Facebook parent lifts capital spending outlook and plans non-voting shares to fund its AI push, while 10 million sign-ups for the Muse agent app lift investor mood despite a $25 billion New Mexico penalty
Meta Platforms is spending more heavily on artificial intelligence even as its new consumer AI agent app, Muse, draws a fast-growing user base. The company announced on Wednesday (October 21) that it would raise fresh capital through a new class of non-voting shares.
Its stock rose more than 4 per cent in extended trading. Investors responded to a fourth-quarter revenue forecast that topped analyst estimates and to strong early traction for Muse.
Spending climbs, funding plan takes shape
Meta lifted the lower end of its annual capital expenditure forecast. It now expects to spend between $135 billion and $145 billion this year, up from the earlier range of $130 billion to $145 billion. Much of the money is going into advanced chips and data centres as the company competes with OpenAI and Anthropic.
The heavy outlay is straining cash generation. Meta reported a free cash flow deficit of $2.12 billion for the third quarter, compared with positive free cash flow of $10.63 billion a year earlier.
To help fund the expansion, Meta will issue non-voting Class C common stock in January 2027, effectively amounting to a two-for-one split. The shares are intended to pay for acquisitions and retain top talent while keeping CEO Mark Zuckerberg’s control intact.
Third-quarter revenue came in at $64.60 billion, ahead of the $63.37 billion expected by analysts, according to LSEG data. For the fourth quarter, Meta projected revenue of $73 billion to $76 billion. Diluted earnings per share were $3.83, and would have been $7.40 without a $9.89 billion charge linked to its August settlement with US states over claims that its platforms addicted children.
Muse momentum and legal headwinds
Zuckerberg said more than 10 million people in the US and Canada had opened Muse accounts in about six weeks, with growth still strong. He expects the app to eventually serve “billions of people” and build the kind of network effect that powered Meta’s social platforms. That is why, he said, users are not being charged upfront.
He acknowledged that Muse costs more to run than most of the company’s earlier products and said monetisation would start sooner than usual. Chief Financial Officer Susan Li expects AI businesses to begin adding revenue in 2027. Reality Labs, the loss-making metaverse unit, will also pivot towards AI, with its losses projected to narrow to about $15 billion next year.
Legal pressure remains. A New Mexico judge ordered a $25 billion penalty on Wednesday after a jury found Meta misled residents over data sharing and content policy enforcement. Meta also cautioned that US trials over youth-related issues could affect its results.
