Meta Will Split Stock, Create New Class to Fund AI Spending
The company, which reported record revenue of $64.6 billion for the third quarter, says the 2-for-1 split won’t affect Mark Zuckerberg’s voting control
- Meta Platforms will create a new class of nonvoting stock to raise capital for artificial intelligence development.
- The company reported record third-quarter revenue of $64.6 billion, but net income fell below analyst forecasts due to a $9.9 billion legal charge.
- An effective 2-for-1 stock split won’t affect Chief Executive Mark Zuckerberg’s voting control.
Meta Platforms META 0.47%increase; up pointing triangle is getting creative to fund its massive investments in artificial intelligence.
The company reported record revenue for the third quarter and said it would create a new class of nonvoting stock to raise the capital it needs for developing and serving AI models. The new shares will be issued as a dividend to holders of common and supervoting shares, with an effective date of Jan. 19, 2027. The effective 2-for-1 stock split won’t affect Chief Executive Mark Zuckerberg’s voting control or the voting power of other shareholders, the company said.
In a filing, Meta said Zuckerberg would be able to immediately sell 20% of his new nonvoting shares, potentially helping him pay a new wealth tax on California’s upcoming ballot. The company said Zuckerberg faced a possible diminishment of his voting interest if the tax forced him to sell shares, and that he had discussed the possibility of relocating. Zuckerberg has committed to living in the same state as Meta’s headquarters for at least eight years barring unforeseen circumstances, the filing said.
The company said it brought in $64.6 billion in revenue, a 26% year-over-year increase, and net income of $9.8 billion. The revenue figure exceeded the expectations of analysts surveyed by FactSet. The net income total was considerably below analysts’ forecast of $17.2 billion, dragged down by a $9.9 billion legal charge related to the company’s settlement of social-media harm lawsuits.
In the current quarter, Meta expects revenue to be in the range of $73 billion to $76 billion, the high end of which is above analyst expectations. It also revised its range of expected capital expenditures for the year, raising the low end to $135 billion, from $130 billion. The high end of the range remained unchanged at $145 billion.
Meta finance chief Susan Li didn’t provide a capex estimate for 2027 but said company leaders “expect to continue investing aggressively” to support both its core business and AI bets.
Meta’s free cash flow went into negative territory for the first time since it became a public company, although analysts had expected a stronger downturn. The company reported negative free cash flow of $2.1 billion versus analyst projections of negative $9.4 billion.
Meta’s shares rose 4% in after-hours trading.
Investors have at times been hesitant to support the spending spree Zuckerberg has undertaken to transform Meta into an AI company, repeatedly pushing him to see near-term returns.
They responded warmly when Meta launched Muse, its new personal-assistant AI agent, in September. The app, which offers subscriptions at $20 and $100 a month, has been downloaded more than 10 million times, according to SensorTower, a market intelligence firm. Meta’s stock gained nearly 20% in the month after its debut.
Investors pointed to Meta’s potential ability to monetize the app, with one estimate from Truist Securities projecting Muse could add $28.5 billion of incremental revenue by 2030. On a call with investors and analysts, Zuckerberg said about 25% of people who have set up Muse use it “on any given day” and that shopping was the most popular use case.
But to become Meta’s next large business, Muse will have to clear a number of hurdles, beginning with widespread unpopularity of AI as expressed in polls. Muse has also been blocked by dozens of websites, including Amazon.com, limiting its utility in carrying out shopping and other tasks.
Still, Meta sees Muse as the centerpiece of its whole operation and has restructured the company around the division that houses it, called Meta Superintelligence Labs. It also announced a new business line focused on selling AI tools to enterprise customers.
The goal, Zuckerberg said, is to create “a large-scale Muse network” where billions of Muse agents work together to get more done for people and businesses.
Another weight on the company’s bottom line has been legal costs related to the many social media lawsuits it is facing. In August, Meta settled with 48 states for up to $18 billion and agreed to make a number of changes to the way its platforms operate accounts for teens.
On Wednesday, ahead of its earnings report, a judge in New Mexico ordered Meta to pay $25 billion after a jury found the social-media company misled users about its data-privacy practices. Meta didn’t immediately respond to a request for comment about the judgment.