Zhaoyin International: Downgrades Meta's target price to $830, with uncertainties in short-term profitability and cash flow.

Zhao Yin International issued a report indicating that Meta announced its Q2 2026 performance, with total revenue increasing by 28% year-on-year to $60.8 billion, roughly in line with market expectations; operating profit decreased by 8% year-on-year to $18.8 billion. Excluding $2.4 billion in legal costs, it saw a year-on-year increase of 4% to $21.2 billion, while market expectations were $21.5 billion. Looking ahead to Q3, management guidance suggests that total revenue will grow year-on-year by 19% to 25%, reaching between $61 billion and $64 billion, also in line with market expectations of $63.1 billion. Given the significant AI opportunities on both the consumer and enterprise sides, the company remains committed to maximizing AI computing capacity in the fiscal years 2026/2027, which may put short-term profit and cash flow under pressure. The firm expects new AI opportunities to gradually contribute to profits and has revised its 2027 to 2028 operating profit forecast upward by 0% to 4%. Considering the uncertainties surrounding short-term profit and cash flow, it has lowered the target price from $880 to $830 while maintaining a "buy" rating. Key upcoming catalysts include the upgrade of foundational models and the acceleration of enterprise AI monetization.