Meta Issues Non-Voting Stock to Bankroll AI Expansion

Meta generated $64 billion in revenue during the third quarter, a 26 percent increase from the same period last year, but the company is facing a 68 percent surge in costs and expenses. To manage this financial strain while accelerating its artificial intelligence ambitions, Meta is introducing a novel financial instrument. On Wednesday, the company confirmed it will create a new class of non-voting capital stock. This move allows Meta to raise capital for AI development, employee compensation, and acquisitions without altering the voting dynamics of its existing shareholder base.

The primary objective of this new share class is to preserve Meta's founder-led corporate structure while expanding its funding tools. Susan Li, the company’s chief financial officer, explained that the new shares will be distributed to all existing shareholders as a stock dividend. By separating voting rights from capital ownership, Meta can maintain the control held by Class A and B shareholders. Li stated that this flexibility is essential for investing in the "unprecedented momentum" driven by AI across various business segments, allowing the company to pursue growth without the usual dilution of voting power associated with traditional stock offerings.

Despite the strong revenue growth, Meta’s Reality Labs division, which handles augmented and virtual reality hardware and software, continues to operate at a loss. However, the company expects these deficits to narrow significantly. The earnings report projects that Reality Labs losses will shrink to between $18 billion and $19 billion, down from higher levels in 2025. This improvement provides a more stable financial foundation for the company’s broader AI investments, which have been a central focus over the past year.

Meta has aggressively expanded its AI portfolio recently, releasing several models including Muse Spark and Muse Glimmer earlier in the year. More recently, the company introduced Muse Wonder and Muse Spark Open, the latter being an open-weight model that allows external developers to access its underlying parameters. Additionally, Meta launched Muse Code, an agent designed for software developers. At its recent Meta Connect event, the company unveiled a line of avatars for its AI assistant, Muse, aiming to make the technology more relatable and engaging for a broader audience.

The adoption rates for these new tools suggest the strategy is gaining traction. CEO Mark Zuckerberg noted that more than 10 million people in the U.S. and Canada have set up Muse personal agents in just a month and a half. He described the product as having "clear product-market fit" and said the company is now entering an operational phase focused on scaling. Zuckerberg indicated that Meta expects the service to eventually serve billions of users, reflecting confidence in the long-term viability of its AI push.

However, the company is not without challenges. Li acknowledged that ongoing legal and regulatory matters could impact future financial results. Specifically, she highlighted increased scrutiny regarding youth-related issues in several markets, with multiple trials scheduled for the coming months in the United States. As Meta moves forward with its new capital structure, it will need to navigate these legal hurdles while continuing to fund its extensive AI infrastructure buildout.