Meta Platforms shares rose 4% in after-hours trading after the social media giant delivered a strong revenue beat and bullish fourth quarter guidance, with investors appearing willing to overlook a $9.89 billion legal settlement charge, a looming $40 billion penalty demand from New Mexico and a controversial move to consolidate founder Mark Zuckerberg's control of the company.
Revenue came in at $64.6 billion, up 26% year on year and ahead of the $63.2 billion to $63.35 billion Wall Street consensus, driven by a 10% increase in ad impressions and a 14% rise in average price per ad across Facebook, Instagram and WhatsApp.
Distortion
The headline earnings figures were distorted by the settlement with 52 US state attorneys general over teen mental health and social media, which reduced reported diluted earnings per share to $3.83 for the quarter.
Stripping out the charge, diluted EPS would have been $7.40, well above analyst forecasts.
Fourth quarter revenue guidance of $73 billion to $76 billion provided additional momentum, pointing to continued double-digit growth into year end.
The results also provided the first read on Muse, Meta's personal AI agent launched on September 8, which had already sent the stock up sharply in September on strong user retention data. JPMorgan reiterated its overweight rating, believing Muse has the potential to become the most widely used consumer AI application after ChatGPT, and regards agent-to-agent transactions as the most important new monetisation path beyond Meta's advertising revenue.
Risk absorbed
Investors appeared to absorb the New Mexico risk with equanimity. New Mexico asked a judge on October 1 to order Meta to pay up to $40 billion in penalties related to child safety on its platforms, a figure that dwarfs even the $18.59 billion attorneys general settlement announced in August.
The results were accompanied by the announcement of a new Class C common stock, a non-voting share class effective January 2027, in a move that cements Zuckerberg's already formidable control of the company.
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Shareholders will receive one Class C share for each existing share held, in a structure that functions as a two-for-one stock split without altering voting rights.
Scale
The scale of Meta's AI ambitions makes the logic plain: the company is spending $135 billion to $145 billion on capital expenditure this year alone, and will need to raise capital, pay staff and potentially pursue acquisitions at a pace that would normally dilute a controlling shareholder over time.
Class C solves that, letting Zuckerberg fund the buildout without ever putting his grip on the company up for debate.
The market's willingness to cheer the move rather than question it says something about where investor sentiment stands: when revenue is growing at 26%, the AI agent is performing ahead of expectations and guidance is rising, the finer points of corporate governance become a secondary consideration.
