Meta’s AI Boom Fuels Stock Rally, 680% Surge Since 2022

Meta Platforms’ journey from Wall Street skepticism to market darling represents a dramatic reversal of fortune. In 2022, META stock had plummeted 76% from its peak as CEO Mark Zuckerberg poured billions into the Reality Labs segment, betting heavily on the Metaverse concept. During this period, the company’s core Family of Apps segment showed declining growth with monthly active users turning negative, while younger demographics increasingly favored competitors like TikTok and Snapchat. The turning point came in November 2022, coinciding with ChatGPT’s release, when Zuckerberg shifted investment priorities from Reality Labs to artificial intelligence.

The strategic pivot proved immediately successful with Wall Street. META stock began its remarkable recovery from a low of $90 per share in November 2022, ultimately surging over 680% as AI investments began paying dividends. The narrative shifted from questions about whether Zuckerberg could stop the financial bleeding to how large Meta’s AI competitive advantage could become. This transformation underscores how quickly market sentiment can change when a company successfully redirects its resources toward emerging technological opportunities.

Meta’s July 30 release of second-quarter 2025 financial metrics demonstrated the tangible benefits of the company’s AI investments. Revenue reached $47.5 billion, representing 22% year-over-year growth and exceeding consensus estimates by $2.8 billion. The advertising business showed particular strength, with ad impressions rising 11% and the average price per ad increasing 9%, indicating that AI-powered targeting and optimization are delivering value to advertisers.

Beyond top-line growth, Meta’s operational efficiency improved significantly. Margins continued their upward trajectory, and even the previously troubled Reality Labs segment narrowed its losses to $4.5 billion. The Ray-Ban Meta glasses, when paired with AI capabilities and digital displays, are emerging as potentially powerful devices finding new market niches. Management’s third-quarter revenue guidance of $47.5-50.5 billion suggests confidence in maintaining approximately 20% year-over-year growth, with analysts increasingly modeling earnings per share closer to $7 rather than the consensus $6.62.

Meta’s commitment to building a sustainable AI advantage extends beyond immediate financial results. The company recently announced a $14.2 billion infrastructure partnership with CoreWeave that will significantly boost its AI cluster capabilities. This substantial investment in computational infrastructure positions Meta to compete effectively in the rapidly evolving AI landscape and suggests the company views AI as a long-term strategic priority rather than a temporary initiative.

User adoption metrics further validate Meta’s AI strategy. The company’s AI assistant has already crossed 1 billion active users, demonstrating rapid integration into Meta’s ecosystem of products. This massive user base provides valuable data for refining AI models and creates opportunities for monetization through improved advertising targeting, customer service automation, and enhanced user experiences. The scale of adoption suggests that AI features are resonating with Meta’s global user base across Facebook, Instagram, WhatsApp, and other platforms.

Despite the substantial stock price appreciation, Meta’s valuation remains reasonable by technology sector standards. At 25.7 times earnings, or approximately 25 times when adjusting for excess net cash, the company trades at a multiple that appears justified given expectations for approximately 16% annual revenue growth in coming years. Earnings per share are projected to grow around 11.6% annually, impressive for a company of Meta’s maturity and scale.

Analyst sentiment reflects optimism about Meta’s continued momentum. The average price target of $853 implies 20.2% upside potential from current levels, while the most bullish projections reach $1,100 per share, suggesting the stock could achieve these levels next year if AI continues to boost financial performance. Even if Meta merely meets rather than exceeds analyst expectations in coming quarters, the combination of solid growth and reasonable valuation suggests satisfactory returns for investors. The upcoming October 29 earnings call will be closely watched for confirmation that the positive momentum from the second quarter is continuing into the critical holiday season.