Meta Platforms (NASDAQ: META) is reportedly planning to enter the cloud computing business, marking a significant departure from its previous approach to AI infrastructure.
According to reports, Meta now intends to lease out its excess AI computing capacity to outside clients, a business model long employed by its hyperscaler rivals.
CEO Mark Zuckerberg previously stated that Meta was using all of its data center capacity for internal workloads, making this shift a notable change in direction.
The move would bring Meta closer in line with Alphabet, Amazon, and Microsoft, which have all built substantial cloud businesses alongside their core operations.
Amazon Web Services is perhaps the most striking example of cloud computing’s profit potential, generating nearly 60% of Amazon’s total operating profits.
Meta is not expected to immediately replicate that kind of scale, but a cloud unit would create a new revenue stream to help fund ongoing data center expansion.
Zuckerberg has been clear that Meta will only sell excess computing capacity if it has any, meaning the cloud business may remain limited in scope for now.
Investors should temper expectations, as there is no indication Meta plans to build new data centers specifically designed to serve external customers at scale.
Still, markets reacted positively to the news, with enthusiasm centered on Meta’s willingness to adapt its AI strategy rather than cling to approaches that are not delivering results.
Meta is scheduled to confirm its cloud computing plans during its second-quarter earnings call on July 29, which could serve as a major catalyst for the stock.
At roughly 18.7 times forward earnings, META trades at a meaningful discount to the S&P 500, which currently carries a forward earnings multiple of approximately 21.7 times.
A successful cloud computing launch could help close that valuation gap, and potentially push investors to assign Meta a premium multiple given its strong growth trajectory.
The combination of a still-cheap valuation and a shifting AI strategy makes the stock an interesting consideration ahead of the Q2 earnings report later this month.
