Inveting.com — Meta’s (NASDAQ: META) new planned entry into the cloud business makes it a potential competitor to Amazon’s AWS (NASDAQ: AMZN), Microsoft’s Azure (NASDAQ: MSFT), and Google Cloud (NASDAQ: GOOGL). As the company considers two potential offerings, a hosted API/model access service comparable to AWS Bedrock and a neocloud-like raw silicon offering, Morgan Stanley analysts offer 5 takes exploring the monetisation pathways and potential of META’s announcement.
Take 1
Morgan Stanley believes that the Neocloud option will be easier for META to pull off compared to the fuller service hyperscaler product. Firm analysts say “the hosted API/model-access business would have more technology, hiring, and execution risk.”
Performing well on TerminalBench and SWE Bench Verified are important when it comes to coding and third party use. But META’s Muse model suite has not scored well on these in the past. Going ahead, META’s Muse Models will also have to compete with frontier models like Gemini, requiring serious improvements.
“A full API of models and applications would have significantly more execution risk and should be viewed as a “show me” vs. more scaled and established hyperscalers,” the analyst said.
Take 2
META is estimated to be bringing on ~2 GW / ~3.5 GW incremental owned-operated IT capacity in ’26/’27 (on an estimated YE25 base of ~3 GW). Morgan Stanely sees an opportunity for META to lease compute capacity at least on a temporary basis.
“Companies are compute constrained and continue to make compute budgeting decisions between training, inference or other products/uses….while also balancing near-term ROIC and long-term opportunities. But as a comparison, we expect hyperscalers like AMZN/GOOGL to add 5 GW/9 GW of IT capacity in ’27… which speaks to the theoretical opportunity for Meta to have compute capacity to lease,” the analysts said.
Morgan Stanley clarified that META likely won’t be able to lease the estimated ~2.5 GW it is renting from third parties like CoreWeave (NASDAQ: CRWV), Nebius (NASDAQ: NBIS), GCP (NYSE: GCP), Oracle (NYSE: ORCL) and others. However, the company will enjoy some flexibility to lease out its own 1P capacity given these third-party arrangements.
Take 3
META can enjoy meaningful EPS accretion if it goes ahead with the Neocloud plan, says Morgan Stanley. Recent neocloud deals are characterized by flexibility in terms of smaller sizes, shorter duration, dual-sided opt out clauses etc. It is a scarce resource, and the firm believes there is material upside to monetising it.
