AI in action · Markets
Meta Plans Nonvoting Shares as AI Spending Drains Its Cash
Meta's free cash flow turned negative, at minus $2.12 billion, in the third quarter of 2026 as AI capital spending outran operating cash. It will also create a listed nonvoting Class C stock it says will help finance growth. The shares fell about 7% on October 22 and the cost of insuring its debt hit a record.
Meta's results for the quarter to September 30 had a headline number most companies would celebrate: revenue of $64.60 billion, up 26% from a year earlier and ahead of the roughly $63.4 billion analysts expected. The figure that moved the stock sat further down the release filed with the SEC on October 21. Operating cash flow was $32.79 billion, but capital expenditure, including principal payments on finance leases, was $34.91 billion. The gap left free cash flow at negative $2.12 billion, against positive $10.63 billion in the same quarter of 2025.
The same filing announced a change to the share structure. Meta's board approved a new class of nonvoting Class C common stock, to be listed on Nasdaq, and plans to hand every holder of Class A and Class B shares one Class C share for each share they own, with the charter amendment slated for January 19, 2027. Because it is paid as a stock dividend, no one's voting power changes, and Meta said the Class A price should reflect the equivalent of a two-for-one split. A separate Founder Alignment Agreement with Mark Zuckerberg governs how he may sell the Class C shares he receives. The company's stated reasons were to keep its founder-led structure and to give itself the ability to finance its growth, which in plain terms means a currency it can issue without diluting control.
The balance sheet shows why that matters. Long-term debt stood at $80.92 billion at the end of September, up from $58.74 billion at the end of 2025, while cash and marketable securities were $82.45 billion. Meta narrowed its 2026 capital spending range to $135 billion to $145 billion, lifting the bottom from $130 billion, and said that in 2027 resources will shift mainly towards AI, with Reality Labs losses falling to around $15 billion. It gave no revenue range for next year beyond expecting strong growth throughout it.
Investors answered in two markets at once. The shares fell about 7% on Thursday, October 22, closing a session in which the Nasdaq dropped 2.6%, according to the Associated Press. Business Today, citing CNBC, reported that the spread on Meta's five-year credit default swaps, the price of insurance against a default, reached a record the same day. A wider spread does not signal that default is near, but it does show bond investors asking to be paid more for lending into an open-ended build-out.
Two details complicate the picture. Reported earnings per share of $3.83 include a $9.89 billion legal charge linked to an August agreement with state attorneys general; without it the figure would have been $7.40. And headcount fell 15% from a year earlier to 66,775, so part of the AI bill is being paid by a smaller workforce rather than by borrowing alone. The question for the next two quarters is whether the new share class stays a governance tool or becomes a regular source of funding for data centres.
Sources: SEC EDGAR — Meta Platforms Q3 2026 results, Form 8-K Exhibit 99.1 (Oct 21, 2026); Business Today — Meta shares slide 7% as AI spending push drives capex higher, free cash flow turns negative (Oct 22, 2026); AP via WXXV 25 — Sharp drops for AI stocks overwhelm markets worldwide as oil prices jump (Oct 22, 2026)