Meta remains the world’s dominant social media network. Across Facebook, Instagram, WhatsApp, and Messenger, the company has a combined user base of approximately 4 billion monthly active users (MAUs). This unprecedented reach grants Meta immense market power, primarily monetized through digital advertising.
To draw an analogy: if advertising were a medieval city square, Meta would own the primary billboard at its center, while competitors offer space on quiet side streets. Merchants eager to get their products in front of the largest audience have little choice but to pay for prime real estate. The lack of serious alternatives gives Meta very high pricing power over time.
It is also remarkable how successfully Meta has coped with competition. When feasible, it neutralizes threats by acquiring rivals early. For example, Instagram ($1 billion, 2012) or WhatsApp ($19 billion, 2014). From more recent times, when the immediate short-post format of Snapchat gained popularity, Meta launched its Stories format in 2016, which kept its users from moving to another platform. The same scenario repeated with TikTok's short videos; Meta's response to this was Reels, launched in 2020.
Investment Thesis
The rise of the "vibe coding" era in early 2026 has brought a massive wave of new software startups into the market, all competing for user attention. While software companies previously dedicated the bulk of their budgets to product development, the dynamic has shifted. Today, the main bottleneck is visibility and distribution. And as founders direct the majority of their capital into marketing now, Meta stands out as the primary beneficiary.
The biggest question mark at the moment is Meta's own investment policy. The previously capital-light business model has been replaced by a highly capital-intensive one. Capital expenditure (CapEx) from two years ago has grown nearly fourfold, from $8.2 billion to $30.1 billion in the last quarter, and there is no end in sight to the spending. In Meta's case, it is important to distinguish that their core advertising business likely does not need as much additional computing power as is currently being acquired, and for this reason, renting out AI infrastructure to third parties is also on the agenda. According to Morningstar analysts, this business could bring Meta up to $40 billion annual revenue by 2030 (approx. 7% of the company's revenue).
From an investor's perspective, investments made on such a large scale are a risk; from 2026-2028, the company's free cash flow will be under strong pressure, and significant future free cash flows justifying the company's value will only begin in 2029. Nevertheless, I estimate that once the investment cycle in AI infrastructure subsides after some time, Meta will once again be one of the most powerful free cash flow-generating machines in history, and thus the fair value of the share price is $810. You can view the exact model and assumptions here.
