Meta creates non-voting shares to bankroll AI expansion

Meta faces a financial balancing act as it seeks to fund its massive artificial intelligence expansion without diluting the voting power of its current shareholders. To resolve this tension, the company is moving to issue a new category of equity that will provide the necessary capital while leaving decision-making authority largely unchanged for those who already hold Class A and B shares.

During its third-quarter earnings call on Wednesday, Meta confirmed reports that it intends to create a distinct class of non-voting capital stock. Susan Li, the company’s chief financial officer, stated that this new instrument will be distributed to all existing shareholders through a stock dividend. Li explained that the primary purpose is to establish a publicly traded non-voting stock that can be used for raising capital, compensating employees, and facilitating acquisitions. This structure is designed to preserve the existing voting dynamics of the company while expanding its financial toolkit.

The move is intended to support what Li described as the "unprecedented momentum" driven by AI across the business. By maintaining its "founder-led structure," Meta aims to retain flexibility in how it deploys funds. This approach allows the company to invest heavily in its AI initiatives without altering the governance balance that has defined its corporate structure since its founding.

The strategic shift comes on the back of strong financial performance. Meta reported $64 billion in revenue for the quarter, representing a 26 percent increase from the same period last year. However, the company’s costs and expenses surged by 68 percent year-over-year, reflecting the heavy investment required to sustain its technological advancements. Despite the strong top-line growth, the Reality Labs division, which handles augmented and virtual reality hardware, continues to operate at a loss, though the company expects these deficits to narrow from 2025 levels to between $18 billion and $19 billion.

Meta’s AI efforts have accelerated significantly over the past year. The company has released several new 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 available for external developers to build upon. Meta also launched Muse Code, a tool for software developers, and unveiled a line of avatars for its AI assistant, Meta Muse, during its recent Connect event to make the technology feel more relatable.

Early indicators suggest these products are gaining traction. CEO Mark Zuckerberg noted that over 10 million people in the United States and Canada set up Muse personal agents within just six weeks. He described the product as having achieved clear market fit and stated that the company is now entering an operational phase focused on scaling the service to eventually serve billions of users. Zuckerberg added that Muse has been the number one app in the App Store nearly every day since its launch.

Despite the optimistic outlook, Li acknowledged that regulatory and legal challenges remain on the horizon. She noted that the company is monitoring active matters that could impact its financial results, particularly regarding youth-related issues in several markets. Several trials concerning these issues are scheduled to take place in the United States in the coming months, presenting a potential risk to the company’s broader growth strategy.