Meta’s push into cloud excites Wall Street despite lower margins

Meta CEO Mark Zuckerberg appears poised to make a big bet on a potentially big market, but one that commands much slimmer margins than his company’s dominant online ad business.

Cloud infrastructure has proven to be highly lucrative for hyperscaler peers Amazon, Microsoft and Google, and Zuckerberg has hinted of late that Meta could be headed in that direction. On Wednesday, CNBC’s Jim Cramer confirmed that Meta will sell excess computing power to outside customers. The company is debating whether to offer access to AI models hosted on its infrastructure or to sell access to raw computing power, according to Bloomberg.

Wall Street welcomed the news. After slumping for the past year, Meta’s stock started the third quarter with a bang, jumping 9% on Wednesday for its sharpest rally in more than five months. Investors have been looking for Meta to diversify its business and monetize its multi-hundred-billion-dollar investment in advanced data centers and artificial intelligence infrastructure.

“Making this as a revenue stream has been part of their road map,” said Karan Ramchandani, managing director at advisory firm Post Oak Group. “It seems like a no-brainer to compete in the market, to sell compute power to other B2B players.”

At Meta’s annual shareholder meeting in May, Zuckerberg said a potential cloud computing business is “definitely on the table.” And seven months earlier, on an earnings call, Zuckerberg said companies are regularly “asking if we have compute that they could buy from us at some premium to what we’ve bought it at.”

Just before Wednesday’s rally, Meta’s stock closed out its fourth straight quarterly drop, losing almost a quarter of its value over that stretch. In April, Meta boosted the high end of its 2026 capital expenditures guidance by $10 billion to $145 billion. Some of that is getting funded through debt, with the company raising $25 billion from a bond sale just as it was reporting first-quarter earnings.

“I think that this is a response to complaints that the company may be overspending and skepticism that Meta will ever earn a commensurate return on its capex,” said Paul Meeks, head of technology research at Freedom Capital Markets, regarding Meta’s push into cloud. “The problem with this company is that it only builds, or only thus far, capacity for itself, and it’s not really monetizing any AI apps yet.”

Almost all the financial benefits of Meta’s AI spending to date have been recognized in the company’s core advertising business, which has seen dramatically improved targeting capabilities and has offered a wider suite of creative tools to marketers. Meta still gets 98% of its revenue from digital ads.

Zuckerberg has been trying to change the narrative, with cloud being perhaps the most ambitious new…