Meta’s Valuation Reality Check: Why It Deserves a Lower Multiple Than the Rest of the ’Magnificent Seven’

Wall Street's favorite club just got a reality check—Meta Platforms isn't playing in the same league as its Magnificent Seven peers when it comes to valuation multiples.

Ad revenue dependency haunts the empire

While other tech giants diversify revenue streams through cloud, hardware, and subscription services, Meta remains shackled to the volatile digital advertising cycle. One economic downturn away from another brutal guidance cut.

Regulatory target on its back

Antitrust scrutiny isn't just background noise—it's a fundamental threat to Meta's growth trajectory. Meanwhile, other Magnificent Seven members navigate regulatory waters with far more agility and less baggage.

Metaverse bets still burning cash

Reality Labs continues its spectacular cash incineration routine while other tech giants actually monetize their AI investments. Vision Pro? More like Vision No—Apple's hardware ecosystem prints money while Zuck's VR playground burns it.

Here's the cynical truth: Meta trades like a growth stock but executes like a legacy media company—the worst of both worlds in a market that punishes identity crises. Maybe those Wall Street analysts should try looking at the actual numbers instead of the hype.

Image source: Getty Images.

Ad-driven momentum -- and its limits

Meta's recent numbers are strong. In the second quarter of 2025, revenue ROSE 22% year over year to $47.5 billion, while income from operations increased 38% and operating margin expanded to 43% as ad demand stayed healthy. Management also noted in the company's follow-up second-quarter earnings call that demand was broad-based across verticals and geographies, with smaller advertisers contributing to growth.

Why wouldn't a business growing like this command a price-to-earnings multiple in the thirties? The catch is concentration. Substantially all of Meta's revenue is generated from advertising, and those results fluctuate with marketers' budgets. Advertising tends to behave like a cyclical expense: when growth fears rise, many brands and direct-response advertisers trim spend quickly. That dynamic can compress both Meta's top line and operating leverage more suddenly than businesses with more recurring, contracted, or diversified revenue.

Platform dependence

Meta's second structural risk is distribution. Meta's products ride on mobile operating systems and app stores it does not control. In its annual filing, the company warns that changes by Apple or Alphabet can limit its ability to target and measure ads, degrade product functionality, or even make access to its apps more difficult -- and that Apple's iOS changes beginning in 2021 have negatively impacted ad performance and revenue. Apple's App Tracking Transparency framework formalized user opt-in for cross-app tracking, illustrating how a single platform policy can Ripple through Meta's ad systems. These aren't theoretical worries; they're documented factors that have already affected results and could again.

A battle for younger generations

Competition for attention also remains real. TikTok's rapid ascent showed that new social platforms can win share fast, and's Snapchat remains deeply popular among U.S. teens alongside Instagram. Meta has responded well with Reels and recommendation improvements -- and the recent quarter reflected that -- but the battle for time and attention is more competitive than ever.

While Snap may not initially seem like a threat to Meta, it's worth noting that the company's daily active users are growing rapidly. In Q2, Snap's daily active users rose 9% year over year. In addition, the company's monthly active user count is approaching 1 billion.

What this means for valuation

A business that is (1) tied to discretionary ad budgets, (2) dependent on external platforms for distribution and some of its key data signals, and (3) facing credible attention from rivals deserves a lower valuation than platform owners or companies with more diversified, contracted, or utility-like cash flows. Today, Meta's price-to-earnings multiple sits roughly in the high-20s on a forward basis, belowand(both in the low-to-mid 30s recently) and slightly above Alphabet, with a price-to-earnings ratio of about 27. That spread mostly makes sense. Microsoft and Amazon lean more on subscription, enterprise, and cloud spending, while Alphabet has an advertising-heavy business. With this said, I believe Alphabet arguably deserves to trade at a higher multiple than Meta. Though its business relies a lot on ads, it benefits from a broader mix, including a fast-growing cloud segment and control of the Android platform.

Yes, Meta stock may continue to compound if engagement holds and ad tools keep improving. Additionally, Meta seems to try to always be prepared for risks by maintaining a healthy balance sheet -- something that may help it during times of economic weakness. But the nature of its revenue and its relationship with gatekeepers mean there's always a chance that macro softness, a new privacy rule, or a policy change dents performance faster than expected. Advertising cyclicality, platform exposure, and intense competition for attention, therefore, argue that a sustained price-to-earnings multiple in the 20s is a prudent place for the market to settle, even as results remain strong.