Meta Outspends Its Cash Flow, Readies Stock to Sell

MENLO PARK, Calif., Oct. 21 — MetaMeta spent more on servers, data centers and networks in the third quarter than its business brought in, and it is creating a new class of stock that it can sell to pay for what comes next.

Its capital spending was $34.91 billion, against $32.79 billion of cash from operations, leaving free cash flow at negative $2.12 billion, the company reported on Wednesday after the market closed. In the same release Meta announced a new stock that carries no vote. An information statement it filed minutes later says the company “anticipates needing to raise additional capital in the near term, including in the form of equity.”

Meta, which unlike Amazon and Google has no cloud business renting out its computers, has paid for its AI mostly from what its apps earn, and in the third quarter that was not enough. Meta bought back no shares through September, and, if it sells the new shares, each share its holders own will be a smaller claim on its profits. The money goes to the makers of chips, servers and power equipment and to the funds that finance data centers, and there is more to come. Meta’s forecast for the year leaves $49.2 billion to $59.2 billion for the fourth quarter, by this paper’s arithmetic; even the low end is about 41 percent more than it spent in the third.

The Spending

Capital spending rose 80 percent from $19.37 billion a year earlier, “driven by investments in servers, data centers, and network infrastructure,” Susan Li, the chief financial officer, said on the call with analysts.Capital SpendingAs Meta counts it: purchases of property and equipment, $33.94 billion in the quarter, plus principal payments on finance leases, $964 million. Meta narrowed its forecast for 2026 to $135 billion to $145 billion, from $130 billion to $145 billion, after spending $85.82 billion in the first nine months. It gives no forecast for the fourth quarter itself, and none yet for 2027; the release says only that Meta expects “to continue investing aggressively to support both our core business and emerging AI initiatives.”

Revenue rose 26 percent to $64.60 billion, above the $63.37 billion analysts expected, according to LSEG data cited by CNBC. Operating income fell 37 percent, to $12.99 billion, after a $9.89 billion charge for Meta’s settlement with state attorneys general; without it, operating income would have been $22.88 billion, up 11 percent, Ms. Li said.The SettlementIn August Meta agreed with 52 state attorneys general to resolve litigation over teen mental health and social media. The agreement provides for payments of up to about $18.59 billion. Net income was $9.86 billion, or $3.83 a diluted share. Meta forecast fourth-quarter revenue of $73 billion to $76 billion, against the $73.73 billion analysts expected, according to LSEG data cited by CNBC. It ended September with 66,775 employees, 15 percent fewer than a year earlier.

Meta has also been borrowing. Its long-term debt was $80.92 billion at Sept. 30, up from $58.74 billion at the end of 2025, after it received $24.91 billion in net proceeds from issuing long-term debt in the first nine months, none of it in the third quarter. In the same months of 2025 it bought back $26.25 billion of stock. It held $82.45 billion of cash and marketable securities.

The New Stock

The Class C shares will arrive first as a dividend, one for each Class A and Class B share, and Meta expects Class A to trade as if split two for one. The new charter takes effect on Jan. 19, 2027, and “we expect trading to begin in late January 2027,” Ms. Li said. There was no vote at a shareholder meeting. Mark Zuckerberg, the founder and chief executive, held 60.6 percent of the voting power at Oct. 20, the filing says, and seven Chan Zuckerberg holding companies, with about 56.1 percent, approved the change by written consent that day.Who Controls MetaMr. Zuckerberg and entities related to him hold over 99 percent of Meta’s Class B stock, the filing says. Meta intends to list the Class C shares on Nasdaq, where its Class A shares trade.

Borrowing on the scale management was considering “could have an adverse effect on the Company’s credit ratings,” the board’s special committee of independent directors recognized, the filing says. At an Aug. 4 meeting its financial adviser, Moelis, described “the recent tightening of credit conditions, particularly for hyperscalers, which was reflected in less demand for the July bond issuance related to the Company’s Texas data center joint venture with a financial partner as compared to other issuances.”El PasoThe filing does not name the venture. In July Kirkland & Ellis, counsel to the buyers, announced that funds managed by BlackRock would own 80 percent of a venture building a 1-gigawatt data-center campus in El Paso, which Meta will lease in full, and that Meta would receive a one-time distribution of about $1 billion. Meta’s third-quarter cash-flow statement shows $1.04 billion of “proceeds from data center venture distribution.” Shares without votes also open the door to state investors: issuing voting stock “would preclude sovereign financial institutions from participating,” Mr. Zuckerberg’s lawyers explained, the filing says. The committee noted that Meta “presently has sufficient capital resources for its current needs,” but wanted to secure capital “before competitors saturate various funding options.”

The filing records that at a June 11 meeting, Moelis passed on what management had told it and the committee’s lawyers orally about three forecast cases presented to the board in May: “in each case, these long-term forecasts showed the Company’s need to raise hundreds of billions of dollars over a period of several years beginning as early as fall 2026.” Moelis also noted “that the maximum the Company could raise was approximately $700 billion in equity capital over a number of years without Mr. Zuckerberg’s voting power dropping below 50%.”

On a follow-up call on Wednesday, Ms. Li, the finance chief, told analysts that the “specific reference in the information statement about the hundreds of billions of dollars was really a theoretical maximum that was basically was computed to determine what level of equity financing would trigger a loss of founder control.” “It is not actually a description of our present equity financing needs or plans,” she said, answering Ron Josey of Citi. “And we don’t have anything to announce on that front.”

It is not actually a description of our present equity financing needs or plans.

Mr. Zuckerberg gets terms of his own, in a Founder Alignment Agreement. He may sell 20 percent of the Class C shares he receives freely; the other 80 percent he may sell only with a corresponding reduction in his voting power, though shares equal to 2.5 percent of his dividend are freed from that condition for each full quarter he stays in Meta’s leadership. He has committed, for eight years and while he stays in Meta’s full-time leadership, to remain a resident of California or of wherever Meta has its headquarters, absent “material unforeseen circumstances.” The filing points to Proposition 40, a California wealth tax on the Nov. 3 ballot: if it is enacted, Mr. Zuckerberg “could become liable for a significant, multi-billion dollar tax payment,” and the free shares would let him pay it “without affecting his majority voting control.”

What Comes Next

On the follow-up call Ms. Li said that “overall the landscape for compute, remains pretty constrained and that’s certainly something that we are experiencing ourselves.” Meta has added “third-party cloud agreements, primarily in service of bringing on capacity in nearer time frames,” she said, and is “trying to procure land and prepare large scale sites.” Meta released Muse Wonder, which it calls its first frontier model, this quarter, and Mr. Zuckerberg told analysts: “My view is that we will be able to build superintelligence through scaling, so we are methodically working our way up the ladder there.”

Meta’s shares closed on Wednesday at $697.52, up 0.47 percent, before the report.METANasdaq614.99▼9.53−1.5%Meta Platforms · Friday’s session They were up 3 percent in extended trading, according to a CNBC report updated at 6:50 p.m.

What comes next is Meta’s quarterly report on Form 10-Q, the final version of its information statement and California’s vote on the wealth tax on Nov. 3; a forecast for 2027 waits for the fourth-quarter call; the last one was on Jan. 28. Before then, Microsoft reports on Oct. 28, Alphabet reports the same day, and Amazon reports on Oct. 29.