Meta Platforms Delivers Third-Quarter Earnings Beat Amid Rising AI Spending; New Non-Voting Share Class Approved!

Revenue and earnings exceeded analysts’ forecasts at Meta, the technology giant behind Facebook and Instagram, for the third quarter ended September 30. Revenue grew 26% year on year to $64.6 billion, against expectations of $63.33 billion. Earnings per share climbed from $1.05 a year earlier to $3.83, surpassing the consensus estimate of $3.57, despite $9.89 billion in legal expenses arising from a settlement with 52 state attorneys general over youth mental health litigation. Advertising contributed $63.06 billion in revenue, an increase of 26%.  

Engagement among users of Facebook and Instagram hit record levels, according to CEO Mark Zuckerberg. For the fourth quarter, Meta forecasts revenue in the range of $73 billion to $76 billion, placing the midpoint above Wall Street expectations. To account for the legal expenses noted above, the company increased its full-year expense guidance. It also projects full-year capital expenditure of $135 billion to $145 billion as investment in AI infrastructure continues to rise.  

A new publicly listed class of non-voting common stock, Class C, has received board approval, effective 19 January 2027. Under a planned one-time stock dividend, Meta will issue one Class C share for every Class A or Class B share held. While existing shareholders will retain their voting rights, the distribution is expected to affect the market price of Class A shares in a manner similar to a two-for-one stock split. Introducing the share class is intended to provide Meta with more flexibility across financing, employee compensation, acquisitions and other corporate matters. A special committee comprising independent directors unanimously recommended the proposal, which was approved by written shareholder consent.  

Discussing Muse’s initial progress on the earnings call, Zuckerberg said approximately 25% of users who downloaded the AI product use it every day. Meta remains committed to developing a large-scale Muse network through which AI agents can collaborate, he said. Although Zuckerberg acknowledged the substantial computing resources Muse has recently needed to operate, he expects improved computing efficiency to deliver a significant increase in its profitability.  

Two parallel priorities define Meta’s competitive push: strengthening its advertising engine through Advantage+ and developing its next source of growth through Muse and business agents. Robust advertising revenue finances the company’s aggressive AI expenditure. Investors, however, still require evidence that this investment can deliver sustained returns. While Muse appears promising, its monetisation potential has yet to be established. Optimism among investors nevertheless extends to both Meta’s existing core business and the future potential of AI.  

Market Insight: What Weighed on Meta’s Operating Profit?

Legal expenses cited above were the main reason Meta’s operating profit missed expectations. Without this third-quarter charge, operating profit for the full year is expected to surpass the 2025 level. An operating loss persisted at Reality Labs, Meta’s virtual and augmented reality division, but came in below the loss investors had anticipated.