Third-Quarter Earnings Beat Expectations at Meta Platforms as It Approves a New Non-Voting Share Class and AI Spending Keeps Rising!

Third-quarter revenue of $64.6 billion put Meta ahead of analysts’ $63.33 billion forecast, marking a 26% year-on-year increase for the period ended 30 September. The technology giant behind Facebook and Instagram also delivered earnings per share above the $3.57 consensus estimate: $3.83, compared with $1.05 a year earlier. That increase came despite legal expenses of $9.89 billion associated with a settlement with 52 state attorneys general over youth mental health litigation. Revenue from advertising reached $63.06 billion, a rise of 26%.  

Record user engagement across Facebook and Instagram was reported by CEO Mark Zuckerberg. Looking ahead to the fourth quarter, Meta anticipates revenue of $73 billion to $76 billion; the midpoint of that range exceeds Wall Street expectations. The legal expenses outlined above prompted an increase in the company’s full-year expense forecast. With investment in AI infrastructure continuing to expand, Meta anticipates full-year capital expenditure of $135 billion to $145 billion.  

Effective 19 January 2027, a new publicly listed class of non-voting common stock, Class C, will be introduced following board approval. Meta intends to distribute one Class C share for each Class A or Class B share held through a one-off stock dividend. Existing shareholders’ voting rights will remain unchanged, while the effect on the market price of Class A shares is expected to resemble that of a two-for-one stock split. Greater flexibility in financing, employee compensation, acquisitions and other corporate matters is the aim of the new share class. Approval came through written shareholder consent, following a unanimous recommendation from a special committee of independent directors.  

Approximately 25% of users who downloaded Muse use the AI product daily, Zuckerberg said during the earnings call as he outlined its early progress. He reaffirmed Meta’s commitment to creating a large-scale Muse network enabling AI agents to work together. The substantial computing resources recently required to run Muse were acknowledged by Zuckerberg, who nevertheless expects significant gains in profitability as computing efficiency improves.  

Continual improvements to its advertising engine through Advantage+ form one side of Meta’s competitive strategy; establishing its next growth engine through Muse and business agents forms the other. Advertising revenue remains strong enough to fund aggressive spending on AI, yet investors still need proof that these investments can produce lasting returns. The promise shown by Muse does not yet establish its potential for monetisation. Investors nonetheless retain their optimism about the company’s core business today and the future potential of AI.  

Market Insight: Meta’s Operating Profit Falls Short

The legal expenses outlined above accounted for most of the shortfall in Meta’s operating profit relative to expectations. Once this third-quarter charge is excluded, operating profit for the full year is expected to exceed the level recorded in 2025. At Reality Labs, the division covering virtual and augmented reality, the operating loss continued, though it was smaller than investors had forecast.