ZACKS·2026-02-19 15:46Core Insights - Meta Platforms (META) is enhancing its AI capabilities through a multi-year partnership with NVIDIA, aimed at building data centers optimized for AI training and inference, as well as improving its core business [1] - The integration of AI is expected to create the world's largest personalization and recommendation systems for META's 3.58 billion users [1] - META's AI strategy is driving user and advertiser engagement across its platforms, including Facebook, WhatsApp, Instagram, Messenger, and Threads [3] AI Integration and User Engagement - META's AI integration is expected to enhance user experience and engagement, with a significant increase in daily active users generating media, which tripled year over year in Q4 2025 [4] - The company is focusing on personalization through AI to better understand user interests and preferences, which is anticipated to improve content relevance across its platforms [4] - META is testing a business assistant powered by AI for advertisers, aimed at optimizing campaigns and providing account support [4] Advertising and Revenue Growth - The improved AI ranking system is benefiting META's advertising business, with a strong pipeline of ad opportunities on Threads and WhatsApp Status [5] - META plans to optimize ad formats and performance before increasing supply, leveraging its Andromeda ads retrieval engine across multiple platforms [5] - The consensus estimate for META's 2026 revenues is projected at $247.15 billion, indicating a 23% growth from 2025 [11] Capital Expenditure and Financial Outlook - META is planning significant capital expenditures between $115 billion and $135 billion in 2026, which may pressure free cash flow [6] - The company is expected to face challenges from a competitive advertising market and regulatory issues, which could impact its share price in the near term [6] - Operating expenses for 2026 are anticipated to be between $162 billion and $169 billion, potentially affecting earnings prospects [12] Stock Performance and Valuation - META shares have decreased by 7.4% over the past 12 months, underperforming the broader technology sector [7] - The current price-to-sales (P/S) ratio for META is 6.42, which is higher than the industry average of 3.86 [14] - META holds a Zacks Rank of 3 (Hold), suggesting that investors may want to wait for a more favorable entry point [15]