Meta sinks almost 7% as AI spending turns free cash flow negative; a new nonvoting share class amounts to a 2-for-1 split
CNBC lays out the capex range, the credit-swap move and the new share class, including the SEC filing's link to California's proposed wealth tax.
Meta reported third-quarter revenue of $64.60 billion, up 26% and above the $63.37 billion analysts expected, and guided fourth-quarter revenue to $73 billion to $76 billion. The stock rose after hours on October 21 but fell almost 7% on October 22.
CNBC reports free cash flow was negative $2.12 billion in the quarter, and Meta raised the floor of its full-year capital spending forecast to $135 billion to $145 billion (from a $130 billion bottom). The spread on Meta's five-year credit default swaps hit an all-time high.
Meta also announced a nonvoting Class C stock, to be distributed to all shareholders as a dividend starting January 2027, which CNBC describes as effectively a 2-for-1 split. Meta says it is meant to keep its "founder-led structure" and help finance growth. The SEC filing says Mark Zuckerberg could leave California if the proposed state wealth tax passes, and that he committed to stay for eight years as part of the new stock plan. Meta's workforce shrank 12% in the quarter to 66,000.
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Stock Split
After exploring Meta reports third-quarter revenue beat and issues strong guidance, for what a split does and does not change, read Stock Split.
The SEC's investor site explains that a split raises the share count without changing shareholders' equity: 100 shares at $100 become 200 shares at $50 in a 2-for-1 split.
Investor.gov (SEC) · Wade · 5 min
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Free cash flow
After exploring Meta stock sinks nearly 7% as AI spend pushes free cash flow negative, to see why a negative number got attention, try Free cash flow.
Wikipedia defines free cash flow as the cash a business generates beyond its working-capital needs and spending on fixed assets, an indicator of its financial flexibility.
Wikipedia · Wade · 5 min
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