Meta shares dropped approximately 6% on Thursday after the company reported negative free cash flow for the third quarter and increased the lower bound of its full-year capital expenditure forecast. The decline in the stock price coincided with a widening of the spread on Meta's five-year credit default swaps to all-time highs, indicating heightened credit concerns among investors as the firm expands its artificial intelligence spending.
In its earnings release, Meta revised its full-year capital expenditure outlook to a range of $135 billion to $145 billion. This adjustment raised the bottom of the range from the previously stated $130 billion to $135 billion, while the top of the range remained at $145 billion. For the third quarter, the company recorded free cash flow of negative $2.12 billion.
Alongside the financial results, Meta announced it will create a new class of nonvoting Class C common stock. The company stated this move is intended to maintain its "founder-led structure" and "provide Meta the ability to finance its growth." According to the SEC filing, this new stock plan helped convince CEO Mark Zuckerberg to remain in California. The filing noted that Zuckerberg might relocate out of the state if a proposed wealth tax passed, citing potential liability for a substantial tax bill tied to his company equity holdings.
Revenue for the period increased by 26% year over year, reaching $64.60 billion. This figure exceeded the $63.37 billion expected by analysts. Reported earnings per share stood at $3.83, although it was unclear whether this metric was directly comparable to the $5.75 per share that Wall Street had anticipated.