The Zhitong Finance App noticed that when the AI computing power competition entered the “money-burning” deep-water zone, Meta (META.US) chose to use an equity financing plan of nearly 95 billion US dollars to prepare more for its AI ambitions. On October 26, the social media giant with a market capitalization of about 1.7 trillion US dollars announced the launch of large-scale equity financing. This scale is rare in the US stock market. Goldman Sachs reiterated the stock's “buy” rating in the research report, with a target price of 885 US dollars for 12 months. It believes that behind this big gamble is a growth logic where core business and AI go hand in hand.
Goldman Sachs pointed out that Meta's current funding was split into two installments. The first instalment was an immediate underwriting offering of approximately US$35 billion, of which approximately US$22.5 billion was Class A common stock, arranged in the form of a forward sales agreement; another US$12.5 billion of Series A depository shares, corresponding to newly issued mandatory convertible preferred shares. The second installment of the $60 billion market-based (ATM) issuance plan will commence after Class C common stock trading begins, until the first quarter of 2027 at the earliest, and the final scale, timing, and terms have yet to be finalized.
Notably, the big three AI chip companies Nvidia (NVDA.US), AMD (AMD.US), and Broadcom (AVGO.US) have each indicated their intention to subscribe for Class A common stock totaling up to about 5 billion US dollars. This detail has been interpreted by the market as an increasingly close capital bond between chip manufacturers and major downstream customers.
The financing plan also includes an arrangement at the corporate governance level: issuing Class C shares without voting rights. This means that while expanding share capital, founder and CEO Zuckerberg can still maintain voting control under multi-year investments, etc., paving the way for long-term AI investment.
Supporting this financing was Meta's outstanding report card for the third quarter. Goldman Sachs summed up four highlights: the core business operating momentum exceeded expectations, the early positive performance of the AI model Muse, the gradual clarification of AI incremental revenue paths (SMEs and enterprise customers), and management's determination to expand investment in AI infrastructure. Together, these four points point to a judgment. Meta is seizing the high ground of AI computing power at a pace that exceeds expectations.
But the price of this gamble is just as impressive. Goldman Sachs estimates that Meta's total GAAP expenses for fiscal year 2027 and fiscal year 2028 will reach about US$221 billion and US$254 billion, respectively, while capital expenditure will reach about US$230 billion and US$250 billion, with a cumulative capital expenditure of about US$480 billion over two years.
Affected by this, the company's free cash flow is expected to plummet from about 46 billion US dollars in 2025 to about 6.369 billion US dollars in 2026, and to a negative value of about 33.452 billion US dollars in 2027; the EBIT profit margin will drop from about 31.2% in 2026 to about 29.9% in 2027; and gross margin will also drop from about 78.7% in 2026 to about 68% in the next two years.
Even so, Goldman Sachs maintained a positive view. The bank believes that Meta occupies a unique position at the intersection of AI and spatial computing, and that existing application families, new independent applications, and Reality Labs' hardware, software, and platform potential form multiple long-term growth pillars. The research report estimates that Meta's revenue from 2026 to 2028 will increase from about US$257.185 billion to US$374.132 billion, corresponding growth rates of about 28.0%, 22.8%, and 18.4%, respectively; GAAP earnings per share will rise from US$28.84 to US$37.49.
Of course, the risks cannot be ignored. Goldman Sachs suggests that competition for user growth, engagement and advertising revenue, huge investment in long-term projects suppressing profit margins, regulatory and antitrust reviews, and uncertainty about monetization in businesses such as Muse and Reality Labs may all put pressure on stock prices.
Whether this $95 billion gamble can be realized depends not only on whether Meta can turn AI investment into sustainable incremental revenue, but it will also take time to test.