Tesla Cuts Capex Guidance, Meta Hikes AI Spending Outlook, Announces New Stock Class

Meta Platforms exceeded Wall Street's third-quarter revenue projections, driven by robust advertising growth, and announced plans to introduce a new nonvoting share class to aid its future investment strategies. The company's shares surged 7% following the announcement. For the quarter ending September 30th, Meta reported revenues of $64.60 billion, marking a 26% increase compared to the same period last year and surpassing analysts' forecast of $63.33 billion.

Earnings per share climbed to $3.83 from $1.05 a year ago, surpassing the $3.57 consensus estimate. Despite a $9.89 billion legal settlement with 52 state attorneys general regarding teen mental health issues, the company's advertising revenue grew by 26% to $63.06 billion. CEO Mark Zuckerberg noted that Facebook and Instagram were experiencing all-time high engagement levels.

Meta forecasted fourth-quarter revenues of $73 billion to $76 billion, exceeding Wall Street expectations. The company also increased its annual expense outlook to account for the legal charge and anticipates capital spending of $135 billion to $145 billion, as it intensifies its investment in AI infrastructure. The board approved a new publicly traded, nonvoting Class C common stock, set to be distributed on January 19, 2027, in a one-time stock dividend.

This move aims to provide Meta with greater flexibility for capital raising, employee compensation, acquisitions, and other corporate activities. The new shares are expected to have the effect of a two-for-one stock split without altering shareholders' voting rights. Zuckerberg highlighted the early adoption of Muse, an AI product, which saw around 25% of users utilizing it daily.

Meta plans to develop a large-scale Muse network that enables AI agents to collaborate. While Zuckerberg acknowledged Muse's significant computational demands in the short term, he anticipates profitability as computing efficiency improves. However, Meta's operating income fell short of expectations due to the legal charge. The company expects full-year operating income to outstrip 2025 levels, excluding the third-quarter charge.

Reality Labs, Meta's virtual and augmented reality division, continued to report an operating loss, albeit narrower than analysts had anticipated.