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12 October 2026
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Once known as Facebook on the stock market, Meta’s change of name encompasses its evolution from a social media company into an advertising and artificial intelligence infrastructure giant.
With billions of users across Facebook, Instagram, WhatsApp and Messenger, the company is investing heavily in AI and virtual reality technologies to drive growth over the next decade.
However, not all is rosy in the garden. Meta recently agreed to pay up to $18 billion to settle US claims that Facebook violated privacy laws and deliberately made its platforms addictive for young users.
The agreement includes changes to how minors use Facebook and Instagram, including a default two-hour daily limit and a ‘Night Mode’ that blocks access between midnight and 6am.
Meta’s smart sunglasses have also raised privacy concerns due to their covert recording capabilities, data harvesting for AI training and a lack of consent from bystanders.
The backlash against Meta’s business methods has been a constant thorn in the company’s side, but so far, such allegations and fines have not slowed sales growth or dented Meta’s huge user base. Meanwhile the company continues to develop new products and services.
Muse charms users to top the AI charts
The release of Meta’s new shiny AI agentic chatbot, Muse has received an overwhelmingly positive response.
Within 10 days of launch on 8 September, Muse became the number one free iPhone app in the US, overtaking ChatGPT. According to Apptopia, Muse was installed 2.8 million times globally during its first 12 days, exceeding ChatGPT’s early mobile adoption when measured on a comparable basis.
How does Meta expect to make money from Muse?
Bank of America analysts wrote: “We think investors were concerned about Meta’s ability to build a differentiated AI product, but have been positively surprised with agentic functionality, driving more optimism on Meta’s potential AI investment returns”.
CEO Mark Zuckerberg believes Meta can monetise Muse by taking a small fee from transactions initiated by the agent. The company has added support of PayPal and announced integrations with retailers including Walmart, Best Buy, The Gap and others.
Meta is rolling out plans take control of the Mac computer on behalf of users. Muse is also coming to Meta’s virtual reality glasses so users can speak to Muse on the go.
The upcoming Muse Charm is a dedicated handheld device which allows users to speak to Muse without the need for a smartphone or VR glasses.
Privacy concerns linger
Early reviews suggest Muse’s functionality is resonating with users, particularly the agent’s ability to execute multi-step tasks with limited user intervention. (Think of getting Muse to find the cheapest broadband deals and negotiating with other chatbots).
However, there are broader privacy and trust concerns with some users feeling uneasy about granting the agent access to personal information, according to TechRadar.
Meta is betting that users who have for years given the company access to their social connections, interests, conversations and behavioural data will also be willing to give AI increasingly intimate access to their lives.
How does Meta make money?
Advertising contributes 98% of Meta’s overall revenue, driven by the attraction of reaching 3.6 billion daily active users across Facebook, Instagram, Messenger, WhatsApp and Threads.
Meta has been adopting AI to improve ad targeting and recommendations which management recently claimed has increased ad conversions on Instagram by around 5% and conversions on Facebook by roughly 3%.
Advertising revenue increased by 28% in the second quarter to $60.8 billion and analysts are projecting annual growth between 19% and 25% in the upcoming quarter.
Revenue from Meta’s family of apps has reached just of $1 billion for the first time, up 73% driven by WhatsApp paid messaging and subscriptions.
Finally, Meta generates hardware sales from its Reality Labs division, which was deeply loss making to the tune of $4.6 billion in the second quarter of 2026.
How has Meta’s pivot towards AI impacted margins and cash flow?
Historically, Meta has generated healthy operating margins and thrown off oodles of free cash flow, reflecting the company’s asset light business model.
That changed when Meta’s pivoted towards AI. For example, the company was generating free cash flow margins against sales of around 32% in 2023 (sales of $135 billion and free cash flow of $43 billion).
This has subsequently halved to 16% in the year to the end of June 2026. Meanwhile, invested capital has grown to nearly $300 billion from $125 billion as capital expenditures have surged.
Analysts are forecasting 2027 capital expenditures of around $200 billion, which would imply negligible or even negative free cash flows, before free cash flow bounces back strongly from 2028.
The key question for investors is whether AI spending will eventually provide an adequate payback for shareholders.
What are the key risks for Meta?
Shifting the business towards a more capital-intensive activity could result in lower profit margins and returns on capital which would imply investors paying a lower PE (price-to-earnings) ratio compared with the past 20 years.
Online safety concerns could result in wider remedies which cut teen engagement with Meta’s platforms or result in further safeguards which make it harder for them to gain access. This could threaten advertising revenues.
On the plus side, Meta already owns the world’s largest attention platform, which provides the company with an unparalleled distribution advantage.
How does Meta’s valuation compare?
Meta trades on PE ratio of 22 times expected 2027 earnings per share which is lower than the other AI data centre providers, sometimes referred to as hyperscalers, while expected earnings growth is at the top end of the range for the group.
Martin Gamble: Shares and Markets Writer
Martin Gamble is Shares and Markets writer at AJ Bell. He was previously the Education Editor of Shares Magazine. He has been with the business since 2019.
Martin graduated from the University of Kent in...