Meta issues non voting shares to fund AI

Meta reported $64 billion in revenue for the third quarter, a 26% increase from the same period last year. This strong top-line performance sets the stage for a significant shift in the company's capital structure. The firm intends to fund its aggressive expansion into artificial intelligence through a newly created class of equity that will be distributed to current shareholders.

The core of this financial maneuver is the introduction of non-voting capital stock. During the earnings call on Wednesday, CFO Susan Li confirmed that the company will issue these shares via a stock dividend to all existing holders. This move allows Meta to raise capital for acquisitions, employee compensation, and general corporate purposes while preserving the voting power of the current Class A and B shareholders.

Li explained that the new shares are designed to maintain the company's founder-led governance structure. By creating a publicly traded non-voting instrument, Meta gains greater flexibility in its funding tools. This approach enables the firm to invest behind the momentum it sees in its AI initiatives without altering the balance of control among existing voting stakeholders.

While revenue grew substantially, the company's costs and expenses surged by 68% year over year. This sharp increase in spending reflects the heavy investment required to sustain rapid technological development. The financial burden of these operations is particularly evident in the Reality Labs division, which handles AR glasses and VR headsets.

Reality Labs continues to operate at a loss, though the deficit is expected to narrow. The company projects that losses for this division will shrink from 2025 levels to a range between $18 billion and $19 billion. This trajectory suggests a gradual path toward profitability for the hardware and software unit, even as it remains a significant drain on overall earnings.

The company has accelerated its AI product releases over the past year, launching several models including Muse Spark and Muse Glimmer. Recent additions include Muse Wonder and Muse Spark Open, an open-weight model available for external developers. Meta also introduced Muse Code, a specialized coding agent, and announced a line of avatar options for its AI assistant to enhance user engagement.

Adoption metrics indicate strong market reception for these new tools. CEO Mark Zuckerberg stated that more than 10 million people in the U.S. and Canada have set up Muse personal agents in just a month and a half. He noted that the product has held the number one spot in the App Store for nearly every day during this period, signaling clear product-market fit.

Despite the growth, management acknowledged ongoing risks. Li pointed to active legal and regulatory matters that could impact financial results. Specifically, the company faces increased scrutiny regarding youth-related issues in several markets. Multiple trials related to these concerns are scheduled in the United States in the coming months, adding a layer of uncertainty to the business outlook.