Core Viewpoint - Meta Platforms is a strong company with impressive financial results, but its revenue concentration and dependence on advertising platforms suggest a lower valuation compared to its tech peers [1][2][3]. Financial Performance - In the first half of the year, Meta's revenue rose 22% year over year to $47.5 billion in Q2 2025, with income from operations increasing by 38% and an operating margin of 43% [5]. - The demand for advertising has been broad-based across various verticals and geographies, with smaller advertisers contributing to growth [5]. Revenue Concentration - Meta generates substantially all of its revenue from advertising, making it vulnerable to fluctuations in marketers' budgets, which can lead to sudden compressions in revenue and operating leverage [6][10]. - The cyclical nature of advertising spending means that during economic downturns, brands may quickly reduce their advertising budgets, impacting Meta's financial performance [6]. Platform Dependence - Meta's distribution relies on mobile operating systems and app stores controlled by Apple and Alphabet, which poses risks to its ability to target and measure ads effectively [7]. - Changes in policies by these platforms, such as Apple's App Tracking Transparency, have already negatively impacted Meta's ad performance and revenue [7]. Competitive Landscape - Meta faces significant competition for user attention from platforms like TikTok and Snap, which have rapidly gained popularity among younger demographics [8][9]. - Despite improvements in Meta's offerings, the competition for time and attention remains intense, affecting its user engagement [8]. Valuation Considerations - Given its reliance on discretionary ad budgets, dependence on external platforms, and competition, Meta's price-to-earnings multiple is expected to remain in the high-20s, lower than that of companies like Microsoft and Amazon [10][11]. - The current valuation reflects the structural risks associated with Meta's business model, which is more volatile compared to companies with diversified revenue streams [10][11].