Meta Platforms (META) stock has gained about 8% over the past five days, at the time of writing, Monday afternoon, Jan. 26, according to Yahoo Finance. Meanwhile, the SPDR S&P 500 ETF (SPY) is up less than half a percent in the same period. Meta is beating the S&P 500 due to prevailing sentiment that Q4 earnings, set to be released on January 28, won’t disappoint.
The company’s decision to lay off over 1,000 employees in its Reality Labs division may also be helping boost the stock. That division has incurred approximately $73 billion in losses since 2021, according to Seeking Alpha.
Meta’s Q3 earnings were not a success, to put it mildly. I covered those in my article “Bank of America resets price target as Meta earnings send stock reeling.”
A one-time, non-cash income tax charge of $15.93 billion, due to the One Big Beautiful Bill Act, caused Q3 2025 diluted earnings per share (EPS) to drop to $1.05 from $6.03 in Q3 2024.
For Meta, 2025 was a “tremendously chaotic year,” the company’s CTO Andrew Bosworth said at a press briefing at the World Economic Forum’s annual meeting in Davos, as reported by Reuters. He also said that the new artificial intelligence lab has delivered its first high-profile AI models internally this month.
The Q4 earnings should be unencumbered by the One Big Beautiful Bill headwind, so we can expect a significant improvement.
Meta’s smartglasses are facing a lawsuit for patent infringement.
Photo by Bloomberg on Getty Images
Bank of America expects Meta’s Q4 report to beat Wall Street estimates
Bank of America analysts Justin Post and Nitin Bansal updated their Meta stock outlook ahead of earnings.
Analysts expect Q4 revenue and EPS of $59.2 billion and $8.27, respectively, which are above the Wall Street consensus estimates of $58.3 billion and $8.20, respectively.
Post is similarly more optimistic than Wall Street for Q1. He expects Meta Q1 2026 revenue and EPS of $52.3 billion and $6.31, respectively, vs. Wall Street estimates of $51.2 billion and $6.29.
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Based on Q3 commentary and year-to-date infrastructure investment news, Bank of America expects the fiscal year 2026 expense guidance to be in the range of $153 billion to $160 billion. For capital expenditures—the lifeblood of the AI trade—analysts expect guidance in the range of $109 billion to $114 billion.
Fast fact: In Q3, Meta guided for capital expenditures of $70-72 billion in 2025, up from its prior outlook of $66-72 billion.
In a research note shared with me, Post reiterated a buy rating and a $810 price target for Meta stock, based on a 27x multiple of his estimate for GAAP EPS in 2027, plus net cash.
“On a total company basis, including Metaverse investments, our valuation is at a slight premium to S&P 500, given Meta’s higher growth rate and AI opportunity,” he said. “Historically, Meta has traded at an average premium of 3pts to S&P 500.”
Downside risks for Meta stock:
- Decline in user activity from competition
- Privacy or data issues impacting revenue generation
- Potential for Wall Street to assign a negative value to Metaverse (RealityLabs)
- New regulations that impact monetization
Meta’s legal troubles mount, China scrutiny builds
Meta and EssilorLuxottica were sued in a U.S. court on January 23rd by a smartglasses maker that claims they copied its technology for their competing wearables.
In a patent infringement lawsuit filed in a federal court in Massachusetts, Solos Technology accused Meta and the other parties of infringing five of its patents. The company is seeking “multiple billions of dollars” in damages and an injunction blocking the alleged infringement, reported Reuters.
An international group of plaintiffs filed a lawsuit in the US District Court in San Francisco on January 23rd, alleging that Meta has made false claims about the privacy and security of its WhatsApp chat service.
They allege that Meta and WhatsApp “store, analyze, and can access virtually all of WhatsApp users’ purportedly ‘private’ communications” — and accuse the companies and their leaders of defrauding WhatsApp’s billions of users worldwide, reported Bloomberg.
A spokesperson for Meta told Bloomberg that the lawsuit is “frivolous” and said that the company “will pursue sanctions against plaintiffs’ counsel.”
More AI Stocks:
- Morgan Stanley sets jaw-dropping Micron price target after event
- Bank of America updates Palantir stock forecast after private meeting
- Morgan Stanley drops eye-popping Broadcom price target
- Nvidia’s China chip problem isn’t what most investors think
- Bank of America sets AI stocks to buy list for 2026
On December 29, 2025, Meta acquired AI startup Manus for $2 billion. The acquisition of an AI agent builder has attracted the Chinese government’s scrutiny. Beijing is intensifying an investigation into Meta’s acquisition of Chinese-founded Manus, increasing the risk that regulators will seek to modify or even unwind the deal if wrongdoing is found, reported Bloomberg.
Chinese officials had begun a probe into whether the acquisition of Manus violated tech export or national security regulations. The main issue is whether Chinese technology or user data could have been compromised or shared with an American company.
The investigators are now also looking into potential violations of rules governing cross-border currency flows, tax accounting, and overseas investments.
Key takeaways:
Overall, Meta shareholders will want to see the company overdeliver on:
- Q4 revenue, expected by BofA to be $59.2 billion. Wall Street is modeling $58.3 billion.
- Q4 EPS: BofA estimate is $8.27, respectively. Wall Street expects $8.20.
- Q1 revenue guidance, BofA expects $52.3 billion. Wall Street is targeting $51.2 billion.
- Q1 EPS guidance, BofA estimate is $6.31. The Wall Street consensus is $6.29.
- Full-year CapEx guidance: Bank of America targets $109 billion to $114 billion.
The author holds no position in META at the time of writing.