Meta Platforms has launched plans to raise up to $95 billion by selling new shares, its largest equity raise ever, as the cost of building artificial intelligence infrastructure outstrips the cash generated by its advertising business.
The owner of Facebook, Instagram and WhatsApp said on 26 October that it would begin with about $35 billion of underwritten public offerings, covering Class A common stock and depositary shares tied to mandatory convertible preferred stock. It also plans to raise up to $60 billion by selling new non-voting Class C shares through an at-the-market programme, under which shares are sold gradually into the market. Trading in the Class C shares is expected to start in the first quarter of 2027, though timing and terms are not final.
Nvidia, AMD and Broadcom have reportedly expressed interest in buying up to $5 billion of Class A shares combined, positioning the chipmakers, which supply Meta's AI infrastructure, as cornerstone investors.
A First Cash Shortfall in a Decade
The equity raise follows third-quarter results in which Meta's free cash flow turned negative for the first time in more than a decade. The company reported negative free cash flow of $2.12 billion in the quarter, compared with positive free cash flow of $10.63 billion a year earlier.
The shortfall came despite strong revenue growth. Third-quarter revenue rose 26 per cent to $64.60 billion, beating analysts' expectations of $63.37 billion, according to LSEG data.
The problem is the scale of investment. Meta raised the lower end of its 2026 capital expenditure forecast to $135 billion from $130 billion, while keeping the upper end at $145 billion. Reuters reported that the company's future spending commitments total about $825 billion. Meta has warned investors that it will need to raise "hundreds of billions of dollars" over several years to fund its AI push.
The Balance Sheet
As of 30 September, Meta held $82.45 billion in cash, cash equivalents and marketable securities, against $80.92 billion of long-term debt. The company has already tapped bond markets heavily to fund its build-out, and says it will fund future spending through operating cash flow, investment-grade debt, partnerships and equity.
Equity issuance is unusual for a company of Meta's size and profitability. Large technology companies have typically funded investment from operating cash flow and returned surplus cash to shareholders through buybacks and dividends. Selling new shares dilutes existing shareholders, and the decision signals how capital-intensive the AI race has become.
Zuckerberg's Control
The non-voting Class C share structure is designed to help preserve the voting control of chief executive Mark Zuckerberg. Meta first disclosed the Class C plan on 21 October, describing it as a two-for-one split.
Under the arrangement, Zuckerberg can immediately sell 20 per cent of the Class C shares he receives, equivalent to about 10 per cent of his total economic stake, which would allow him to meet potential tax obligations without giving up voting control. In return, he committed to remain a resident of California, or wherever Meta is headquartered, for eight years. Reports have linked the arrangement to Proposition 40, a proposed one-time 5 per cent tax on California's billionaires.
A Wider Trend
Meta is not alone in turning to equity markets. Alphabet sold $84.75 billion of equity in June, and other technology companies have explored creative financing structures to fund AI infrastructure. SpaceX recently disclosed a financing arrangement under which an Apollo affiliate buys AI chips and servers and leases them to the company, and banks and Blackstone have lined up $63 billion to finance Broadcom chips for Anthropic.
