Meta creates new class of shares to fund AI investments
What's the story
Meta plans to introduce a new class of non-voting shares to help fund its growing AI ambitions. The move was reported by Semafor as the company released its third-quarter earnings and was later confirmed during its earnings call. Susan Li, Meta's CFO, said the shares would be distributed to all existing shareholders through a stock dividend. Unlike regular shares, the new stock would not give holders voting rights on company decisions, allowing Meta to raise capital without changing control.
Funding allocation
New shares will be used for acquisitions and employee compensation
The newly introduced non-voting stock will not only be used to fund Meta's AI initiatives but also for potential acquisitions, employee compensation, and other general corporate purposes.
During the earnings call, Li said that this new class of shares would "expand our funding tools and give us flexibility to invest behind the unprecedented momentum we're seeing across every part of our business driven by AI."
Strategic growth
Meta's investment in AI
Meta has invested heavily in the AI race, building massive data centers, hiring top talent from companies like OpenAI, and developing competitive AI models.
The company now expects capital expenditures between $135 billion and $145 billion this year, slightly higher than its previous estimate of $130 billion to $145 billion.
Despite these costs, Meta's shares rose over 4% in extended trading after the announcement of the new non-voting shares.
AI developments
Muse's rapid growth and potential revenue generation
Meta launched its AI agent, Muse, in September. The app quickly became popular, hitting 10 million downloads in the US this week.
Zuckerberg said he expects Muse to eventually serve "billions of people," potentially generating more revenue than the average Meta user.
He also hinted at monetizing the agent sooner than usual due to its high operational costs compared to other new products from Meta.
Financial forecast
Optimism around AI revenue streams and Q3 performance
Li expects the company's AI businesses to start contributing incremental revenue in 2027.
She also predicts these will become "a meaningful source of revenue diversification over time."
Despite a free cash flow deficit of $2.12 billion in Q3, Meta's revenue for the period exceeded expectations at $64.60 billion, beating Wall Street estimates of $63.37 billion.