Mercer Adjudication Build

Which of the market's assumptions does Mercer accept, adjust, reject, or leave unresolved?

Adjudication, not forced disagreement. Accepting the market view is a normal, valid outcome — conviction comes only from evidence-backed adjustments.

Accepted

Adjusted

Rejected

Unresolved

Net edge (pre-countercase)

-110 bps

17 of 17

Assumption	Market-implied view	Mercer judgment	Mercer view	Valuation impact	Confidence	Catalysts
drv_meta_ai_ads_ranking_and_recommendation_model_improvements A01_drv_meta_ai_ads_ranking_and_recommendation_model_improvements · revenue	Market price implies AI ads ranking and recommendation model improvements delivers ~21.12% revenue_growth_pct over 10y.	Adjust	AI ad ranking improvements are real and accelerating ad revenue; Q1 2026 advertising revenue grew 33% YoY to $55B, well above the ~21% blended 10y requirement near-term. The required mid is reasonable but front-loaded growth is running hotter than the implied path, supporting modest upside.	+60 bps	55	2
drv_meta_user_engagement_growth_from_content_recommendation_improveme A02_drv_meta_user_engagement_growth_from_content_recommendation_improveme · revenue	Market price implies User engagement growth from content recommendation improvements delivers ~21.12% revenue_growth_pct over 10y.	Accept	Engagement growth supports revenue but is a slower compounding lever than monetization; 3.5B+ daily users with video at all-time highs supports continued but not outsized contribution. Required path is reasonable.	0 bps	60	2
drv_meta_advertising_demand_and_pricing_dynamics A03_drv_meta_advertising_demand_and_pricing_dynamics · revenue	Market price implies Advertising demand and pricing dynamics delivers ~21.12% revenue_growth_pct over 10y.	Accept	Strong ad pricing and demand dynamics (record holiday demand, 33% geographic growth) support the implied revenue path. No clear edge versus market.	0 bps	60	2
drv_meta_reality_labs_hardware_sales_ai_glasses_and_quest A04_drv_meta_reality_labs_hardware_sales_ai_glasses_and_quest · revenue	Market price implies Reality Labs hardware sales (AI glasses and Quest) delivers ~21.12% revenue_growth_pct over 10y.	Adjust	Glasses sales more than tripled and are fast-growing, but Reality Labs is only $2.21B of ~$199B revenue and continues to drive heavy operating losses. Applying 21% blended growth to this segment overstates near-term contribution; remains a small revenue line with negative margins.	-40 bps	40	2
drv_meta_whatsapp_business_messaging_and_subscriptions_monetization A05_drv_meta_whatsapp_business_messaging_and_subscriptions_monetization · revenue	Market price implies WhatsApp/business messaging and subscriptions monetization delivers ~21.12% revenue_growth_pct over 10y.	Accept	WhatsApp momentum and agentic business messaging are credible monetization vectors, but still early. Required path is reasonable as a contributing driver.	0 bps	45	2
drv_meta_advantage_automation_and_ai_ad_creative_adoption A06_drv_meta_advantage_automation_and_ai_ad_creative_adoption · revenue	Market price implies Advantage+ automation and AI ad creative adoption delivers ~21.12% revenue_growth_pct over 10y.	Adjust	Advantage+ adoption quadrupled to 4M advertisers in six months with $60B run-rate; this is a concrete, accelerating monetization engine that supports above-implied near-term ad growth.	+70 bps	55	2
drv_meta_user_base_growth_and_engagement_across_family_of_apps A07_drv_meta_user_base_growth_and_engagement_across_family_of_apps · revenue	Market price implies User base growth and engagement across Family of Apps delivers ~21.12% revenue_growth_pct over 10y.	Accept	FoA at $198.76B with continued engagement growth supports the implied path; this large mature base grows steadily rather than explosively. Market view reasonable.	0 bps	60	2
drv_meta_legal_accruals_and_related_expense_volatility A08_drv_meta_legal_accruals_and_related_expense_volatility · operating_expense	Market price implies Legal accruals and related expense volatility delivers ~16.35% operating_expense_growth_pct over 10y.	Unresolved	Litigation exposure noted (lawsuit news) but legal accruals are low-materiality and unpredictable; insufficient evidence to size deviation from implied opex path.	0 bps	30	1
drv_meta_meta_ai_assistant_adoption_and_engagement A09_drv_meta_meta_ai_assistant_adoption_and_engagement · revenue	Market price implies Meta AI assistant adoption and engagement delivers ~21.12% revenue_growth_pct over 10y.	Unresolved	Meta AI/Muse/MuSpark show strong adoption growth but direct revenue monetization is unproven; cannot confidently size its contribution to the 21% revenue path either way.	0 bps	40	1
drv_meta_technical_and_ai_talent_compensation_growth A10_drv_meta_technical_and_ai_talent_compensation_growth · operating_expense	Market price implies Technical and AI talent compensation growth delivers ~16.35% operating_expense_growth_pct over 10y.	Adjust	Aggressive Superintelligence Labs hiring ('strongest research team in industry' over 10 months) signals elevated comp growth that could push opex above the implied 16.35% blended path in the medium term, modestly pressuring margins.	-50 bps	45	2
drv_meta_ai_infrastructure_capital_expenditure_and_depreciation A11_drv_meta_ai_infrastructure_capital_expenditure_and_depreciation · capex	Market price implies AI infrastructure capital expenditure and depreciation delivers ~36.59% capex_growth_pct over 10y.	Adjust	Capex is rising sharply (quarterly capex from $6.4B in 2024Q1 to $19-21B in 2025-2026), and capex fears are explicitly weighing on the stock. The 36.59% blended capex growth may understate near-term spend intensity and depreciation drag on UFCF.	-90 bps	50	2
drv_meta_infrastructure_efficiency_and_custom_silicon A12_drv_meta_infrastructure_efficiency_and_custom_silicon · cost_of_revenue	Market price implies Infrastructure efficiency and custom silicon delivers ~16.61% cost_of_revenue_growth_pct over 10y.	Accept	Custom silicon (and Qualcomm data center partnership) supports cost-of-revenue efficiency; gross margins stable at ~82%. Implied 16.61% cost growth is reasonable.	0 bps	45	0
drv_meta_engineering_productivity_from_ai_coding_tools A13_drv_meta_engineering_productivity_from_ai_coding_tools · operating_expense	Market price implies Engineering productivity from AI coding tools delivers ~16.35% operating_expense_growth_pct over 10y.	Accept	AI coding productivity is a plausible offset to opex growth but unquantified; implied opex path reasonable. No basis for edge.	0 bps	35	0
drv_meta_compute_capacity_constraints_relative_to_demand A14_drv_meta_compute_capacity_constraints_relative_to_demand · capex	Market price implies Compute capacity constraints relative to demand delivers ~36.59% capex_growth_pct over 10y.	Accept	Compute demand exceeds supply, justifying high capex; this is consistent with the elevated 36.59% capex requirement. Reflected in A11 adjustment rather than double-counting here.	0 bps	45	0
drv_meta_reality_labs_investment_and_operating_losses A15_drv_meta_reality_labs_investment_and_operating_losses · operating_expense	Market price implies Reality Labs investment and operating losses delivers ~16.35% operating_expense_growth_pct over 10y.	Adjust	Reality Labs continues to absorb large operating losses against a $2.21B revenue base, with continued glasses/Quest investment. The implied 16.35% opex path may understate sustained RL loss drag on UFCF.	-60 bps	45	0
A90_discount_rate A90_discount_rate · wacc	Market accepts a 0.107133 WACC for the implied path.	Accept	10.71% WACC is reasonable for a mega-cap with strong cash generation but elevated AI capex/execution risk. No basis to deviate.	0 bps	60	0
A91_terminal_growth A91_terminal_growth · terminal_growth	Market embeds a 2.5% perpetual terminal growth.	Accept	2.5% perpetual terminal growth is standard and reasonable, roughly in line with long-run nominal GDP. No edge.	0 bps	60	0