This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Key Points
- Meta's second-quarter revenue growth rate accelerated, on top of an already strong Q1.
- Heavy infrastructure spending may cap margins near term, but it supports a multi-year growth runway.
- Given Meta's momentum and profitability, there's a clear path to a good return for the stock over the next five years.
Shares of Meta Platforms (NASDAQ: META) have surged since late July's earnings update, fueled by the social media specialist's stronger-than-expected quarter and upbeat revenue guidance. No wonder Wall Street is piling into the stock. There's a lot to like. The Facebook, Instagram, and WhatsApp parent is leaning hard into artificial intelligence (AI) across products and ads, while returning significant sums of cash to shareholders via dividends and buybacks.
But can the growth stock's momentum continue? I think so. But where exactly could shares end up in five years?
Incredible business momentum
In the second quarter of 2025, Meta's revenue rose 22% year over year to $47.5 billion, with operating margin expanding to 43% and diluted earnings per share up 38% to $7.14. Ad impressions increased 11% and average price per ad rose 9%. Free cash flow was about $8.6 billion, even as capital expenditures climbed to more than $17 billion. Adding to the growth story, this was an acceleration from an already strong Q1, when revenue grew 16% and earnings per share jumped 37%.
In addition to growing rapidly, the cash-rich company is shareholder-friendly. Meta is returning a lot of cash to shareholders. In the second quarter, the company repurchased approximately $9.8 billion of its stock and paid $1.3 billion in dividends. And the balance sheet ended the period with over $47 billion in cash, cash equivalents, and marketable securities, providing ample flexibility to keep investing in AI and returning capital.
Looking ahead: Where is Meta's stock price headed?
With so much momentum and such a strong business, shares are likely headed meaningfully higher over the next five years. But how much higher?
The investment debate centers on two moving pieces: earnings growth and the multiple the market will pay for those earnings. A practical five-year framework for forecasting Meta's stock price in 2030 is to start with trailing-12-month earnings per share of $27.62 and grow it 10% to 15% annually through 2030. That range bakes in robust ad demand and AI-driven product improvements, while acknowledging that heavy infrastructure outlays could cap margin expansion for a while. Using that range, 2030 earnings per share would land roughly between $45 and $56.
What multiple should those earnings command? If Meta sustains double-digit revenue growth, a mid-20s price-to-earnings ratio feels reasonable. Put a multiple of 24 to 26 on that earnings per share range, and you get a rough 2030 stock-price band of about $1,080 to $1,460 per share, with a midpoint around $1,270 using 12% annualized earnings-per-share growth and a price-to-earnings ratio of 25. Based on Meta's stock price at the time of this writing, that would imply compounded annual returns in the high single digits to low teens over the next five years. That's a forward-looking estimate, not a promise -- but it shows how modest assumptions can still produce attractive outcomes.
There are real risks. Management now expects 2025 capital expenditures of $66 billion to $72 billion and has cautioned that 2026 expense growth will likely run above 2025 as depreciation on new infrastructure ramps and technical hiring continues. That can pressure near-term operating margin. Further, regulatory overhangs are also non-trivial, including potential changes to ad experiences in Europe under the Digital Markets Act. Finally, any macro slowdown that hits ad budgets would add volatility and potentially weigh on earnings and the stock price's potential.
Even so, the core story is intact: Meta's ads business keeps compounding, AI upgrades continue to improve relevance and advertiser performance, and the company is building what Meta CEO Mark Zuckerberg calls "personal superintelligence." If earnings per share compounds in the low-teens and the market remains willing to pay a mid-20s price-to-earnings multiple, Meta's long-term math works. The path won't be linear. But the destination looks compelling.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
