Meta Sells $35 Billion of Stock as AI Spending Outruns Cash Flow

A $22.5 billion forward sale and $12.5 billion of convertible preferred anchor a program worth up to $95 billion, a sign that AI spending has outgrown what Meta’s cash flow can carry.

Key Takeaways

• Meta launched about $35 billion of common and preferred equity, but the $22.5 billion common tranche settles forward, so most of the cash arrives only when Meta chooses, by November 2027.
• Third-quarter capital spending of $34.91 billion exceeded operating cash flow of $32.79 billion, and 2026 guidance of $135 billion to $145 billion implies an even heavier fourth quarter.
• Non-voting Class C shares, effective January 2027, let Meta sell up to $60 billion more stock without loosening Mark Zuckerberg’s control, leaving disclosure and returns as the main checks.

From Buyer to Seller

A year ago, Meta Platforms was steadily retiring its own stock. It repurchased $26.25 billion of shares in the first nine months of 2025 and none over the same period this year. On Monday the flow reversed. The company launched two concurrent underwritten offerings totaling about $35 billion. They consist of $22.5 billion in Class A common stock sold under forward agreements and roughly $12.5 billion in a new Series A Mandatory Convertible Preferred Stock. Meta also said it intends to follow with an at-the-market program of up to about $60 billion in non-voting Class C shares. Morgan Stanley and Goldman Sachs are running the books. Taken in full, the plan would bring as much as $95 billion of new equity into a company that, until very recently, treated surplus cash as something to give back.

The structure says as much as the size. Meta collects nothing from the common tranche at launch. Affiliates of the two banks sell borrowed shares now. Meta settles later by issuing new stock for cash on dates of its choosing, no later than November 19, 2027, at the offering price less underwriting discounts and contractual adjustments. In effect, Meta has locked in today’s price on capital it can draw over the next year, without enlarging its share count until it does. The preferred carries a $1,000 liquidation preference and is slated to list on Nasdaq as METAM. It converts automatically around August 15, 2029, with its dividend and conversion terms set at pricing. Market reports put early guidance at a 6% to 6.5% dividend and a conversion premium of 17.5% to 22.5%.

The Quarter That Forced the Issue

Last week’s results explain the timing. Revenue rose 26% to $64.60 billion as ad impressions grew 10% and the average price per ad climbed 14%, beating the $63.37 billion Wall Street expected. The advertising machine is working. What changed is the arithmetic underneath it. Capital expenditures, including finance lease principal, reached $34.91 billion against operating cash flow of $32.79 billion. That turned free cash flow negative at $2.12 billion, compared with a positive $10.63 billion a year earlier. Net income of $9.86 billion also carried a $9.89 billion charge for Meta’s August agreement with 52 attorneys general over teen mental health claims, which allows for payments of up to about $18.59 billion.

The fourth quarter points the same way, only more steeply. Meta has spent about $85.8 billion on capital projects through September, and its narrowed 2026 range of $135 billion to $145 billion implies roughly $49 billion to $59 billion in the final three months alone. The obligations behind that pace run far past the calendar. The latest quarterly report lists $454.52 billion in non-cancelable contractual commitments, $121.41 billion of them due in 2027. On top of that sit about $355.73 billion in data center, energy and network leases that have not yet begun. Management has not set a 2027 budget, but expects to keep investing aggressively in the core business and new AI initiatives.

A Balance Sheet Using Every Tool

Equity completes a financing structure Meta has assembled step by step through the year. In April, Meta sold $25 billion of senior notes in six tranches running as far as 2066. Long-term debt stood at $80.92 billion at the end of September, up from $58.74 billion in December. Cash, equivalents and marketable securities of $82.45 billion only modestly exceeded it. In July, Meta placed its El Paso data center campus into a roughly $14 billion joint venture in which BlackRock-managed funds own 80%, with Meta leasing the site back. Its third-quarter cash flow statement records $1.04 billion from a data center venture distribution. Operating cash, bondholders and infrastructure partners have each taken a share of the load. Shareholders are next.

Meta calls the new stock “a complementary source of capital” and notes that its Aa3/AA- ratings already let it borrow efficiently. Read plainly, management would rather protect those ratings than spend them. A mandatory convertible suits that preference, since such securities typically earn partial equity treatment from rating agencies. Litigation adds a claim on liquidity that sits outside any capital budget. On October 21, a New Mexico judge ordered Meta to pay $25 billion in penalties under the state’s Unfair Practices Act, with interest accruing at 15% a year until the sum is paid. Meta’s chief legal officer said the company expects to win on appeal. Until then, the judgment sits beside the attorneys general settlement as a liability of uncertain size and timing.

Votes and Value, Separated

The larger program rests on a governance change disclosed with the results. Meta’s board approved a publicly listed, non-voting Class C stock, effective January 19, 2027. It will be distributed as a one-time dividend of one Class C share for every Class A and Class B share, which Meta expects to behave like a two-for-one split. The stated purposes are capital raising, employee compensation and acquisitions. Subject to conditions, both the forward contracts and the preferred can settle in Class C once it exists, and the ATM program is expected to start in the first quarter of 2027. Meta stresses that no ATM agreement has been signed and that its timing, size and terms remain undetermined.

The design separates economic dilution from dilution of control. Every holder bears the first in proportion to its stake. The second has been engineered away. At Friday’s close Meta was valued at about $1.64 trillion. The $35 billion launched therefore equals roughly 2.1% of market value and the full $95 billion about 5.8%, before the variable conversion of the preferred is known. The dividend leaves every holder’s voting power unchanged, and the charter amendment was approved by shareholder written consent. A Founder Alignment Agreement governs Mark Zuckerberg’s sales of the Class C shares he receives. For institutional investors, the levers of accountability narrow to disclosure and to the returns themselves.

What the Market Is Pricing

Investors had marked the stock down before the offering arrived. Shares rose in extended trading after the October 21 report. They then fell more than 7% the next day as investors focused on negative free cash flow and the higher spending floor. The stock closed Friday at $642.62, down about 9.4% over five sessions. On Monday it rose 1.6% in premarket trading, then dropped as much as 4% during the session before recovering to trade about 1% higher. Nvidia, AMD and Broadcom have indicated interest in buying up to $5.0 billion of the common stock at the offering price, though the indications are nonbinding. They also come from companies whose chips fill Meta’s data centers, a circularity investors in AI financing have learned to discount.

The case for the raise rests on what the spending produces. Meta points to 3.64 billion daily users, six straight quarters of revenue growth above 20%, and more than 10 million Muse users in the United States and Canada within weeks of launch. It also cites Muse Wonder, its first frontier model, now offered to developers through the Meta Model API. Zuckerberg was direct: “Our investments are paying off, the core business is strong.” The evidence will arrive in short order: final pricing of the preferred, the size of any overallotment, fourth-quarter capital spending against the implied range and, early next year, a 2027 budget. Meta has asked shareholders to finance the buildout directly. They will now hold it to a stricter test than any revenue beat: whether each dollar raised earns more than the dilution it carries.