META

The operating business is firing, not fading. FY2025 revenue rose 22.2% to $201B with income from operations up 20% to $83.3B — a 41.4% operating margin — driven by 12% more ad impressions and 9% higher price-per-ad on a Family daily-active base of 3.58B (+7%). This throws off enormous cash: $116B of operating cash flow (+26.8%) and a 27.8% ROE. The Family of Apps segment alone earned $102.5B at a 52% margin, funding everything else. This is a high-quality, wide-moat compounder with genuine pricing power, not a melting asset.

The scary-looking headline — net income -3.1% and diluted EPS -1.6% — is an accounting artifact, not operational decay. Per the MD&A, the effective tax rate was 30% because of a valuation-allowance charge tied to the One Big Beautiful Bill Act in Q3 2025; absent it the rate would have been 13%. In other words, pre-tax operating performance grew ~20% while reported earnings were depressed by a one-time tax item that should normalize in 2026. That makes the 24.6x trailing P/E misleading on the high side: on a normalized tax rate the multiple sits closer to ~20x for a 20%+ grower with 30% net margins — undemanding. My ~$700 target assumes the market re-rates toward those normalized earnings rather than the tax-suppressed print.