Meta META shares slipped in premarket trading on Thursday even after the Facebook parent delivered better-than-expected third-quarter revenue, as investors weighed the cost of its aggressive artificial intelligence expansion.
The stock had initially climbed in after-hours trading on Wednesday following the results, but the gains proved short-lived as the stock was down over 1% early Thursday morning.
Attention shifted to Meta’s plan to introduce a new class of non-voting shares, adding another dimension to the debate over how the company will fund its growing AI ambitions.
The company also faced a legal setback after a judge in New Mexico ordered it to pay a $25 billion penalty in a data privacy case, adding to the challenges confronting the social media giant.
Advertising business continues to deliver
Meta recorded revenue of $64.60 billion in the third quarter, up 26% from the same period a year earlier and above analysts’ expectations of roughly $63.3 billion.
Advertising continued to be the company’s main growth engine, generating $63.06 billion during the quarter.
The results underlined the continued strength of Meta’s core business even as it directs substantial resources toward AI development.
Its outlook also exceeded expectations. Meta forecast fourth-quarter revenue between $73 billion and $76 billion, implying a midpoint of $74.5 billion, higher than Wall Street consensus.
However, the headline earnings figure was affected by a major legal expense.
Diluted earnings per share came in at $3.83 after Meta recorded a $9.89 billion charge linked to an August settlement involving teen mental-health litigation.
The company said diluted EPS would have been $7.40 without that expense.
New share class adds another dimension to AI funding
Meta’s proposed Class C shares are set to take effect on January 19, 2027.
The company plans to distribute one non-voting Class C share for each outstanding Class A and Class B share, although the record and payment dates have not yet been determined.
The distribution is expected to have the same market-price effect as a two-for-one stock split, while leaving existing shareholders’ voting power unchanged.
The new share class is intended to provide Meta with greater flexibility as it funds its expansion.
The move comes while the company is spending heavily on advanced chips, data centers and other infrastructure needed to compete in the AI market.
Meta’s capital expenditure forecast for 2026 stands at $135 billion to $145 billion, with the lower end raised from its previous estimate of $130 billion.
Muse growing as analysts remain positive
Meta is also seeking to build consumer-facing AI products that could complement its advertising business with its Muse agent largely impressing in its early days.
CEO Mark Zuckerberg said more than 10 million people in the US and Canada had created Muse accounts in roughly six weeks, adding that growth remained strong.
Analysts remained broadly optimistic about the company’s prospects, pointing to advertising momentum and opportunities to incorporate AI into its products.
JPMorgan’s Doug Anmuth maintained an Overweight rating and raised price target from $920 to $940 after the results. Goldman Sachs’ Eric Sheridan also retained a Buy rating, with an $885 target.
Evercore ISI raised its price target to $870 from $860 while maintaining an Outperform rating but Piper Sandler lowered the target to $850 from $875 while maintaining an Overweight rating citing increasing costs.
For investors, the central question remains whether the company’s substantial spending commitments will translate into growth sufficient to justify the cost, particularly as the new share plan and legal penalty add to scrutiny of its financial decisions.
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