Meta pushes into AI agents as spending surge squeezes cash flow
Meta’s Muse app has attracted more than 10 million users in North America, and the company expects AI to start generating additional revenue in 2027. But rising infrastructure costs, negative free cash flow and mounting legal liabilities complicate its effort to turn AI investment into a new growth engine.
Meta is trying to turn artificial intelligence agents into a new engine of growth, but the push is becoming increasingly expensive. The company is expanding its AI infrastructure, preparing to introduce a new class of non-voting shares and developing a consumer agent called Muse, even as its cash flow deteriorates and legal challenges mount.
The Facebook and Instagram parent reported third-quarter revenue of $64.60 billion, beating analysts’ expectations of $63.37 billion, according to LSEG data. Its shares rose more than 4% in after-hours trading on Wednesday. Meta also projected fourth-quarter revenue of $73 billion to $76 billion, above the $73.73 billion expected by analysts at the midpoint of the range.
The results underscore the scale of the opportunity Meta sees in AI, as well as the resources it is prepared to commit to capturing it. The company raised the lower end of its capital expenditure forecast for this year to $135 billion, from $130 billion, while keeping the upper end at $145 billion. The spending is intended to support its growing computing and infrastructure needs as it develops new AI models and services.
The investment is already weighing on its finances. Meta recorded negative free cash flow of $2.12 billion in the third quarter, compared with positive free cash flow of $10.63 billion a year earlier.
The company is also changing how it plans to distribute shares to help finance its expansion. In January 2027, Meta intends to issue a new class of Class C common stock without voting rights. The move will effectively amount to a two-for-one stock split, while allowing the company to use shares for acquisitions and employee compensation without weakening CEO Mark Zuckerberg’s control.
At the center of its consumer AI ambitions is Muse, a new AI agent app that has attracted more than 10 million users in the United States and Canada during its first six weeks. Zuckerberg has suggested that the service could eventually reach billions of users and generate more revenue per user than Meta’s average user today.
For now, Meta is prioritizing adoption over immediate monetization. Zuckerberg said the company wants to establish a network of users and businesses before charging broadly for access, arguing that the service will become more valuable as more people use it. But he also said Muse could be monetized sooner than Meta’s typical new products because of the high costs associated with operating the service.
Chief Financial Officer Susan Li said Meta expects its AI businesses to begin contributing incremental revenue in 2027, with the potential to become a meaningful source of diversification over time.
That prospect is important for a company whose business remains heavily dependent on advertising. Meta is developing a new generation of AI models intended to compete with OpenAI and Anthropic, while seeking to make AI agents a more central part of how people interact with its products. Some enterprise customers, however, have restricted access to Muse over security concerns, highlighting the trust issues that could complicate wider adoption.
Meta is also redirecting resources within its business. AI is set to become a greater focus for Reality Labs, its division responsible for virtual and augmented reality products. The company expects Reality Labs’ losses to narrow to approximately $15 billion next year as investment shifts toward AI.
The financial and strategic challenges come as Meta faces renewed scrutiny over its handling of user data and the effects of its platforms on young people. A New Mexico judge ordered the company to pay $25 billion after a jury found it had misled state residents about data sharing with third parties and its enforcement of policies addressing hate speech and misinformation. The case was related to the Cambridge Analytica scandal.
In August, Meta agreed to pay as much as $18 billion over a decade and restrict teenagers’ use of Facebook and Instagram to settle claims brought by nearly all U.S. states that its platforms were designed to addict children.
The August settlement also affected Meta’s reported earnings. The company posted earnings per share of $3.83, but said earnings would have been $7.40 without a $9.89 billion charge associated with the settlement. Further legal proceedings and scrutiny over youth safety remain ahead.
