Meta lifts capex floor and unveils nonvoting Class C stock after record quarter

Meta just raised the floor on its capital spending and announced a new class of nonvoting stock, both in the same earnings report. The company now expects capital expenditure of $135 billion to $145 billion this year, up from $130 billion to $145 billion before, according to Mint, and will issue Class C common stock in January 2027.

Shares of the Facebook and Instagram parent rose more than 4% in extended trading. Big numbers, big appetite, and a founder who keeps the steering wheel. I am delighted.

The quarter: record revenue, enormous bills

Third-quarter revenue came in at $64.60 billion, up 26% from a year earlier and ahead of the $63.37 billion Wall Street estimate compiled by LSEG. Meta's own release has the rest of the engine room: daily active people averaged 3.64 billion in September, up 3%. Ad impressions rose 10% and the average price per ad rose 14%.

The outlook is just as glossy. Meta projected fourth-quarter revenue of $73 billion to $76 billion, against estimates of $73.73 billion.

Now the other side of the ledger. Total costs and expenses rose 68% to $51.61 billion, a figure that includes a litigation charge. Diluted earnings per share were $3.83, and would have been $7.40 without a $9.89 billion charge tied to the August settlement. In that deal, Meta agreed to pay up to $18 billion over a decade and restrict teen use of Facebook and Instagram, to settle claims by nearly all US states that its platforms were designed to addict children.

Then there is the spending itself. Third-quarter capital expenditures, including principal payments on finance leases, were $34.91 billion. Meta posted a free cash flow deficit of $2.12 billion, compared with positive free cash flow of $10.63 billion a year earlier. It still held $82.45 billion in cash, cash equivalents and marketable securities as of September 30.

The new share class

The Class C shares will be issued as a dividend to holders of common and supervoting shares, effective January 19, 2027, which amounts to an effective 2-for-1 stock split. The company says the move will not affect Mark Zuckerberg's voting control or the voting power of other shareholders. Mint reports the purpose: fund AI expansion, finance acquisitions and retain top talent.

This is a known playbook. As we reported earlier, Semafor notes that Alphabet did a similar 2-for-1 split in 2014 that introduced nonvoting shares and kept Larry Page and Sergey Brin's combined control just over 50%. Per Semafor, Alphabet issued $85 billion of new stock earlier this year to pay for AI investments, and half of those shares carry no voting rights.

What the reporting does not include: a dollar target or issuance volume for the Class C shares, or a ticker symbol. Those are the details that will tell us how much Meta intends to raise with its new paper.

Muse starts the monetization clock

The product at the center of the strategy is Muse, Meta's agent. Zuckerberg said more than 10 million people in the US and Canada have set up Muse accounts in a month and a half, and that growth remains strong. He also acknowledged that Muse costs more to offer than many of Meta's other new products, and said the company would monetize it "somewhat sooner on this than our normal playbook."

CFO Susan Li forecast that Meta's AI businesses would begin contributing incremental revenue in 2027 and become "a meaningful source of revenue diversification over time." Meanwhile, Meta forecast that Reality Labs losses would narrow next year to around $15 billion "as we reallocate investment toward other priority areas, primarily AI." The metaverse budget is feeding the machine.

One wrinkle: according to Mint, some enterprises are restricting the agent's access over security concerns. The reporting does not say what those concerns are.

What to watch

• The courtroom bill. A New Mexico judge ordered a $25 billion penalty on Wednesday after a jury found Meta misled the state's residents about how it shared user data and enforced policies on hate speech and misinformation, in a case related to Cambridge Analytica. Whether Meta will appeal is not stated in the coverage.
• The size of the Class C program. No target, no ticker, and January 19, 2027 is the date on the calendar.
• Muse monetization. Zuckerberg promised it sooner than usual. The details have not been given.
• Cash flow. A $2.12 billion deficit in one quarter, with spending guided to $135 billion to $145 billion for the year, is the number to track.

The record revenue pays for a lot, but not yet for all of it. Meta is betting that its audience, its founder's control and a fresh class of shares can carry the AI build-out the rest of the way.