Meta Plans to Lease Data Centers to Expand Cloud Business
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 5 hours ago
0mins
Source: Fool
- Cloud Business Expansion: Meta is developing a business plan to lease its excess data center capacity, a move that not only enhances its competitiveness in the cloud computing market but also potentially generates new revenue streams, alleviating investor concerns over its AI spending.
- Surge in Computing Demand: With the rapid advancement of AI technology, global data centers are expected to bring tens to hundreds of gigawatts of computing capacity online over the next decade, presenting a significant market opportunity for Meta, especially as it has yet to enter the cloud services arena.
- Financial Risks and Opportunities: While Meta faces potential costs of up to $500 billion in AI and data center investments, its generation of over $48 billion in free cash flow over the past year provides financial backing, allowing it to take on this risk and explore new business models.
- Market Competition Strategy: Meta needs to devise an effective go-to-market strategy to compete with existing cloud service providers, with potential directions including leveraging its vast infrastructure to offer raw computing power to targeted customers, thereby securing a foothold in the cloud market.
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Analyst Views on META
Wall Street analysts forecast META stock price to rise
44 Analyst Rating
37 Buy
6 Hold
1 Sell
Strong Buy
Current: 600.290
Low
655.15
Averages
824.71
High
1117
Current: 600.290
Low
655.15
Averages
824.71
High
1117
About META
Meta Platforms, Inc. is building human connections, powered by artificial intelligence and immersive technologies. The Company's products enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality (VR) and mixed reality (MR) headsets, augmented reality (AR), and wearables. It also helps people discover and learn about what is going on in the world around them, enabling people to share their experiences, ideas, photos, videos, and other content with audiences ranging from their closest family members and friends to the public at large. The Company's segments include Family of Apps (FoA) and Reality Labs (RL). FoA segment includes Facebook, Instagram, Messenger, WhatsApp and Threads. RL segment includes its virtual, augmented, and mixed reality related consumer hardware, software and content. Its product offerings in VR include its Meta Quest devices, as well as software and content available through the Meta Horizon Store.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- New Cloud Business Plans: Meta's intention to establish a new cloud business to sell excess AI computing capacity not only reflects a reassessment of its AI capabilities but also serves as a direct response to its excessive spending during the pandemic, heightening investor concerns.
- Lack of Market Confidence: Meta's Reality Labs division continues to incur billions in losses each quarter, and the failure of its metaverse investments to deliver anticipated returns raises doubts about its future spending strategy, potentially leading to further stock price declines.
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- New Revenue Stream: Meta may create a new revenue stream by renting out its excess computing capacity, a strategy similar to SpaceX's successful model, which could generate over $2 billion in monthly revenue, highlighting the profitability potential of this market.
- User Growth Challenges: Despite attracting over 3.5 billion users daily across its social media apps, Meta is addressing stagnant advertising growth by enhancing user engagement through AI, which helps increase ad revenue and mitigates growth stagnation in its advertising business.
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- Stock Performance Struggles: Over the past year, Meta's stock has declined by more than 15%, and it is down 7% in 2026 so far, making the company's current valuation metrics appear attractive with a forward P/E ratio below 20.
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See More
