Meta Shares Fall 7.5 Percent Despite Strong Third-Quarter Earnings

Shares of Meta Platforms fell 7.5 percent on Thursday, October 22, dropping to $644.30 each as investors reacted to the social media giant's heavy spending plans for artificial intelligence. The drop came even though the parent company of Facebook and Instagram reported third-quarter revenue of $64.6 billion, beating analyst expectations of $63.37 billion. Earnings per share came in at $3.83. Revenue growth got support from a 10 percent increase in ad impressions and a 14 percent rise in the average price per ad, driven by AI tools like Muse and Muse Wonder.

Spending Plans

Meta raised its full-year capital expenditure forecast to a range of $135 billion to $145 billion, increasing the lower end of its previous estimate. The spending will fund infrastructure and the Muse AI agent as the company tries to turn AI into a consumer product. CEO Mark Zuckerberg noted that the family of apps reached 3.64 billion daily users and that Threads surpassed Elon Musk's X in monthly active users.

Share Structure

To help fund these pushes, Meta will create a new class of non-voting shares called Class C. Shareholders will receive one new share for each existing share held through a stock dividend, which acts like a two-for-one stock split. Trading in the new shares is expected to start in January, and the stock could help finance AI investments, acquisitions, and employee pay over several years.

Context

Large technology companies are spending billions of dollars on data centres and hardware to build advanced artificial intelligence models. While these massive investments can lower short-term stock prices due to high costs, companies argue they are necessary to secure long-term growth in the tech sector.