Prediction: Meta Platforms Will Soar on July 29 When It Makes This Announcement
Buzz is building around a new cloud computing business from Meta Platforms (META -2.53%), and it looks like the stars are aligning for it to make the announcement on July 29 when it reports second-quarter earnings.
The Facebook-parent has yet to make a formal acknowledgment about adding cloud infrastructure operations, but CEO Mark Zuckerberg indicated it was a strong possibility earlier this year when he said a cloud business is “definitely on the table.”
A few weeks ago, Bloomberg said that the company is building out a cloud computing business, and just a few days ago, The New York Times said the company was in talks to lease computing power to Anthropic in a deal that could be valued at $10 billion over the next two years.
Image source: Getty Images.
Meta hasn’t confirmed these reports, but the rumors make a lot of sense as the company said it would plow between $125 and $145 billion into capex this year, much of that going to AI infrastructure. However, it’s the only one of the four major hyperscalers, which includes Alphabet, Microsoft, and Amazon, to not have its own cloud computing business.
Demand for AI infrastructure is soaring, and the recent second-quarter report from Alphabet confirmed that as the company reported 82% revenuet growth to $24.8 billion in Google Cloud and operating income more than tripled to $8.8 billion. It’s worth noting that Google Cloud was losing money just a few years ago, but the AI boom clearly changed that.
With numbers like that, Meta investors are likely chomping at the bit for it to launch its own cloud business.
Today’s Change
(-2.53%) $-16.29
Current Price
$627.52
Key Data Points
Market Cap
Day’s Range
$624.00 – $648.52
52wk Range
$520.26 – $796.25
Volume
552.2K
Avg Vol
18.1M
Gross Margin
81.94%
Dividend Yield
0.33%
Why Meta stock could soar on the news
Adding a cloud computing business would solve a lot of problems for Meta. It would reassure investors that there’s a profitable business attached to its soaring capex spend, rather than experiments like the metaverse and reality labs that have already burned tens of billions of dollars.
A cloud computing business would also help the company develop a second revenue stream to diversify and complement its ad business, much like Alphabet has done with Google Cloud.
Finally, a cloud business would tap into existing demand, as Zuckerberg said his company gets asked about cloud services weekly, and it would leverage infrastructure already in place, as it’s invested heavily in its own AI infrastructure.
For Meta, the move looks like a no-brainer, and the stock looks cheap at a price-to-earnings ratio of just 24. At that valuation, it won’t take much for the stock to pop.
