Meta Platforms (NASDAQ: META) saw its shares dip nearly 2% in early trading on Monday before recovering to a modest gain of about 0.2% by late morning, following the company's announcement of a $35 billion equity raise to support its artificial intelligence initiatives. The move comes amid ongoing investor scrutiny over Meta's escalating capital expenditures in the AI sector.
The company also revealed plans for an at-the-market offering program of up to $60 billion, contingent on the introduction of its new non-voting Class C shares, expected to begin trading in the first quarter of 2027. This additional fundraising mechanism provides Meta with flexibility to tap equity markets as needed.
Meta's third-quarter results, reported last week, showed revenue of $64.6 billion, a 26% year-over-year increase, beating analyst expectations. Advertising revenue, the company's primary income source, also rose 26% to approximately $63.1 billion. Adjusted earnings per share came in at $7.40, excluding a $9.9 billion legal charge related to a child-safety settlement. The company guided fourth-quarter revenue to between $73 billion and $76 billion, ahead of consensus estimates.
Despite these strong operational metrics, investor concerns have centered on the rising costs of Meta's AI expansion. The company raised its full-year capital expenditure outlook to $135 billion to $145 billion, and reported negative free cash flow of about $2.1 billion for the quarter. Additionally, Meta has committed approximately $825 billion to data centers, computing capacity, and related agreements, amplifying worries about future capital needs.
Piper Sandler analyst Thomas Champion viewed the equity offering positively, stating that it could help alleviate some of these concerns. The firm believes the $35 billion raise removes an overhang on the stock, is less dilutive than feared, signals strong demand from key AI players, and provides Meta with additional funding to continue its AI investments. Piper Sandler maintains an Overweight rating on Meta with a price target of $850.
Bank of America also raised its price target on Meta to $845 from $810, reaffirming a Buy rating and listing the company among its top AI investment ideas. The analyst community's supportive stance has helped stabilize the stock after last week's sharp sell-off.
The equity raise and ATM program are seen as strategic moves to finance Meta's ambitious AI roadmap without straining its balance sheet. Investors will be watching how the company balances these investments with profitability and shareholder returns in the coming quarters.
This article is for informational purposes only and does not constitute financial advice.
