Meta to issue new class of shares as it tightens AI spending forecast

Oct 21 (Reuters) - Meta on Wednesday raised the lower end of its annual spending forecast and said it would introduce new non-voting shares, in a move that would help fund its costly AI expansion.

Meta has been pouring money into chips and data centers to compete more aggressively with OpenAI and Anthropic, eroding its historically strong free cash flow.

The new shares may allow the company to finance acquisitions and attract top talent without diluting CEO Mark Zuckerberg's voting control amid Silicon Valley's intensifying AI race.

The Facebook and Instagram parent said it now expects capital expenditure to be between $135 billion and $145 billion this year, up from $130 billion to $145 billion expected previously.

The company also reported better-than-expected quarterly revenue of $64.60 billion, ahead of Wall Street estimates of $63.37 billion, according to data compiled by LSEG. It also forecast fourth-quarter revenue above estimates.

The early popularity of its consumer-focused AI agent Muse and the release of a competitive new series of AI models have helped Meta justify those investments to investors, even though some enterprises are restricting the agent's access over security concerns.

Legal challenges are also mounting, including a $25 billion penalty ordered by a judge in New Mexico earlier on Wednesday after a jury found Meta misled the state's residents about ​how it shared user data with third parties and enforced policies on hate speech and misinformation in a case related to British political consulting firm Cambridge Analytica.

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 by nearly all US states alleging that Meta's platforms were designed to addict children.

The agreement removed a significant regulatory hurdle that had weighed on Meta's stock and allowed the company to avoid a potentially lengthy trial that could have exposed more internal documents about its treatment of young users.

Almost all of Meta's revenue comes from advertising, with Reels competing with TikTok and YouTube Shorts for dominance in the short-video market and Threads taking on Elon Musk's X, while its AI sharpens ad targeting and recommendations to boost user engagement.

(Reporting by Jaspreet Singh in Bengaluru; Editing by Diti Pujara)