Meta unveils $64 billion quarter and a new stock class to fuel AI

Meta is set to introduce a distinct financial instrument to support its aggressive expansion into artificial intelligence. During a call held on Wednesday, the company confirmed it will create a new class of stock that does not carry voting rights. This move is designed to help finance the significant costs associated with its ongoing AI development while preserving the governance structure for current investors.

The announcement followed the release of the company's third-quarter financial results. While the firm reported strong revenue growth, it also highlighted a sharp increase in expenses. This financial backdrop underscores the need for additional capital to sustain the rapid pace of innovation in the AI sector.

Meta's financial performance for the most recent quarter exceeded Wall Street forecasts. The company generated $64 billion in revenue, marking a 26% increase compared to the same period last year. However, this growth came with a corresponding rise in costs, which climbed by 68% on an annual basis. The company's Reality Labs division, which handles augmented and virtual reality hardware and software, continues to operate at a loss. Management projects that these losses will narrow slightly from their 2025 levels to a range between $18 billion and $19 billion.

Susan Li, the company's chief financial officer, detailed the mechanics of the new equity during the earnings call. She stated that the non-voting capital stock will be distributed to all existing shareholders through a stock dividend. Li explained that the primary goal is to create a publicly traded instrument that can be used for raising capital, compensating employees, and funding acquisitions. This approach allows the company to maintain its current founder-led structure while expanding its available funding tools.

The creation of this new share class offers Meta greater flexibility in how it deploys capital. Li noted that this flexibility is crucial for investing in the momentum currently driving every part of the business. By separating voting power from economic interest in this new class, the firm aims to streamline its investment strategy without altering the balance of power among existing Class A and Class B shareholders.

Over the past year, Meta has intensified its focus on AI with several product launches. The company released models such as Muse Spark and Muse Glimmer earlier in the year. More recently, it introduced Muse Wonder and Muse Spark Open, the latter being an open-weight model that allows external developers to access and build upon its parameters. Additionally, the firm launched Muse Code, a specialized agent designed to assist software developers.

At its annual Connect event, the company also revealed a new line of avatars for its AI assistant, Meta Muse. These characters are designed to be cute and cuddly, aiming to make the technology feel more relatable and engaging for users. This branding strategy reflects a broader effort to humanize the user experience with AI services.

The adoption of these new tools has been rapid. CEO Mark Zuckerberg reported that more than 10 million people in the United States and Canada have set up personal Muse agents within just six weeks. He noted that the product has maintained the number one spot in the App Store for nearly every day during this period. Zuckerberg described the current state as having achieved clear product-market fit, signaling a shift toward a more operational phase focused on scaling the service to eventually serve billions of users.

Despite the positive product metrics, the company is not without challenges. Li acknowledged that ongoing regulatory and legal matters could impact future financial results. The firm is currently facing scrutiny regarding youth-related issues in several markets. Several trials concerning these matters are scheduled to take place in the United States in the coming months, adding a layer of uncertainty to the company's forward-looking plans.