Despite traffic to its namesake site falling, being entirely dependent on its own sites for traffic and revenue and having advertising as its sole means of support, Facebook (NASDAQ:FB) is still building data centers. So what does this mean for FB stock?

Facebook spent $2.8 billion on data centers in just the first quarter and it expects to spend $15 billion on them in 2018. 

If a manufacturer were building new factories while demand for its product was declining, its stock would go down. Even after taking a post-earnings plunge in July, Facebook stock is still up for the year.

FB Stock: Building the Net

Bloomberg wrote in February that “Facebook spends like an oil company”, but it’s more accurate to say that Facebook spends like a phone company. Verizon (NYSE:VZ) is expected to put $18.2 billion into capital expenditures this year; meanwhile, AT&T (NYSE:T) is expected to spend $25 billion.

However, most of the phone company money, is going into wireless infrastructure, as the industry prepares for 5G service. Facebook is building wired infrastructure, including the fastest undersea cable between the U.S. and Europe.

While AT&T is being punished for its high spending, the stock down almost 14% this year, FB stock is still up almost 3%. FB is also worth 2.35 times more than AT&T’s $236 billion.

What’s happening is that Facebook, like the other Cloud Czars — Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN), is becoming a global phone company. We don’t describe it that way, because its lines run data, voice being a low-bandwidth application.

But that’s what is happening.

The difference between Facebook and the other Czars, however, is that Facebook stock remains entirely dependent on advertising and free traffic to fill its coffers and data centers. It depends, like Tennessee Williams’ Blanche DuBois, entirely on the kindness of strangers, although both call such people “friends.”

The Power to Reason Away

It’s still working for Facebook stock.

Facebook logged $13 billion in revenue for the second quarter, and it still has no debt. The only hint of trouble is that while revenue was up 42% year-over-year in that second quarter, net income was up “only” 33%.

Thus analysts are ignoring the danger signs, because profits are still growing.

Of 47 analysts following FB stock, 35 still have it rated as a buy, and just two are saying sell. A JPMorgan Chase analyst was typical, calling the second-quarter performance “startling”, but then terming it a “reset” and keeping an overweight rating on FB stock.

There’s a reason for this madness beyond the fact that Facebook remains profitable. That is, its cloud assets are still considered very valuable. The company listed $18.36 billion in property assets in its second-quarter report, and $42 billion in cash and marketable securities. In December, it had $13.7 billion in property assets and $41.6 billion in cash and securities.

But if a cloud isn’t being used, does it make a sound on Wall Street?

The Bottom Line on Facebook Stock

FB stock, in short, has a huge cushion of cash against a fall, and even beyond that, FB has enormous physical assets in its data centers.

What Facebook doesn’t have is a strategy for using all its cloud capacity, beyond existing services Facebook, Instagram and Messenger. What it doesn’t have is a revenue stream beyond advertising, something all the other czars have.

You can argue that Alphabet has a similar vulnerability, but most of its services are meant to connect other services. They’re not a walled garden, like Facebook. They’re connective tissue. FB can argue that its services are also connective tissue … that it’s connecting people. But it’s easy to stop using Facebook services. It’s much harder to stop using things like search.

FB stock is not yet in an actual crisis, but the trend is not its friend.

Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Romantic Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in T, MSFT and AMZN.