Morgan Stanley: Meta Platforms (META.US) Headcount Reductions and Neocloud Backup Optionality
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Morgan Stanley highlights that Meta Platforms' planned workforce reduction of approximately 10,000 employees, representing roughly 13% of its total headcount, is set to significantly lower operating expenses in 2026 by an estimated $3 billion. Furthermore, the firm points to Meta's Neocloud backup optionality as a crucial mechanism for capital expenditure flexibility. This strategy allows the company to curtail cloud infrastructure investments if demand softens, potentially saving between $1 billion and $2 billion in capex. Consequently, free cash flow projections for 2026 could increase from $15 billion to $18 billion.
Morgan Stanley maintains an Overweight rating on Meta with a target price of $350, underpinned by a 2026 adjusted EPS estimate of $12.50 and a 28x PE multiple. The report notes that while advertising revenue growth has moderated to 10%, these aggressive cost containment measures should partially offset the impact. Additionally, Reality Labs losses are projected to narrow to $8 billion in 2026 from $10 billion the previous year. Total capex is now anticipated to be $30 billion, down from a prior $32 billion estimate. The firm believes the market is currently underpricing the combined value of these operational efficiencies and capital allocation flexibility.
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