Meta Platforms, the parent company of Facebook and Instagram, is making artificial intelligence the centre of its future growth strategy as it prepares to introduce a new class of shares to help fund its expensive AI expansion.
The company announced on Wednesday that it would issue a new category of non-voting shares in January 2027, effectively creating a two-for-one stock split. The move is intended to help Meta finance acquisitions and attract top talent while preserving Chief Executive Officer Mark Zuckerberg’s control of the company.
Meta’s shares rose more than 4 per cent in extended trading following the announcement, as investors reacted to its financial results, stronger-than-expected revenue forecast and early success with its new consumer AI agent, Muse.
The company has been investing heavily in advanced computer chips and data centres as it attempts to compete with AI leaders OpenAI and Anthropic. However, the spending has put pressure on Meta’s cash flow as it races to establish a stronger position in the rapidly developing AI market.
Meta’s Muse AI Attracts Millions of Users
Zuckerberg said more than 10 million people in the United States and Canada had created Muse accounts within approximately six weeks of its launch, adding that user growth remained strong.
He believes the AI agent could eventually serve billions of people and potentially generate more revenue per user than Meta’s existing platforms.
Zuckerberg also expects Muse to benefit from a network effect, in which the service becomes more valuable as more people and businesses begin using it.
“Part of the reason why we’re not just charging everyone up front to use this is we want to establish this Muse network, and we think that it’s going to be more valuable for people at scale when there are a lot of people and businesses using Muse,” he said during a conference call following the company’s third-quarter financial results.
However, Zuckerberg acknowledged that operating Muse costs more than many of Meta’s previous products. He said the company would begin monetising the AI agent sooner than it typically does with new services.
Meta Chief Financial Officer Susan Li expects the company’s AI businesses to begin generating additional revenue in 2027, eventually becoming a significant source of income beyond its existing operations.
Despite its early popularity, some businesses have restricted Muse’s access to their systems because of security concerns.
Meta Increases Spending as Cash Flow Comes Under Pressure
Meta has increased its investment in AI infrastructure, including chips and data centres, as it competes to develop more advanced AI products.
The company raised the lower end of its capital expenditure forecast for the year, now expecting spending of between $135 billion and $145 billion, compared with its previous forecast of $130 billion to $145 billion.
The spending comes as Meta’s free cash flow weakened significantly. The company reported a deficit of $2.12 billion in the third quarter, compared with positive free cash flow of $10.63 billion during the same period a year earlier.
Nevertheless, its latest financial results exceeded analysts’ expectations.
Meta reported third-quarter revenue of $64.60 billion, surpassing the $63.37 billion forecast by analysts surveyed by LSEG.
The company also projected fourth-quarter revenue of between $73 billion and $76 billion, compared with analysts’ estimate of $73.73 billion.
Jesse Cohen, a senior analyst at Investing.com, said investors’ attitude towards Meta’s heavy spending had changed as the company demonstrated progress with its AI products.
“The market has shifted from punishing Meta for spending to rewarding it for having a compelling product story,” he said.
AI Takes Priority as Meta Reassesses Reality Labs
Meta is also redirecting its strategy towards AI within Reality Labs, the division that previously led the company’s push to develop the metaverse, an immersive digital environment that inspired its name change from Facebook to Meta in 2021.
In its financial report, the company said it remained focused on improving Reality Labs’ profitability.
Meta expects the division’s losses to narrow to approximately $15 billion next year as it redirects investment towards other priorities, particularly AI.
The shift signals a change in the company’s investment focus, with artificial intelligence taking greater priority as Meta looks for products that can generate revenue and strengthen its position in the technology industry.
Legal Challenges Continue to Threaten Meta
Despite its financial performance and AI ambitions, Meta continues to face significant legal challenges over privacy, user safety and the handling of personal information.
On Wednesday, a judge in New Mexico ordered the company to pay a $25 billion penalty after a jury found that Meta had misled state residents about how it shared user data with third parties and enforced policies on hate speech and misinformation. The case was linked to concerns surrounding British political consulting firm Cambridge Analytica.
Emarketer senior analyst Minda Smiley said the ruling highlighted the legal difficulties Meta could continue facing into next year.
She also warned that privacy and safety concerns could intensify as AI agents become more widely used, potentially creating additional challenges for a company whose record on these issues has already attracted scrutiny.
In August, Meta agreed to pay as much as $18 billion over a decade and restrict teenagers’ use of Facebook and Instagram to settle claims brought by nearly all US states. The states had alleged that the company’s platforms were designed to encourage addictive behaviour among children.
Meta reported diluted earnings per share of $3.83 for the third quarter. The figure would have been $7.40 without a $9.89 billion charge associated with the August settlement.
The agreement removed a significant regulatory obstacle that had weighed on Meta’s stock and helped the company avoid a potentially lengthy trial that could have revealed more internal documents about its treatment of young users.
However, Meta warned investors that it continued to face regulatory scrutiny and US trials involving youth-related issues that could affect its financial results.
With Muse gaining users and AI investment expanding, Meta is betting that its latest technology push will generate new revenue streams and justify its rising costs, even as legal disputes and security concerns remain significant risks.
