Meta creates new stock type to fund AI growth

Meta has announced a structural change to its corporate shares that will help pay for its massive expansion in artificial intelligence.

The company confirmed during its third quarter earnings call that it plans to issue a new class of capital stock. This new stock will not carry voting rights for the people who own it. Susan Li, the company's chief financial officer, explained that these shares will be distributed to all current shareholders as a stock dividend. This move allows Meta to create a publicly traded instrument that can be used for raising new capital, compensating employees, and funding acquisitions. At the same time, it ensures that the voting power remains with the existing Class A and Class B shareholders.

This strategy is designed to preserve the founder-led structure of the business. Li stated that the new shares provide the company with more funding tools and greater flexibility. This flexibility is intended to support the significant momentum the company is seeing across its various business units, which is largely driven by its AI initiatives. By separating ownership from voting power, Meta can continue to invest heavily without diluting the control held by its current leadership and major investors.

The financial results for the recent quarter were strong, exceeding expectations set by Wall Street analysts. The company reported revenue of $64 billion, which represents a 26 percent increase compared to the same period last year. However, this growth came with higher costs. Expenses rose by 68 percent year over year, reflecting the heavy investment required to support its technological advancements and new product lines.

The Reality Labs division, which handles augmented reality glasses and virtual reality headsets, continues to operate at a loss, though the deficit is shrinking. The company expects the losses for this division to decrease from their 2025 levels to a range between $18 billion and $19 billion. Meanwhile, the AI sector has seen rapid development over the past year. Meta has released several new models, including Muse Spark and Muse Glimmer earlier in the year. Recently, it added Muse Wonder and Muse Spark Open, the latter being an open-weight model that allows outsiders to access its underlying parameters. The company also launched a coding agent for developers called Muse Code.

At its recent Meta Connect event, the company introduced a new line of avatars for its AI assistant, Meta Muse. These characters are designed to be cute and cuddly, aiming to make the AI services feel more relatable to users. The adoption of these tools has been rapid. CEO Mark Zuckerberg noted that more than 10 million people in the U.S. and Canada have set up Muse personal agents in just a month and a half. He added that the product has maintained the number one spot in the App Store almost every day.

Zuckerberg described the current state as a new operational phase focused on scaling the product. The company expects the appeal of these tools to grow until they serve billions of people. Despite the positive momentum, the company acknowledged some ongoing risks. Li mentioned that the company is monitoring active legal and regulatory matters that could impact its financial results. In particular, there is continued scrutiny regarding youth-related issues in several markets, with several trials scheduled in the United States in the coming months.

This new stock structure provides Meta with a versatile tool for managing its balance sheet. It allows the company to tap into public markets for funding without altering the internal governance dynamics. As the company continues to push forward with its AI strategy, this financial maneuvering may prove essential in sustaining its aggressive pace of innovation and market expansion.