Meta's Cost Surge Outpaces Revenue Growth, Reaching 68% in Quarter
The company's spending climbed significantly even as it reported higher earnings and announced a new stock class for AI funding.
By Ananya Gupta ·
Meta's reported financial results on Wednesday, October 21, 2026, alongside news regarding its strategy to finance its artificial intelligence ambitions. The company detailed plans for a new financial instrument intended to support its ongoing expansion in this area.
The company's costs and expenses for the period rose to 68% year-over-year. This figure represented a substantial increase, a stark contrast to the 26% rise in revenue to $64 billion for the quarter. The company's earnings exceeded Wall Street's projections.
To help fund its AI buildout, the company announced plans to create a new class of non-voting capital stock. This new stock would not grant its owners voting rights in company decisions. Chief Financial Officer Susan Li stated the new shares are intended for capital raising, employee compensation, acquisitions, and other general corporate purposes. She also noted the company could not immediately provide a timeline for when the stock might be issued.
Li further stated the creation of this new stock class would allow the company to preserve the voting power of its existing Class A and B shareholders. The structure would maintain its current founder-led structure while expanding its funding tools for investment driven by AI.
The company's Reality Labs division, which develops AR glasses and VR headsets, continued to post losses. The company expects losses for the division to be between $18 billion and $19 billion for the year, a reduction from its 2025 levels.
In recent months, the company has launched several new AI models, including Muse Spark, Muse Glimmer, Muse Wonder, and Muse Spark Open. It also released a coding agent called Muse Code. The company announced a new line of avatars for its AI assistant, Meta Muse, at its recent Meta Connect event.
During the earnings call, Chief Executive Officer Mark Zuckerberg reported that over 10 million people in the U.S. and Canada have set up Muse personal agents in the six weeks since its release. He added, "Growth continues to be strong, and we have been number one in the App Store almost every day." Zuckerberg also stated the company expects to eventually "serve billions of people" with the product.
The company also pointed to ongoing legal and regulatory issues as a potential risk. "We continue to monitor active legal and regulatory matters that could significantly impact our business and financial results," Li said, noting scrutiny on youth-related issues in several markets and youth-related trials scheduled in the coming months in the United States.
The company's strong earnings and new stock proposal come as its AI investments require significant funding. Its increased spending reflects the costs associated with developing and scaling these new technologies, while its AI products continue to be developed and released. The company's future financial health will depend on the performance of these new AI offerings and the resolution of ongoing legal matters.
Source: TechCrunch
