Meta Lacks The 'Deep Pool' Of Cloud Demand, Unlike Google And Amazon, Says Arete

Arete downgraded the tech giant from ‘Buy’ to ‘Neutral’ and slashed its price target for the stock to $676 from $732.

• Arete said the downgrade reflects worries that Meta’s heavy investment in AI infrastructure may begin to weigh on profitability.
• The firm said that Meta’s spending trajectory is rising quickly while revenue growth is not keeping pace.
• Meta appears to be falling behind its peers as it lacks third-party demand for its AI services. 

Meta Platforms Inc. (META) saw its rating lowered by Arete, which downgraded the tech giant on Thursday from ‘Buy’ to ‘Neutral’, citing growing concerns about the company’s ability to turn artificial intelligence spending into meaningful revenue.

The firm also slashed its price target for the stock to $676, down from a previous forecast of $732, according to TheFly. 

AI Investment Raises Profitability Concerns

Arete’s downgrade reflects worries that Meta’s heavy investment in AI infrastructure may begin to weigh on profitability, even as the company pushes aggressively into the technology. According to the firm, Meta’s spending trajectory is rising quickly while revenue growth is not keeping pace, a trend that could pressure margins. 

In its fourth-quarter (Q4) earnings report, the company said it expects to spend between $115 billion and $135 billion in 2026, significantly higher than the $72.2 billion in capital expenditure in 2025. 

“This is going to be a big year for delivering personal superintelligence, accelerating our business, building infrastructure for the future, and shaping how our company will work going forward,” said Mark Zuckerberg, Meta founder and CEO.

Meta stock inched 0.6% lower in Thursday’s premarket. On Stocktwits, retail sentiment around the stock remained in ‘bearish’ territory amid ‘low’ message volume levels. 

Rising Costs Compared With Revenue Growth

Arete believes Meta appears to be falling behind peers and lacking “the deep pool,” as companies like Google’s parent Alphabet Inc. (GOOGL, GOOG) and Amazon.com Inc. (AMZN) command a large share of third-party demand for their cloud services. While the company continues to pour resources into AI-related development and infrastructure, the firm thinks the financial returns from those efforts remain limited so far.

Arete warned that the company’s aggressive spending cycle could reverse the cost discipline Meta established after 2022, when management tightened budgets and improved operational efficiency. With a renewed push into AI, that period of streamlined spending may now be ending.

In January, Meta announced a new program called “Meta Compute” to build data infrastructure capable of producing tens of gigawatts of computing power to aid its AI ambitions.

META stock has gained over 1% in the last 12 months.  

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