth to fund Meta’s expanding AI ambitions while preserving meaningful earnings power.

Product momentum provides a second catalyst. Meta’s release of Muse Spark 1.1, shortly after Muse Spark and (now discontinued) Muse Image, supports our view that Meta Superintelligence Labs has moved beyond rebuilding the company’s training and post-training stack and into a faster, more predictable product cycle. The next-generation model is already in training, with Meta targeting a return to the frontier by year-end. We expect a more frequent cadence of model, assistant, creative, and agent releases to create recurring catalysts while improving engagement and advertising performance across the Family of Apps.

Meta is also building more visible paths to monetize AI directly. The rollout of subscriptions across Instagram, Facebook, WhatsApp, Meta AI, and creator/business products creates recurring revenue opportunities tied to premium features, additional AI capacity, and higher-value workflows. Separately, reports that Meta is evaluating third-party compute and hosted- model services introduce a potential direct return on the company’s infrastructure investment. Raw compute sales could monetize older-generation or temporarily underutilized capacity, while a Bedrock-like API layer could establish a higher-

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quality recurring revenue stream around Meta-hosted models. Both initiatives should make the company’s AI return profile easier for investors to underwrite.

Of course, Capex remains a key debate. Prior to Alphabet recently raising FY26 capex guide, we think there were limited expectations for Meta to increase its current 2026 guidance of $125-$145bn. However, now, it is likely investors fear an increase in FY26 outlook likely may be coming, although we would point out that Alphabet's raised capex guide includes the impact of both incremental capacity adds as well as price increases, and we do not think Meta may be adding more capacity (beyond what's currently…