Meta's AI Funding Path: A New Stock Class

Meta is significantly increasing its investment in artificial intelligence, and it is now outlining a specific method to finance that expansion. During the release of its third-quarter earnings on Wednesday, October 21, reports surfaced regarding a plan to utilize a specific financial instrument to support these expenditures.

The company intends to create a new class of non-voting capital stock. Susan Li, Meta's chief financial officer, explained that these shares are designed to be distributed to all current shareholders through a stock dividend. The specific purpose of this new class of stock is to facilitate publicly traded non-voting stock for various corporate activities.

Li detailed that the new stock can be used for capital raising, employee compensation, acquisitions, and other general corporate purposes. Importantly, this structure is intended to preserve the voting power of existing Class A and B shareholders. By doing so, the company aims to maintain its current founder-led structure while simultaneously expanding its available funding tools.

Li added that this provides flexibility to invest behind the unprecedented momentum seen across every part of the business, driven by AI. These shares will allow the company to expand its funding tools and provide flexibility to invest in the momentum across the business, driven by AI. The issuance of this stock class is directly linked to the company's ability to finance its push into artificial intelligence.

The financial context for this move includes strong quarterly performance. Meta reported $64 billion in revenue for the quarter, which represents a 26% increase compared to the previous year, beating Wall Street expectations. However, costs and expenses also rose by 68% year-over-year.

A significant portion of the company's investment has been directed toward Reality Labs, the division responsible for AR glasses, VR headets, and software. While this division continues to operate at a loss, the company expects those losses to decrease from 2025 levels to a range of $18 billion to $19 billion.

The company has been releasing several AI models and tools recently, including Muse Spark and Muse Glimmer, along with Muse Wonder and Muse Spark Open. Meta also launched a coding agent for software developers called Muse Code. At its Meta Connect event, the company announced a new line of avatars for the AI assistant, Meta Muse, designed to be more relatable.

Regarding user engagement, CEO Mark Zuckerberg stated that in a month and a half, over 10 million people in the U.S. and Canada have set up Muse personal agents. He noted that growth continues to be strong and that the product has been number one in the App Store almost every day.

Zuckerberg claimed that the company expects to grow the product's appeal to eventually serve billions of people. Li noted that certain storm clouds linger on the horizon regarding regulatory and legal issues, stating that the company continues to monitor active legal and regulatory matters that could significantly impact business and financial results.