Third-Quarter Earnings Top Forecasts: Meta Platforms Approves New Non-Voting Share Class as AI Spending Rises Further!

Meta recorded third-quarter revenue of $64.6 billion. For the period ended 30 September, the technology giant behind Facebook and Instagram delivered 26% year-on-year growth, exceeding analysts’ $63.33 billion estimate. Earnings per share advanced from $1.05 a year earlier to $3.83, ahead of the $3.57 consensus forecast. This was despite a $9.89 billion legal expense tied to a settlement with 52 state attorneys general in youth mental health litigation. Advertising generated $63.06 billion, up 26%.  

Engagement on Facebook and Instagram set new records, CEO Mark Zuckerberg said. Meta’s fourth-quarter revenue guidance stands at $73 billion to $76 billion, a range whose midpoint is above Wall Street forecasts. Full-year expense guidance was also revised upwards to incorporate the legal expenses detailed above. As Meta expands its investment in AI infrastructure, it expects capital expenditure for the full year to reach $135 billion to $145 billion.  

Board approval has cleared the introduction of publicly listed Class C common stock without voting rights, effective 19 January 2027. A planned one-off stock dividend will allocate one Class C share for every Class A or Class B share held. Existing shareholders will keep their voting rights. For the market price of Class A shares, the expected impact of the distribution is comparable to a two-for-one stock split. Meta intends the new class to broaden its flexibility in financing, employee compensation, acquisitions and other corporate matters. Written shareholder consent secured approval after a special committee of independent directors recommended the move unanimously.  

Zuckerberg used the earnings call to discuss early progress at Muse: of the users who downloaded the AI product, approximately 25% use it daily. He said building a large-scale Muse network where AI agents can collaborate remains a commitment for Meta. Operating Muse has recently demanded substantial computing resources, Zuckerberg acknowledged. He nevertheless expects greater computing efficiency to improve its profitability significantly.  

Meta’s competitive strategy runs on two tracks. Advantage+ supports ongoing enhancements to its advertising engine, while Muse and business agents underpin efforts to build the next engine of growth. The strength of advertising revenue funds aggressive AI spending. Evidence of lasting returns from those investments, however, is still needed by investors. Muse’s prospects are encouraging, but its monetisation potential remains unproven. Investor optimism continues to encompass Meta’s current core business as well as AI’s future potential.  

Market Insight: Operating Profit Shortfall

A miss against operating profit expectations at Meta stemmed chiefly from the legal expenses detailed above. Full-year operating profit is expected to be higher than in 2025 when this third-quarter charge is excluded. Reality Labs, which handles virtual and augmented reality, remained loss-making at the operating level. Its loss was nevertheless smaller than investors had expected.