Meta Confirms Plan to Issue Non-Voting Shares to Fund AI Expansion

Meta has long been viewed as a company with a distinct governance structure, but on Wednesday, it moved to formalize a new financial instrument that could reshape how it funds its future. As the company disclosed its third-quarter earnings, it confirmed a strategy to issue a specific type of non-voting stock, a move initially reported by Semafor and subsequently validated by Meta’s finance team.

The core of the announcement was detailed by Chief Financial Officer Susan Li, who stated that the company intends to create a new class of non-voting capital stock. This instrument will be distributed to all existing shareholders via a stock dividend. Li explained that the primary objective is to generate a publicly traded non-voting share class that can be utilized for capital raising, employee compensation, acquisitions, and other general corporate needs. Crucially, this structure is designed to preserve the voting power currently held by holders of Class A and B shares.

Li emphasized that this new equity class allows Meta to maintain its current founder-led structure while expanding its funding tools. She noted that this flexibility is intended to support the company's ability to invest in what she described as the "unprecedented momentum" driven by artificial intelligence across various business units. The move signals a strategic shift in how Meta approaches capital allocation for its high-cost AI initiatives.

Financially, Meta reported a strong quarter, with revenue reaching $64 billion, a 26% increase from the same period in the previous year. However, this revenue growth came alongside a significant rise in costs and expenses, which climbed by 68% year-over-year. While the top-line numbers beat Wall Street expectations, the rapid increase in expenditures underscores the heavy investment required to sustain the company's technological advancements.

Despite the overall financial strength, the Reality Labs division, which oversees Meta’s augmented reality glasses, virtual reality headsets, and related software, continues to operate at a loss. The company indicated that these losses are expected to shrink from their 2025 levels, with projections placing the deficit between $18 billion and $19 billion. This improvement, though still substantial, represents a narrowing of the gap compared to previous years.

Over the past year, Meta has aggressively expanded its AI portfolio. The company released several models, including Muse Spark and Muse Glimmer earlier in the year. More recently, it introduced Muse Wonder and Muse Spark Open, the latter being an open-weight model with publicly available parameters that allow external developers to build upon its underlying architecture. Additionally, Meta launched Muse Code, a coding agent for software developers, and debuted a line of avatars for its AI assistant, Meta Muse, during its Connect event.

CEO Mark Zuckerberg highlighted the traction these AI products have gained. He reported that within just one and a half months, more than 10 million people in the U.S. and Canada have set up Muse personal agents. Zuckerberg claimed that growth remains strong, noting that the product has been number one in the App Store almost every day. He stated that with clear product-market fit established, the company is entering a more operational phase focused on scaling the service to eventually serve billions of users.

However, the company also acknowledged lingering risks, particularly regarding regulatory and legal matters. Li noted that Meta continues to monitor active legal and regulatory issues that could significantly impact its business and financial results. Specific scrutiny on youth-related issues in several markets was cited, with multiple youth-related trials scheduled in the United States in the coming months, suggesting that legal challenges may continue to shape the company's operational environment.