Key Moments
- Bank of America raised its price target on Meta Platforms (NASDAQ:META) to $845 from $810 and reiterated its buy rating.
- Meta reported third-quarter revenue of $64.6 billion, with advertising revenue of $63.1 billion, both beating analyst estimates.
- BofA now projects 2027 revenue of about $319 billion but expects higher AI-related spending to push 2027 free cash flow to roughly negative $33 billion.
Price Target Increased on Expanding AI Monetization
Bank of America has turned more upbeat on Meta Platforms as the company’s artificial intelligence strategy opens new revenue channels beyond its traditional advertising base. The firm lifted its price target on the social media giant’s stock to $845 from $810 and reaffirmed Meta as one of its preferred AI exposure ideas, while maintaining a buy rating.
The updated view reflects Bank of America’s conviction that Meta’s AI initiatives are not only reinforcing its advertising engine but also laying groundwork for additional monetization opportunities in consumer and enterprise markets.
Third-Quarter Results and Outlook Beat Expectations
Bank of America’s revision comes on the heels of Meta’s third-quarter performance, where revenue reached $64.6 billion, an increase of 26% year over year and ahead of analysts’ expectations of $63.3 billion.
Advertising revenue came in at $63.1 billion, topping estimates of $61.7 billion. Growth excluding foreign-exchange effects also registered at 26%, despite facing more challenging comparisons with the prior year.
Meta guided for fourth-quarter revenue in a range of $73 billion to $76 billion, surpassing the Wall Street consensus estimate of $73.6 billion at the midpoint of its outlook.
| Metric | Reported/Guided | Consensus/Estimate |
|---|---|---|
| Q3 Total Revenue | $64.6 billion | $63.3 billion |
| Q3 Advertising Revenue | $63.1 billion | $61.7 billion |
| Q4 Revenue Guidance | $73 billion – $76 billion | $73.6 billion |
AI Driving Engagement and Advertising Performance
According to Bank of America, Meta’s spending on AI is already paying off in its foundational business. The firm said that AI tools are enhancing the quality of content recommendations, sharpening ad targeting, and boosting advertiser returns, which in turn supports revenue expansion.
The report pointed to rising engagement across Instagram, Facebook Reels, and Threads, and argued that deeper deployment of large language models could further amplify Meta’s advertising growth trajectory over time.
Muse and Enterprise AI Seen as Emerging Growth Engines
Beyond core ads, Bank of America highlighted new revenue prospects associated with Meta’s Muse AI assistant and its enterprise-focused AI offerings. The brokerage said Meta is working on monetization options that span subscriptions, ads, commerce transactions, and business-facing services such as API licensing and coding agents.
Bank of America believes these initiatives could start adding incremental revenue in 2027. Management is targeting more than 1 billion Muse users over time, and the report noted that Muse had already exceeded 10 million setups in the United States and Canada in roughly six weeks after its launch.
Revised Long-Term Estimates and Cost Implications
Reflecting the anticipated contribution from AI-related businesses, Bank of America raised its 2027 revenue forecast by 1.3% to approximately $319 billion. However, it cut its 2027 adjusted earnings projection to $34 per share from $34.24, citing the expense of scaling Muse and building out enterprise AI capabilities.
The firm expects Meta’s cost base to climb significantly as it expands AI infrastructure. It projects 2027 capital expenditures of about $210 billion and anticipates free cash flow turning negative by roughly $33 billion in that year.
| 2027 Metric | Previous BofA Estimate | Revised BofA Estimate |
|---|---|---|
| Revenue | – | About $319 billion |
| Adjusted EPS | $34.24 | $34 |
| Capital Expenditure | – | About $210 billion |
| Free Cash Flow | – | Approximately -$33 billion |
Third-Quarter Earnings Impacted by Legal Charge
Meta reported third-quarter earnings per share of $3.83, which was below the consensus estimate of $5.52. Bank of America noted that the shortfall was partly due to a one-time legal settlement charge of $9.9 billion.
The brokerage said that, excluding this charge, Meta’s profitability was stronger than it appeared in the headline number, helped by research and development costs that came in lower than expected.
Valuation, AI Visibility, and Key Risks
Bank of America argued that improving clarity around AI monetization may bolster investor confidence in Meta’s long-term returns. At the same time, the firm flagged several risks, including escalating infrastructure investments, the possibility of capital raises, competitive pressure from OpenAI and Google, and the potential for additional legal or regulatory outlays.
Despite these uncertainties, the brokerage views Meta’s current valuation as compelling relative to its growth profile. It also believes the market is not yet fully reflecting the possible value embedded in Meta’s AI models, agent-based systems, and enterprise-oriented services.
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