Meta Platforms Inc. saw its shares dip more than 1% in premarket trading on Thursday, even after the company reported third-quarter revenue that topped analyst expectations. The initial after-hours gains faded as investors focused on the escalating costs of its artificial intelligence expansion and a newly proposed share structure.
The company posted revenue of $64.60 billion for the quarter, a 26% increase year-over-year and above the consensus estimate of roughly $63.3 billion. Advertising remained the primary growth engine, generating $63.06 billion in revenue. The results underscore the continued strength of Meta's core business even as it channels substantial resources into AI development.
Meta's fourth-quarter revenue outlook also came in ahead of Wall Street forecasts, with the company guiding to a range of $73 billion to $76 billion, implying a midpoint of $74.5 billion. However, the headline earnings figure was affected by a significant legal charge. Diluted earnings per share came in at $3.83 after recording a $9.89 billion charge tied to an August settlement involving teen mental-health litigation. Without that expense, diluted EPS would have been $7.40.
New share class adds another dimension to AI funding
Meta announced plans to introduce a new class of non-voting shares, set to take effect on January 19, 2027. The company intends to distribute one non-voting Class C share for each outstanding Class A and Class B share, though record and payment dates have not yet been determined. The distribution is expected to have the same market-price effect as a two-for-one stock split while leaving existing shareholders' voting power unchanged.
The new share class is designed to give Meta greater flexibility as it funds its expansion. The company is spending heavily on advanced chips, data centers, and other infrastructure needed to compete in the AI market. Meta's capital expenditure forecast for 2026 stands at $135 billion to $145 billion, with the lower end raised from its previous estimate of $130 billion.
Muse growing as analysts remain positive
Meta is also working to build consumer-facing AI products that could complement its advertising business. CEO Mark Zuckerberg said more than 10 million people in the US and Canada had created Muse accounts in roughly six weeks, adding that growth remained strong.
Analysts remained broadly optimistic about the company's prospects, pointing to advertising momentum and opportunities to incorporate AI into its products. JPMorgan's Doug Anmuth maintained an Overweight rating and raised his price target from $920 to $940. Goldman Sachs' Eric Sheridan retained a Buy rating with an $885 target. Evercore ISI raised its price target to $870 from $860 while maintaining an Outperform rating, but Piper Sandler lowered its target to $850 from $875, citing increasing costs.
The company also faced a legal setback after a judge in New Mexico ordered it to pay a $25 billion penalty in a data privacy case, adding to the challenges confronting the social media giant.
This article is for informational purposes only and does not constitute financial advice.
