Massive Meta Platforms Layoffs Could Be Coming. Why Did META Stock Gain on the News?

According to a Reuters report, social media giant Meta Platforms (META) is planning to cut a significant portion of its workforce. The stock climbed on news of the company’s alleged plans to reduce its headcount by over 20%, suggesting Meta is trying to balance its planned high spending on artificial intelligence (AI).

Meta anticipates 2026 capital expenditures, including principal payments on finance leases, to range between $115 billion and $135 billion, roughly double its 2025 spending. This increase stems from heightened investments to bolster efforts at Meta Superintelligence Labs and the core business.

Although the report on job cuts is still speculative, it follows a trend of companies reducing headcount to invest heavily in AI. While high spending has concerned investors, it might indicate a broader shift in which “AI is increasingly driving productivity,” Jefferies’ analysts said in a note.

Amid this, we take a closer look at Meta Platforms…

Meta Platforms is one of the world’s top tech giants, powering global connections through its core social and messaging apps, including Facebook, Instagram, WhatsApp, and Messenger. Its advanced ad system uses precise data targeting to link businesses with users on its platforms and beyond. The firm boasts a market capitalization of $1.58 trillion.

Heavy investments in AI infrastructure have affected Meta’s stock lately. Over the past 52 weeks, the stock has gained a modest 3.92%. However, over the past six months, it has dropped 22%, while it is down 8.1% year-to-date (YTD). The stock reached a 52-week high of $796.25 back in August 2025, but is down 24% from that level.

On a forward-adjusted basis, Meta’s price-to-earnings ratio of 20.93x is higher than the industry average of 12.83x.

On Jan. 28, Meta reported its fourth-quarter results for fiscal 2025, which beat expectations, leading to a 10.4% intraday gain in its stock on Jan. 29. The company’s revenue increased 24% year-over-year (YOY) to $59.89 billion, surpassing the $58.59 billion that Wall Street analysts had expected.

Meta’s robust results were largely driven by greater engagement across its platforms. Daily Active People (DAP) over its family of apps was 3.58 billion on average for December 2025, indicating an increase of 7% YOY. Ad impressions for the fourth quarter increased by 18% YOY, while the average price per ad increased by 6% YOY. Overall, its family of apps recorded a revenue of $58.94 billion, up 25% from the prior-year period.

While Meta’s income from operations increased by 6% YOY to $24.75 billion, the operating margin declined from 48% to 41%. The company’s quarterly EPS increased 11% from the year-ago value to $8.88, beating the $8.21 figure that Street analysts had expected.

For the current year, Meta expects to incur total expenses of $162 billion to $169 billion. The majority of expense growth is expected to be driven by infrastructure costs, including third-party cloud spend. Even with this substantial ramp-up in infrastructure spending, the company expects 2026 operating income to surpass last year’s levels.

Wall Street analysts are optimistic about Meta’s future earnings. They expect the company’s EPS to climb by 3.7% YOY to $6.67 for the current quarter. For fiscal 2026, EPS is projected to surge marginally to $29.75, followed by a 14.9% growth to $34.18 in fiscal 2027.

Analysts have remained positive on Meta’s stock, despite concerns about its high AI spending. Wells Fargo analyst Ken Gawrelski maintained a bullish “Overweight” rating on the stock but lowered the price target from $795 to $754, expecting a short-term timing gap between ramped-up AI spending on computing power and the discovery of fresh applications and offerings. UBS analysts also kept a “Buy” rating on Meta’s stock but cut the price target from $915 to $830.

Analysts at Argus Research also maintained a “Buy” rating on the stock and raised the price target to $775 from $686. Increasing advertising revenue and margin expansion have helped the company, as it competes with other tech giants to monetize models and applications. Despite concerns about spending, Argus analysts noted that Meta is already leaning on generative AI to improve its targeted advertising.

Guggenheim analyst Michael Morris has maintained a “Buy” rating for the social media behemoth. However, Morris lowered the price target from $875 to $800, reflecting cautious market sentiments.

Meta has been in the spotlight on Wall Street, with analysts awarding it a consensus “Strong Buy” rating. Of the 56 analysts rating the stock, a majority of 46 analysts have rated it a “Strong Buy,” three analysts suggest a “Moderate Buy,” while seven analysts are playing it safe with a “Hold” rating. The consensus price target of $864.04 represents a 43% upside from current levels. The Street-high price target of $1,144 indicates an 89.5% upside.

On the date of publication, Anushka Dutta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com