Meta shares surged more than 4% in early after-hours trading Wednesday as the Facebook parent reported a 26% jump in quarterly revenue and unveiled plans for a new class of stock that could help finance its massive artificial intelligence spending.
Shares of the social media giant jumped 4% to $726 in after-hours trading as of 4:05 p.m. Wednesday, up nearly $30 from their closing price of $697.52.
The rally came as Mark Zuckerberg’s company reported third-quarter revenue of $64.6 billion, up 26% from $51.2 billion a year earlier, as advertising sales climbed 26% to $63.1 billion.
The Menlo Park, Calif.-based tech giant also forecast fourth-quarter revenue of $73 billion to $76 billion and signaled plans to continue spending aggressively on artificial intelligence next year.
“Our investments are paying off, the core business is strong, and we’re seeing velocity across the board,” Zuckerberg said in a statement.
Meta said advertising impressions across its family of apps, which includes Facebook and Instagram, rose 10% from a year earlier, while the average price per ad jumped 14%.
The company reported net income of $9.86 billion, or $3.83 per diluted share, compared with $2.71 billion, or $1.05 per diluted share, in the year-earlier period.
But Meta’s earnings were weighed down by a nearly $10 billion charge tied to a sweeping legal settlement.
Meta booked a $9.89 billion charge tied to an August agreement with 52 state attorneys general to resolve litigation related to teen mental health and social media.
The agreement calls for payments of up to about $18.59 billion.
The charge helped drive a 37% decline in operating income to $12.99 billion, even as sales continued to climb.
Excluding the legal charge, Meta said operating profit would have reached $22.88 billion, while diluted earnings per share would have been $7.40.
The company’s bottom line also benefited from a sharply lower income tax provision of $3.14 billion, down from $18.95 billion in the year-earlier quarter.
Major shift
Meta also unveiled a major shake-up of its capital structure, announcing plans for a new class of non-voting shares that could help bankroll its AI ambitions while preserving Zuckerberg’s leadership of the company.
The board approved the creation of publicly traded, nonvoting Class C shares, with the new structure set to take effect Jan. 19, 2027.
Meta’s existing Class A shares trade on Nasdaq, while the new Class C stock will carry no voting rights.
Under the plan, shareholders will receive one nonvoting Class C share for every Class A or Class B share they own, with the distribution date to be determined.
Meta said the distribution is expected to have the effect of a two-for-one stock split on the market price of its Class A shares, without changing shareholders’ voting power.
The announcement comes as Meta ramps up spending on artificial intelligence.
Capital expenditures, including principal payments on finance leases, totaled $34.91 billion during the third quarter.
The company now expects full-year capital expenditures of between $135 billion and $145 billion, narrowing its previous forecast of $130 billion to $145 billion.
The spending helped push quarterly free cash flow into negative territory, with an outflow of $2.12 billion compared with positive free cash flow of $10.63 billion a year earlier.
Meta said its AI investments were already generating additional advertising revenue through improved recommendations, stronger engagement and more efficient monetization.
“We hit major milestones this quarter toward delivering personal superintelligence for everyone — including launching Muse and Muse Wonder, our first frontier model,” Zuckerberg said.
The company also plans to shift investment away from its Reality Labs division, which develops virtual- and augmented-reality products, toward AI.