Facebook and Instagram's parent company, Meta, greenlit a new class of non-voting shares to help finance its AI expansion after its quarterly spending hit an all-time high of $34.91 billion.
Spending rose roughly 12% from just over $31 billion in the second quarter, outpacing the cash Meta generated from operations, leaving it with negative free cash flow of $2.12 billion.
Meta also raised the bottom end of its annual capital spending forecasts by $5 billion, now expecting to spend $135 billion to $145 billion this year.
The new Class C shares would give Meta another avenue to raise money and fund new acquisitions without diluting shareholders' voting power, helping CEO Mark Zuckerberg retain control of the company.
Under the new share plan, expected to take effect Jan. 19, 2027, existing shareholders will receive one Class C share for every Class A or B share they own.
"We hit major milestones this quarter toward delivering personal superintelligence for everyone," Zuckerberg said, pointing to the launches of Muse and Muse Wonder, which he described as Meta’s first frontier model.
Meta said AI was already helping its advertising business by improving ads and making them more effective. Its newer AI investments would take longer to pay off, the company said. It also stated it would not be providing a full-year 2027 revenue outlook.
Meta plans to keep investing and putting more resources toward AI in 2027 and said it expects losses at Reality Labs, its VR/AR division, to fall to around $15 billion next year.
Third-quarter revenue jumped 26% from a year earlier to $64.6 billion while its operating profit fell 37% to just under $13 billion.
Separately, a New Mexico court on Wednesday ordered Meta to pay $25 billion in penalties stemming from the 2018 Cambridge Analytica scandal. Meta chief legal officer C.J. Mahoney said it would appeal the ruling, according to CNBC.
Shares of Meta (META) jumped 5.8% in after-hours trading to $730. The stock remains up roughly 7.5% year to date.