Meta creates new shares to fund its massive AI spending

Sixty-four billion dollars. That is the revenue Meta generated in its most recent quarter, a figure that represents a 26 percent surge compared to the same period last year. While these earnings beat Wall Street expectations, they were accompanied by a 68 percent year-over-year increase in costs and expenses. This financial strain, driven largely by the company’s aggressive expansion into artificial intelligence, has prompted a significant shift in how Meta plans to finance its future operations.

The timeline of this financial pivot began with reports from Semafor suggesting the company was preparing to issue a unique type of equity. On Wednesday, during its third-quarter earnings call, Meta officially confirmed the plan. The move allows the company to maintain its current structure while accessing new capital. This follows a year of rapid AI development, including the release of models like Muse Spark and Muse Glimmer earlier this year, as well as recent launches such as the open-weight Muse Spark Open and the coding agent Muse Code.

At the Meta Connect event earlier this year, the company also unveiled a new line of avatars for its AI assistant, Meta Muse, aiming to make the technology more relatable. The strategy appears to be paying off in terms of user adoption. CEO Mark Zuckerberg noted that growth has been strong, with the product holding the number one spot in the App Store almost daily. He stated that the company is now entering a more operational phase focused on scaling the service to eventually serve billions of people.

To support this scaling, CFO Susan Li announced that Meta intends to create a new class of non-voting capital stock. This new equity will be distributed to all existing shareholders as a stock dividend. Li explained that the primary goal is to create a publicly traded non-voting stock that can be used for capital raising, employee compensation, and acquisitions. This approach preserves the voting power of existing Class A and B shareholders, which is crucial for maintaining the company’s founder-led governance structure.

Li emphasized that this new funding tool provides the flexibility needed to invest in the momentum driven by AI across the business. The move is designed to ensure that the rapid growth of AI products does not come at the expense of the company’s existing ownership dynamics. It allows Meta to continue its heavy investment in technology while keeping decision-making control firmly in the hands of its current major shareholders.

While the AI division shows promise, other parts of the business face different challenges. Reality Labs, which handles Meta’s augmented and virtual reality hardware and software, continues to operate at a loss. However, the company expects these losses to shrink compared to 2025 levels, with projections placing the deficit between $18 billion and $19 billion. This reduction in losses is a positive sign, though it remains a significant drain on overall profitability.

Looking ahead, Meta faces potential headwinds from regulatory and legal scrutiny. Li acknowledged that the company is monitoring active matters that could impact its financial results. Specifically, there is increased attention on youth-related issues in several markets. The company has noted that several trials regarding these matters are scheduled in the United States in the coming months, adding a layer of complexity to its forward-looking financial outlook.

The issuance of non-voting stock represents a strategic move to balance aggressive growth with structural stability. By separating the voting rights from the capital-raising capability, Meta aims to sustain its momentum in the AI sector. This financial engineering allows the company to continue building out its infrastructure and expanding its user base, which currently includes more than 10 million people in the U.S. and Canada who have set up personal agents in just a month and a half.