Meta creates a non-voting stock class to fund AI spending: $135-145 billion capex, cash flow negative

Meta Platforms reported third-quarter revenue of $64.60 billion, up 26% from a year earlier, and announced a new class of publicly listed, non-voting Class C stock, according to its 8-K earnings release on SEC EDGAR. CNBC reported that revenue beat analyst expectations. Meta shares closed at $697.52 and were at $718.93, up 3.1%, in after-hours trading at 5:51 PM ET, per Nasdaq.

What the new share class does

Effective January 19, 2027, Meta will create Class C common stock with no votes. The board then pays a one-time dividend of one Class C share for every Class A and Class B share. Meta says it expects the Class A price to then reflect the effect of a two-for-one split. The record and payment dates have not been set.

The stated reasons are the useful part. The release says the new class gives Meta a way to raise capital, pay employees, make acquisitions and cover general corporate purposes. A special committee of independent directors recommended it, and the release says it also keeps founder and CEO Mark Zuckerberg in control, because new shares carry no votes. The stock dividend does not change anyone's voting power. Zuckerberg also signed a Founder Alignment Agreement covering his sales of the Class C shares he receives.

Put plainly, a split by itself raises no money. A second listed share class that can be sold, handed to employees or used to buy companies without diluting voting control is a financing tool. Meta did not say it plans to sell any.

The number behind the 264% profit jump

Net income was $9.86 billion against $2.71 billion a year ago, and diluted EPS was $3.83 against $1.05. That looks like a blowout. It is mostly a comparison effect. Operating income actually fell 37%, from $20.54 billion to $12.99 billion, and the operating margin halved from 40% to 20%. Two items explain it:

• A $9.89 billion legal charge tied to Meta's August agreement with 52 state attorneys general over teen mental health, which provides for payments of up to about $18.59 billion. Excluding it, Meta says operating income would have been $22.88 billion, a margin of about 35% on our arithmetic, and EPS $7.40.
• A tax line that collapsed. The provision for income taxes was $3.14 billion, against $18.95 billion a year earlier, when the effective rate was 87%. The tax swing, not the business, is what lifts net income.

Spending: cash flow went negative

Capital expenditures, including finance lease principal, were $34.91 billion in the quarter, more than the $32.79 billion the business generated from operations. Free cash flow was negative $2.12 billion. Meta guided 2026 capex to $135-145 billion, narrowing the low end from $130 billion, and raised full-year expenses to $175-179 billion to absorb the legal charge.

The balance sheet shows where the money is going. Net property and equipment rose from $176.4 billion at the end of 2025 to $253.2 billion. Long-term debt rose from $58.7 billion to $80.9 billion, an increase of $22.2 billion in nine months. Cash and marketable securities are $82.45 billion, about level with $81.6 billion at the end of last year. Meta is funding the build-out with borrowing as well as profits, which is the context for a new share class.

Guidance and the open question

• Fourth-quarter revenue of $73-76 billion, with currency a roughly 1% headwind.
• Reality Labs losses of $18-19 billion in 2026, about $15 billion next year.
• No 2027 revenue forecast, but Meta expects to "sustain strong overall revenue growth" and to keep "investing aggressively." It has not yet set 2027 capex.
• Headcount of 66,775, down 15% from a year ago.

Operationally the quarter was strong: ad impressions rose 10% and the average price per ad rose 14%. The bear case, which Meta itself flags, is that spending is growing faster than the cash it produces, and that more youth-related trials are scheduled in coming months. Earlier today a judge ordered Meta to pay New Mexico $25 billion in a separate case; see our report. The company said the AI outlays will take longer to pay back than the core business. Background on the stock is in what is going on with Meta stock.

What to watch

The 8-K and information statement the company says are coming should give the record date, the Class C terms and the Founder Alignment Agreement. The next test is whether the 2027 capex figure arrives alongside any use of the new shares. Markets are at /markets.

Sources: Meta Platforms 8-K and Exhibit 99.1, SEC EDGAR; CNBC's live earnings headline on the revenue beat; WSJ and Bloomberg reporting on the stock class; Nasdaq for after-hours prices. Some data may be delayed. This is market information, not investment advice.