Meta Platforms has been handed the largest financial penalty in its history, just as it asks investors to keep trusting its rapidly growing bill for artificial intelligence.
A judge in New Mexico has ordered the owner of Facebook and Instagram to pay $25 billion. The order follows a jury finding that the company misled the state’s residents about how it shared user data with outside parties and how it enforced its rules on hate speech and misinformation. The case is linked to the Cambridge Analytica affair. The Meta $25 billion penalty dwarfs previous sanctions against the company.
A costly week of legal news
The ruling does not stand alone. In August, Meta agreed to pay as much as $18 billion over ten years and to restrict teenagers’ use of Facebook and Instagram, settling claims from nearly all US states that its platforms were designed to be addictive for young users. That agreement removed a major regulatory overhang and spared the company a lengthy trial that could have exposed internal documents.
The New Mexico penalty is a reminder that legal risk has not gone away. Whether Meta will contest the judgment, and how it would be paid, were not clear from the reporting available on Thursday.
Strong revenue, rising costs
Investors had been braced for Meta’s third-quarter results, released after the market closed on Wednesday. Revenue rose 26 percent from a year earlier to $64.6 billion, comfortably ahead of analyst forecasts of about $63.4 billion. The company reported earnings of $3.83 a share, a figure that includes a litigation charge. It also gave a positive outlook for the current quarter.
Shares closed Wednesday at $697.52 and rose about 2 percent in after-hours trading.
The company also narrowed its spending outlook. Capital expenditure for the year is now expected to fall between $135 billion and $145 billion, up from a previous range of $130 billion to $145 billion. The change is small, but it moves the floor higher.
Why the spending matters
Meta has been pouring money into chips and data centres to compete with OpenAI and Anthropic. That spending has eroded a free cash flow that was once among the strongest in corporate America. Analysts have spent months asking whether the returns will justify the outlay.
Some early answers are encouraging. Meta says its consumer AI agent, Muse, has been popular, and a new family of its AI models has been well received. Better ad targeting and recommendations also continue to lift engagement across its apps, which still produce almost all of its revenue through advertising. Yet some businesses have restricted the agent’s access over security worries, a sign that enterprise adoption is not guaranteed.
New shares to fund the push
The company also announced plans to introduce a new class of non-voting shares. The shares could be used to pay for acquisitions and to attract top engineers without diluting the voting control held by chief executive Mark Zuckerberg.
Governance specialists often criticise such structures because they separate economic ownership from influence. Supporters argue that they let founders pursue long-term bets without short-term pressure. Expect the debate to sharpen as details emerge.
The investor question
For shareholders, the picture is mixed. The core advertising business is growing quickly, which supports the case for continued AI investment. But a $25 billion penalty, an $18 billion settlement obligation and a capital budget well above $130 billion add up to substantial claims on future cash.
The next test comes in the months ahead: whether Meta can show that AI products earn revenue fast enough to cover both the infrastructure and the legal costs. For now, the market appears willing to give the company the benefit of the doubt. The courts, it seems, are less patient.
