Key Takeaways
- Meta launched about $35 billion of common and convertible preferred stock on Monday, and shares rose after falling 9% the week before.
- Scott Galloway named Meta the likely “big winner” of the AI boom, pointing to its moats and its capital for the AI arms race.
- Meta’s ad business grew revenue to $201 billion in 2025, but this year’s spending has outrun its cash, and another $60 billion share program is planned for 2027.
- At 20x forward earnings, below its three-year average of 23x, the stock isn’t priced like an AI winner, and the 2027 spending plan in late January is the next test.
Meta Platforms (META) just launched the stock sale investors had been bracing for, and shares are up [1%] today.
The offerings come to about $35 billion, to pay for Meta’s AI build: roughly $22.5 billion of Class A common stock and $12.5 billion of mandatory convertible preferred, according to its filing. Shares slid early, then turned higher, after a 9% drop in a week on its spending plans.
And they landed the same day Scott Galloway made a call he clearly didn’t enjoy making.
On the latest episode of Prof G Markets, which he co-hosts, Galloway asked which company, three years from now, “we’ll look back and think that was the big winner of this AI boom.” His pick was Meta, which he said “has the biggest moats, has the capital to engage in this arms race.”
His own verdict: “I hate to admit it, it’s Mark Zuckerberg and Meta right now.”
The wait is over
The raise itself was no surprise. Janus Henderson’s Alison Porter told Bloomberg Tech last Thursday that “we do think this is going to be an overhang on the stock through until we see that capital raise actually occur.” She expected it “sometime in Q1.”
It came four days later.
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The ads pay for the arms race
Galloway’s point about capital starts with the ad business. Advertising brought in $196.2 billion of Meta’s $201.0 billion of revenue in 2025, and total revenue grew 70% from 2021 to 2025.
And it’s still growing fast. Third-quarter revenue rose 26% to $64.6 billion, and management guides the fourth quarter to $73 billion to $76 billion, 22% to 27% above a year earlier. Its apps reached 3.64 billion people a day on average in September.
The catch is the spending. Those ads threw off $46.1 billion of free cash flow in 2025, down from $54.1 billion in 2024 as the build ramped up.
This year, the build overtook the cash. Third-quarter capex of $34.9 billion topped operating cash flow of $32.8 billion, so free cash flow turned negative. Management guides 2026 capex to $135 billion to $145 billion, roughly double 2025’s $72.2 billion.
So Meta needs outside money. But it gets to raise it against a business that grew sales 26% last quarter, and that’s the edge Galloway is talking about.
Another $60 billion is on the way
Meta also plans an at-the-market program of about $60 billion in its new non-voting Class C stock once those shares start trading, which is expected in the first quarter of 2027. That’s up to $95 billion of new equity all told, from a company that stopped buying back stock in 2026.
So Porter’s overhang now has a size and a date: $35 billion today, and up to $60 billion more starting early next year. The cost is dilution for every shareholder, for as long as the build outruns the cash.
Still, investors were pricing in a raise of unknown size at an unknown time. Now the bill is on the table, and the stock went up on it.
The stock isn’t priced like a winner
Heading into Monday, Meta traded at 20x forward earnings, below its three-year average of 23x and well off its February 2025 peak of 29x.
That’s for normalized earnings analysts expect to grow 15% in 2027 and 16% in 2028. Cash is the slower story: consensus has free cash flow at negative $35.1 billion in 2027, roughly breakeven in 2028 and $80.5 billion in 2029.
My take: Meta’s ad business makes this raise a funding choice the company can afford, and at 20x forward earnings, investors aren’t paying much for the chance the build pays off.
Of course, the bill could still grow. Meta sets out its 2027 budget and capex plan with fourth-quarter results in late January, and consensus already has 2027 capex at $203 billion. A plan well above that would make today’s $35 billion look like a down payment.
So what is Meta stock actually worth?
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