Meta Beat Expectations in the Last Quarter. Its Stock is Plunging Anyway.

Meta Platforms reported stronger-than-expected third-quarter revenue Wednesday and announced plans for a new class of nonvoting shares, as the Facebook and Instagram parent seeks additional financial flexibility for its artificial intelligence expansion.

Revenue reached $64.60 billion for the quarter ended September 30, up 26% from a year earlier. The result exceeded the $63.34 billion expected by analysts. Reported earnings were $3.83 per share, reflecting a substantial legal settlement charge. However, its stock is plunging on Thursday amid a broader rout in the market. It was falling 6.33% at 11:17 a.m. ET after initially jumping in after-hours trading.

The earnings report also introduced a financing change with implications beyond the quarter. Meta plans to establish nonvoting Class C common stock in January 2027, giving it another way to raise capital while preserving Chief Executive Mark Zuckerberg's voting control. The new shares would help finance the development and operation of AI models.

Such a structure would allow Meta to sell equity without transferring additional voting power to buyers. That flexibility comes as the company commits increasing resources to computing infrastructure, placing its financing strategy alongside advertising growth as a central feature of this earnings report.

Meta now expects capital expenditures of $135 billion to $145 billion this year, raising the bottom of its previous range by $5 billion. Quarterly capital spending reached $34.91 billion, compared with $31.08 billion in the second quarter. The investments include expensive data centers and computing capacity supporting Meta's AI ambitions.

The financial pressure is visible in cash generation. Meta reported negative free cash flow of $2.12 billion, compared with positive free cash flow of $10.63 billion a year earlier, according to Reuters. Its established business continues producing cash, but infrastructure spending is absorbing an increasing share of those resources.

Legal expenses also weighed heavily on profitability. Meta recorded a $9.89 billion charge connected with its August agreement with state attorneys general over teen mental health and social media. Excluding that charge, the company said earnings would have been $7.40 per share, above the $6.54 analysts expected.

Within its core business, Meta reported that daily users across its family of apps averaged 3.64 billion in September, up 3% from a year earlier. Advertising impressions increased 10%, while the average price per advertisement rose 14%. Those figures show revenue growth drawing support from both additional advertising delivery and higher prices.

"Our investments are paying off, the core business is strong, and we're seeing velocity across the board," Zuckerberg said in the earnings release. He highlighted the launches of Muse and Muse Wonder as milestones in the company's AI development.

Meta's second-quarter revenue rose 28% to $60.80 billion, while costs increased 55%. At that time, the company projected third-quarter revenue of $61 billion to $64 billion, a range that Wednesday's results exceeded.