Meta Issues Non-Voting Shares to Bankroll AI Expansion

For everyday investors and employees at one of the world’s largest technology firms, the rules of ownership are shifting. On Wednesday, during its third-quarter earnings call, Meta confirmed it will create a new category of equity that allows the company to raise money and compensate staff without granting new holders a say in corporate governance. This move directly addresses how the company funds its aggressive artificial intelligence expansion while keeping decision-making control in the hands of existing shareholders.

The first major development is the official introduction of non-voting capital stock. Susan Li, Meta’s chief financial officer, stated that the company plans to distribute these new shares to all current shareholders via a stock dividend. Li explained that the purpose is to create a publicly traded instrument that can be used for capital raising, employee compensation, and acquisitions. By doing so, Meta can expand its funding tools without altering the voting balance of its current Class A and Class B shareholders.

The second key point centers on the preservation of the company’s founder-led structure. Li emphasized that this new share class is designed to maintain the existing power dynamics within the firm. This flexibility is intended to support significant investment opportunities driven by artificial intelligence. The company aims to use these shares to navigate its "unprecedented momentum" across various business units, ensuring that financial growth does not come at the cost of strategic control.

The third element involves the financial performance that necessitates this structural change. Meta reported strong results for the quarter, with revenue reaching $64 billion, a 26% increase from the same period last year. However, this growth came with a significant cost, as expenses and costs rose by 68% year-over-year. The Reality Labs division, which handles augmented and virtual reality hardware and software, continues to operate at a loss, though the company expects these deficits to narrow from 2025 levels to a range of $18 billion to $19 billion.

Contextualizing this move requires looking at Meta’s recent product launches. Over the past year, the company has released several AI models, including Muse Spark and Muse Glimmer. More recently, it introduced Muse Wonder and Muse Spark Open, the latter being an open-weight model that allows external developers to access its underlying parameters. Additionally, Meta launched Muse Code, a tool for software developers, and debuted a line of avatar designs for its AI assistant, Meta Muse, aiming to make the technology more relatable and shareable.

The adoption of these AI products appears to be robust. During the earnings call, CEO Mark Zuckerberg noted that more than 10 million people in the United States and Canada had set up Muse personal agents in just one and a half months. He described the growth as strong, noting the product has been number one in the App Store on nearly every day of that period. Zuckerberg indicated that the company is entering a scaling phase focused on operations, with ambitions to eventually serve billions of users.

Despite the positive reception of its AI initiatives, the company faces ongoing challenges. Li acknowledged that active legal and regulatory matters could impact future financial results. She specifically pointed to increased scrutiny regarding youth-related issues in multiple markets. With several trials scheduled in the coming months in the United States, Meta remains cautious about how these external pressures might affect its trajectory as it integrates its new capital strategy.