SAN FRANCISCO, Oct 22 Meta Platforms reported stronger-than-expected third-quarter revenue as it expanded investments in artificial intelligence (AI), but its profits were significantly reduced by a major legal settlement in the United States.
The Facebook and Instagram parent company posted a profit of US$9.86 billion for the July-to-September period, nearly 50% below investor expectations. Meta attributed the decline partly to a US$9.9 billion charge linked to an US$18 billion settlement involving nearly all US states.
The announcement came hours after a New Mexico judge ruled that Meta must pay US$25 billion in a separate case related to allegations of misleading users, following a jury verdict last month involving the Cambridge Analytica scandal.
Meta chief financial officer Susan Li warned that ongoing legal and regulatory proceedings could significantly affect the company’s financial performance, including several youth-related trials expected in the United States in the coming months.
Despite the legal challenges, Meta shares climbed as much as 7% following the results.
AI investment and wearables drive strategy
Chief executive Mark Zuckerberg said the company expected its Reality Labs division, which develops hardware such as AI-powered smart glasses, to improve its financial performance and move towards profitability.
Meta has been investing heavily in AI-powered devices and recently introduced new wearable products, including smart glasses without cameras, amid growing privacy concerns surrounding recording without consent.
Zuckerberg also highlighted the company’s Muse AI model as central to its long-term strategy for wearable technology. Meta said its upcoming Muse Charm device would allow users to interact with an AI assistant independently of their smartphones.
The company added that 10 million people in the United States and Canada were already using its Muse model.
However, expanding AI capabilities requires substantial computing infrastructure, prompting technology companies to invest billions in data centres and related equipment.
Meta spent US$35 billion on capital expenditure during the third quarter, below analysts’ expectations of US$41 billion. Its total capital expenditure for the year had exceeded US$85 billion at the time of the announcement.
In July, the company raised its full-year spending forecast to US$145 billion from US$130 billion, nearly double its 2025 expenditure.
New share class to support AI expansion
Meta also announced plans to introduce a new Class C share category without voting rights, giving the company an additional mechanism to raise funds for its AI development plans.
Under the proposal, existing shareholders would receive one new Class C share for every share they already own.
The arrangement could also help Zuckerberg maintain his voting control if he needs to sell shares to cover potential tax liabilities.
In a securities filing, Meta warned that his voting power could fall to approximately 53% or lower if he were required to sell a significant portion of his holdings to pay higher taxes.
The concern comes amid a proposed billionaire wealth tax measure in California, known as Proposition 40, which could be put to voters in November.
Meta’s latest results highlight the company’s efforts to balance aggressive AI investment with mounting legal costs, regulatory scrutiny and the challenge of delivering sustainable returns to shareholders.
-MALAYMAIL
