Meta’s revenue surges to $64.6 billion, but billions in settlements and skyrocketing AI spending turn screws on profit, free cash flow

Mark Zuckerberg’s Meta Platforms topped Wall Street revenue targets in the third quarter and forecast continued top-line growth, even as billions in legal payments for teen mental health litigation cut its operating margins in half, and massive AI investments pushed free cash flow into negative territory.

The company also said it create a Class C stock share class to help it fund the AI buildout, pay employee stock compensation, and fund acquisitions.

Investors ignored the short-term pain for the potential of a future AI payoff, cheering early signs of traction with the recently released Muse AI agent, sending Meta shares up as much as 5% in after-hours trading on Wednesday.

“Our investments are paying off, the core business is strong, and we’re seeing velocity across the board,” Zuckerberg said in a prepared statement on Wednesday, later adding on the conference call that plans were underway to monetize Muse.

“The average revenue per American user for our existing ‘family of apps’ users is several hundreds of dollars annually, and we expect Muse will reach an even higher level over time due to the amount of commerce that we already see taking place,” Zuckerberg said.

Meta’s third-quarter revenue rose 26% to $64.6 billion, above the $63.3 billion analysts expected, according to Visible Alpha consensus from S&P Global Market Intelligence. And the company forecast revenue for the........

© Fortune