Meta Platforms Inc. announced on Wednesday that it will issue a new class of non-voting shares early next year as part of its strategy to finance an accelerated expansion in artificial intelligence (AI) development. The announcement coincided with the company reporting stronger-than-expected revenue growth for the third quarter and setting a robust revenue outlook for the fourth quarter.
The newly introduced Class C common stock will come into effect in January 2027 and is expected to operate as a two-for-one stock split. The move aims to support Meta’s continued investments in AI, acquisitions, and employee retention, while maintaining CEO Mark Zuckerberg’s control over the company amid rising competition in the AI sector. Meta has been heavily investing in advanced computing infrastructure, including chips and data centers, to compete with rivals such as OpenAI and Anthropic.
Zuckerberg highlighted the rapid user adoption of Meta’s consumer AI agent app, Muse, noting that over 10 million people in the United States and Canada had established accounts within six weeks of its launch. He projected Muse’s user base could eventually expand into the billions, potentially generating higher revenue per user than Facebook or Instagram currently do. “We want to help every person have an extremely capable personal agent that understands your goals and can help you achieve them and improve your life in whatever ways you want,” Zuckerberg stated during a conference call.
Meta raised the lower bound of its capital expenditure forecast for the year to between $135 billion and $145 billion, up from a previous estimate of $130 billion to $145 billion. For the quarter ending September 30, the company reported revenue of $64.6 billion, surpassing analysts’ expectations of $63.37 billion. Meta’s guidance for the fourth quarter stood between $73 billion and $76 billion, above the consensus estimate of $73.73 billion.
Despite strong revenue, the company experienced a free cash flow deficit of $2.12 billion in the third quarter, a reversal from a positive free cash flow of $10.63 billion during the same period last year. Zuckerberg attributed the deficit to increased AI-related investments, stating, “Our investments are paying off, the core business is strong, and we’re seeing velocity across the board.”
Investor sentiment has shifted positively, with analysts recognizing the early traction of Muse and the launch of competitive AI models as key factors justifying Meta’s elevated spending. However, some enterprises have limited their use of Muse over concerns about data security.
Meta is simultaneously facing mounting legal challenges. On Wednesday, a judge in New Mexico ordered the company to pay a $25 billion penalty after a jury found that Meta had misled residents about user data sharing and policies related to hate speech and misinformation, linked to the Cambridge Analytica scandal. Additionally, Meta agreed in August to a settlement potentially costing up to $18 billion over ten years, accompanied by restrictions on teenagers’ use of Facebook and Instagram, addressing claims that the platforms were designed to foster addiction among minors.