Meta is an interesting buy/watch candidate; AI-driven revenue growth offsets CapEx and debt concerns.

Now, we come to Meta who has seen some incredible volatility so far in 2026, but in the last year down by 22.3% and year-to-date down by 10%

and it's really not any secret what's been going on with Meta stock. There's a lot of concerns with the increased CapEx spending. For example, look at the dividend breakdown sheet.

Yes, Meta doesn't pay much in dividends, but what you really need to pay attention to is the fact that in 2025, we saw free cash flow actually decline.

In fact, if we take a much closer look at this on the free cash flow analysis sheet, we'll come over here and plug in Meta. Remember, like we stated earlier, free cash flow is simply operating cash flows minus capital expenditures and operating cash flows for Meta have continued to grow significantly in the last 3 years.

So, the core cash flows that the business is actually generating is doing exceptionally well. However, CapEx spending is growing at an even faster rate, which is why we saw a rare decrease in free cash flow from 2024 to 2025.

But, here's what's interesting. We really haven't hit the inflection point when it comes to CapEx spending for Meta yet. In fact, take a close look at what analysts are expecting.

Yes, 2026 CapEx spending will be 139.5 billion, which is pretty hard to wrap your head around, but by 2027-2028, you're looking at about $200 billion of CapEx spent.

Now, we need to put that into a little bit of perspective. So, if we jump over to our profitability sheet, what you'll see is in 2025, they generated around $200 billion in revenue.

So, essentially, they're spending almost all of their 2025 revenue by next year on capital expenditures. They are all in on the AI race. They're swinging for the fences. It's all or nothing.

Now, the reality anytime is you have increased CapEx spending, aggressive CapEx spending, aggressive investments. You can tell how the market really feels about the investment being made by looking at the bond market, something not a lot of equity investors do.

But, take a look at the spreads. We can see Meta in the gray right here. Their spreads are widening, particularly in the last month alone, as you can see right here.

Now, what is this telling us? Well, a credit default swap is like insurance against a company failing to repay its debt. So, a rising spread indicates that investors are demanding more compensation to take on that credit risk.

So, ultimately, the market is becoming increasingly less confident in the quality of Meta's debt as the company increases borrowing while committing enormous amounts of capital to AI infrastructure.

So, ultimately, that's the bad news. That's the sole reason you could argue that the market has concerns for Meta. But, what's the bull case? Well, the bull case is that Meta is still growing at an exceptional rate.

Revenue year-over-year was 27% up 27%. That's just absolutely mind-blowing, particularly for a stock that already has absolutely incredible margins, about a 82% gross profit ratio as of last year.

They have more people using the app. They're showing more ads, and they're making more per ad. They're firing on all three cylinders.

So, again, this is a scenario when you look at the sensitivity analysis, the forward-looking returns do look attractive. What you'll see is projected EPS CAGR at 14.45%.

So, here's what's interesting. Yes, they're trading below their historic market average valuation multiple, but let's just assume that they stay at that level. We'll assume despite the fact, again, they're trading significantly below their historic market averages, but even if they stay at this valuation multiple, forward-looking returns look incredibly strong.

So, yes, this tells us two things. Meta right now is a swing for a home run. This will either end up being an incredible opportunity if their increased CapEx spending, if the capital they're taking on, if they get a good ROI on this CapEx, which obviously sounds quite obvious, then the forward-looking returns are just going to be astronomical for this stock.

So, again, is Meta interesting at these prices? I actually do think it is. It's certainly a situation to watch closely, but I do think there's already signs of the increased CapEx spending, of the investment into AI are starting to pay off as we see them start to generate higher revenue per ad shown, more ads being intelligently shown.

All the while, more people are using their platforms.

If you're a dividend growth investor, keep this one on your watchlist.