Meta's Earnings Report: New C Shares, Muse Details

Meta Platforms (META) earnings report Wednesday was packed with information, ranging from the rollout of its new Muse product to its continued ambition to dominate the artificial intelligence space, as well as an approach to raising future capital to fund its AI initiatives.

Immediately after the announcement, the stock jumped more than 7% in after-hours trading, but it has since reversed and is trading slightly lower Thursday morning.

Meta reported quarterly revenue of $64.6 billion, topping the consensus estimate of $63.37 billion, with advertising continuing to account for 97.6% of total revenue. Adjusted earnings per share came in at $3.83, which was impacted by a $9.89 billion legal charge recognized during the quarter. The company also posted negative free cash flow of $2.12 billion, as capital expenditures now exceed the operating cash flow generated by its day-to-day business.

On guidance, Meta projected fourth-quarter revenue between $73 billion and $76 billion, ahead of the Street’s estimate of $73.73 billion. Full-year CapEx is now expected to range from $135 billion to $145 billion after the company raised the low end of its guidance by $5 billion.

Meta to Issue New Class C Shares

Meta also made headlines by adding a new class of stock to its capital structure. A new Class C non-voting common stock, effective in January 2027, will be distributed as a one-time stock dividend of one Class C share for each Class A and Class B share outstanding. This effectively functions as a two-for-one stock split, and the structure allows founder and CEO Mark Zuckerberg to retain voting control while expanding the share count.

A Meta SEC filing noted the stock plan provides Zuckerberg incentive to stay in California due to his potential increased stock-ownership tax burden. In the future, the new share class could be a strategy for raising capital to fund operations and expand AI investment without diluting the voting power of existing shareholders, particularly Class A holders. The new class provides an instrument for subsequent financing, compensation, and acquisitions. However, it can still dilute existing holders’ economic ownership even without diluting voting power. It also stands in contrast to other companies that have been rapidly issuing debt to finance AI ambitions.

Will Scaling Meta Muse Raise Costs?

Meta’s Muse AI assistant drew attention as well. Zuckerberg believes Muse, launched in September, could eventually generate higher revenue per user than the Family of Apps. As Meta scales the network, Muse is free with a usage limit, and Meta also offers subscriptions. However, the company’s CFO cautioned that Muse’s compute intensity means growing the user base will require significant investment, which hints at additional CapEx spending ahead. Muse will also be integrated into Meta’s smart glasses starting in November.

Overall, Meta delivered a strong earnings report, unveiling a new way to raise capital while offering a high-level roadmap for monetizing its new AI product offerings as they reach the market.

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