UBS reiterates Buy on Meta, believing that selling excess AI computing capacity may ease 2027 EPS compression risk

Overview

This is a UBS company research report on Meta Platforms Inc., focusing on whether Meta's potential sale of excess AI computing capacity or provision of AI model access could reduce market concerns about 2027 EPS compression. The report maintains a Buy rating and a US$865 target price, without adjusting earnings forecasts because of this news.

Core views

UBS believes that if Meta commercializes underutilized computing capacity or model capabilities externally, it could bring forward revenue contribution and ease investor concerns over the long AI investment cycle and the possibility that 2027 EPS may be flat or decline. However, this business has not yet been formally confirmed by the company and does not belong to the long-term opportunity themes previously explicitly identified by Zuckerberg, so some investors may worry about a shift in strategic focus.

Analysis framework

The report cross-checks the news against Zuckerberg's previous public remarks and compares potential computing-capacity monetization with Meta's original long-term AI opportunities; in valuation, it continues to use the GAAP EPS multiple method, applying an unchanged 26x multiple to 1Q28E diluted GAAP EPS to derive the target price.

Methodology notes

• Valuation methodsGAAP EPS multiple valuation

  Target price US$865 = 26x × 1Q28E diluted GAAP EPS US$33.26

  UBS keeps both the valuation multiple and earnings forecasts unchanged, and the target price has not been adjusted due to the potential computing-capacity sale news.

• Earnings forecastForecast Stock Return

  Forecast price appreciation 43.7%, forecast dividend yield 0.3%, forecast total stock return 44.1%

  UBS adds the upside from the target price relative to the current price to the dividend yield and compares it with a 9.2% market return assumption, arriving at a forecast excess return of 34.9%.

• Short-term factor assessmentQuantitative Research Review

  Most short-term industry, regulatory, fundamental, and EPS surprise questions are N/A, with no clear catalyst over the next three months

  This section uses a different time frame from the 12-month stock rating and is mainly used to record UBS's quantitative questionnaire responses on short-term factors.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• META.US / Meta Platforms Inc.

  Core covered asset

  Strengths

  It owns platform assets including Facebook, Instagram, WhatsApp, and Reality Labs, and may obtain more near-term incremental revenue by selling excess computing capacity or AI model access externally.

  Weaknesses

  The potential new business has not yet been confirmed by the company and was not included in the previously explicit list of long-term opportunities, which may raise market concerns about a strategic shift.

  Comparison

  The report compares this option with waiting for Meta Business Agents and Meta AI chatbots to scale, arguing that the former could theoretically generate revenue faster; it also mentions cloud service providers such as AWS and Azure as potential competitive references.

  Risks

  Key risks include an advertising downturn, the impact of iOS changes on ad targeting and measurement, regulatory and antitrust changes, pressure from competing platforms such as TikTok on user growth and engagement, a rising mix of lower-monetization content such as Reels, and heavy investment in Reality Labs despite still-uncertain product-market fit.

Key data

• 12-month ratingBuyUBS reiterates its Buy rating in this report.
• Target priceUS$865.00Based on an unchanged 26x multiple and 1Q28E diluted GAAP EPS of US$33.26.
• Current priceUS$601.85Price timestamp is 2026-07-01 10:35:37 EDT.
• Forecast price appreciation43.7%Calculated from the target price relative to the current price.
• Forecast total stock return44.1%Includes a 0.3% forecast dividend yield.
• Forecast excess return34.9%Relative to a 9.2% market return assumption.
• Market capitalizationUS$1,543bDisclosed in the report's trading data table.
• 52-week rangeUS$790.00-525.72Disclosed in the report's trading data table.
• Net debt/EBITDA0.3xOn a 12/26E basis.
• UBS EPS forecast12/26E US$32.61; main text mentions 2026E US$32.67; 12/27E US$32.98; 12/28E US$34.98There is a slight difference between the main text and the table for 2026E EPS, while 2027E is US$32.98 in both.

Impact & implications

If Meta confirms and executes external sales of computing capacity or model access, the market may reassess the payback path of AI infrastructure investment and reduce concerns that EPS will be dragged down by capital expenditures and depreciation. Conversely, without a clear commercialization timeline or revenue evidence, investors may still view the news as a passive response to overbuilding risk.

Risks

• A broad downturn in the advertising market could weigh on revenue growth.
• iOS changes may continue to affect ad targeting and performance measurement.
• Changes in the regulatory environment and antitrust interpretation could affect business operations.
• Competing platforms such as TikTok may suppress user growth and engagement.
• User engagement may shift toward lower-monetization scenarios such as Reels, while the long-term monetization of new formats remains uncertain.
• Reality Labs requires heavy investment, but current outcomes and product-market fit remain uncertain.
• The sale of computing capacity or model access has not yet been confirmed by the company, and if implementation falls short, it may fail to ease concerns about EPS compression.

What to watch

• Whether Meta formally confirms the sale of raw computing capacity, cloud services, or AI model/API access.
• The revenue scale, gross margin, customer demand, and pricing model of any potential external computing-capacity business.
• Whether 2026E and 2027E EPS maintain growth, especially whether 2027E avoids being flat versus or compressed relative to 2026E.
• Further disclosures on AI capital expenditures, computing utilization rates, and overbuilding risk.
• Commercialization progress of long-term opportunities such as Meta Business Agents, Meta AI chatbots, business messaging, and AI devices.
• Whether new company-level catalysts emerge over the next three months; UBS's quantitative questionnaire currently shows no clear catalyst.