Meta: AI Ambition Masks Structural Decline

We initiate META at Strong Sell with $484 PT. Meta Platforms, Inc.—the builder of Facebook,

Instagram, WhatsApp and Reality Labs—has branded itself a generative AI powerhouse but our checks reveal a biz burning cash on billions of insane moonshots with no trajectory towards takeoff. Behind the billion user headlines and inane management spin cycle we see a biz trapped in the transition from legacy social apps’ waning former glory and its own reckless capital intensity severed from actual AI output. The juxtaposition is this: Meta’s claiming generative AI is surely its strength but neither usage or technical output prove it. $72B annualized capex output and $14.3B Scale AI bonfire burned, product-market fit still nowhere in sight, foundational models crashing and burning (not just technically but also 78% Llama team attrition). Spending like a generation defining AI platform, returning like a mature ad tech (or worse), forced integration to support MAU vs standalone engagement, and Reality Labs pouring $4.2B last quarter with management saying losses are about to accelerate are all signs of a biz with high outlays, low output, and little sign of return “for the forseeable furure”. Street models are in our view too high: our FY26E EPS forecast of $25.50 is approx 10% below Street factoring in material D&A structural increases from AI infrastructure, and nosedived SBC growing above rev. But a disciplined 19x P/E despite materially worse business economics and structural margin degradation from technical overreach and cost bloat is still too tolerant for a platform not remotely on pace to define the