Key insights
- Meta Platforms exceeded Q3 revenue expectations driven by strong advertising growth and provided an optimistic Q4 forecast. The company also announced a new nonvoting share class, effective in 2027, intended to provide capital-raising flexibility. Significant investments in AI infrastructure were highlighted, with early positive engagement for its Muse AI product. Shares rose following the news.
Investing.com -- Meta Platforms beat Wall Street’s third-quarter revenue expectations on strong advertising growth and forecast further gains in the current quarter, while unveiling a new nonvoting share class to support its long-term investment plans. Shares rose 7% following the results.
The Facebook and Instagram parent reported revenue of $64.60 billion for the quarter ended Sept. 30, up 26% from a year earlier and above analyst expectations of $63.33 billion. Earnings per share rose to $3.83 from $1.05 a year earlier, beating the $3.57 consensus, despite a $9.89 billion legal charge tied to a settlement with 52 state attorneys general over teen mental health litigation.
Advertising revenue climbed 26% to $63.06 billion. Chief Executive Mark Zuckerberg said Facebook and Instagram were seeing all-time highs in engagement.
Meta forecast fourth-quarter revenue of $73 billion to $76 billion, above Wall Street expectations at the midpoint. The company also raised its full-year expense outlook to incorporate the legal charge and forecast capital spending of $135 billion to $145 billion as it continues investing heavily in AI infrastructure.
The board approved a new publicly listed, nonvoting Class C common stock, effective Jan. 19, 2027. Meta plans to distribute one Class C share for each outstanding Class A and Class B share in a one-time stock dividend, which it expects to have the effect of a two-for-one stock split on the market price of Class A shares without changing shareholders’ voting power.
The new shares are intended to give Meta additional flexibility for capital raising, employee compensation, acquisitions and other corporate purposes. The move was unanimously recommended by a special committee of independent directors and approved by shareholder written consent.
On the earnings call, Zuckerberg highlighted early traction for Muse, saying about 25% of people who downloaded the AI product use it every day. Meta aims to build a large-scale Muse network that allows AI agents to collaborate, he said.
Zuckerberg acknowledged that Muse is highly compute-intensive to run in the near term but expects it to become highly profitable as computing efficiency improves.
Meta’s operating income fell short of expectations, reflecting the legal charge. The company said it expects full-year operating income to exceed 2025 levels, excluding the third-quarter charge. Reality Labs, its virtual and augmented reality division, continued to post an operating loss, although it was narrower than analysts had expected.
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