Dear readers,
Yesterday we wrote that the next 48 hours would answer the question this market has been deferring for months. The clock is now running. The S&P 500 and Nasdaq sit at record highs, the Fed will almost certainly hold rates steady at 3.50–3.75% this afternoon, and after the closing bell, the mega-caps start opening their books. Our focus today: Meta Platforms — the company that may be doing more than anyone else to prove that the largest capital expenditure cycle in corporate history can actually produce revenue on the other side.
Meta: The $55 Billion Quarter
Meta reports first-quarter 2026 results after the close today. The consensus is staggering: analysts project revenue of approximately $55.4 billion, a 31% year-over-year increase, driven almost entirely by advertising growth of roughly 30%. Earnings per share are expected to land near $6.71.
The number that matters most, though, sits outside the income statement. An Emarketer forecast published in mid-April projects Meta will surpass Google in total digital ad revenue by year-end 2026 — the first time that has ever happened, globally or domestically. Instagram is the engine. Organic content on the platform has become a competitive moat for advertisers, and Meta is now layering on new inventory: advertising in WhatsApp “Status” updates, an initiative first announced in June 2025 and shelved once before in 2018, has been rolling out since mid-last year. In March 2026, Meta’s DMA compliance report confirmed the expansion of WhatsApp ads into the European Union. The company’s proprietary AI model, “Muse Spark,” is designed to push return on ad spend even higher.
Yesterday we noted that the Magnificent Seven minus Nvidia are growing first-quarter earnings at just 6.4% — their weakest pace in two years. Meta, with 31% revenue growth, is doing most of the heavy lifting.
Hardware, Headcount, and the $135 Billion Bill
The spending is real. Meta’s planned 2026 capital expenditures range from $115 billion to $135 billion, with total expenses projected between $162 billion and $169 billion. That is an extraordinary commitment, and management is offsetting it with extraordinary cuts: starting in May, approximately 8,000 positions — roughly 10% of the workforce — will be eliminated.
Morgan Stanley sees the math working. The firm’s analysts estimate the layoffs could save $3 billion to $7 billion, adding over $1 per share to 2027 earnings. Morgan Stanley named Meta its top internet sector pick with a $775 price target, implying significant upside from current levels.
On the hardware product side, Meta’s smart glasses business is pulling away from the field. Counterpoint Research reported the company held 82% of the smart glasses market in the second half of 2025, up from 73% in the first half. Global AR smart glasses shipments climbed 98% year-over-year for full-year 2025.
The Cautionary Tale Next Door
The risks of spending billions on AI infrastructure without a clear monetization path are not theoretical. On Monday, the Wall Street Journal reported that OpenAI has missed internal targets for both weekly users and revenue — news that dragged on tech stocks Tuesday. Microsoft’s decision to pull back from data center projects totaling approximately 2 GW of capacity in the U.S. and Europe, first reported by TD Cowen analysts in March 2025, looks prescient in retrospect: an early signal that the buildout was outrunning demand.
OpenAI, for its part, is now chasing advertising revenue of its own. In early March 2026, reports surfaced that the company held preliminary talks with The Trade Desk about an automated ad partnership. The Trade Desk’s stock surged roughly 18% on March 5 in response. The market’s message was clear: AI companies that can connect to ad dollars get rewarded. AI companies that cannot get questions.
Europe: Inflation, Autos, and a €29 Billion Elevator Deal
The oil price shock continues to ripple through the European economy. Brent crude remains pinned near $111–$112 per barrel following the UAE’s announced OPEC exit effective May 1, and the consequences are showing up in consumer prices: German inflation rose to 2.9% in April, the highest reading since January 2024.
Mercedes-Benz delivered a weak first quarter. EBIT fell nearly 17% to €1.90 billion on revenue of €31.6 billion, down roughly 5%, with persistent weakness in China weighing on unit sales. On a brighter note, Finnish elevator maker Kone announced it will acquire TK Elevator — the former Thyssenkrupp unit — for €29.4 billion including debt, in a cash-and-stock transaction.
The Takeaway
Yesterday we posed the question: can the software and services layer convert hundreds of billions in infrastructure spending into durable, recurring revenue? Meta’s answer, at least on paper, is the most convincing in the group — a company spending aggressively on AI while simultaneously growing ad revenue at 30%, cutting headcount by 10%, and expanding into new monetization surfaces like WhatsApp. The contrast with OpenAI’s missed targets and Microsoft’s data center pullbacks is sharp. After the bell today, we find out whether the numbers confirm the thesis or complicate it. Meanwhile, Jerome Powell’s press conference — his last before stepping down on May 15 — deserves close attention. Any signal that energy-price inflation from the Hormuz crisis could force an unexpected rate hike would change the calculus for every stock discussed above.
Best regards,
The StocksToday.com Editorial
