A judge in New Mexico ordered Meta Platforms on Wednesday to pay the state $25 billion (€22.24 billion) after a jury found the company had misled consumers about the privacy of their data, hitting the company with one of the largest financial penalties in US history.
The ruling came in a case stemming from allegations that Cambridge Analytica, a British political consulting firm involved in Donald Trump’s 2016 presidential campaign, obtained data from millions of Facebook users without their consent. New Mexico had sued Meta, accusing it of lying to Facebook users in New Mexico about who had access to their data.
“Facebook’s wrongdoing – over the course of years and systematically broadcast to the public – goes to the heart of Facebook’s core business practices,” Judge Francis Mathew wrote in his order, which came more than three weeks after the verdict.
Mathew found that a penalty of more than $219 billion was warranted based on state law, but he reduced the figure to $25 billion.
In a statement, CJ Mahoney, Meta’s chief legal officer, said the company is confident it will win on appeal.
“This ruling, and the Attorney General’s approach to this enforcement, makes it all but impossible to do business in the state of New Mexico,” Mahoney said. “At its core, this lawsuit seeks to impose a tax on speech to enforce new rules for what people can say online.”
New Mexico Attorney General Raúl Torrez said in a statement after the ruling that the penalty was one of the largest financial penalties against a corporation in US history.
Meta is also facing a class-action lawsuit in Australia that alleges its Instagram and Facebook social media platforms exposed children to harmful content and kept them addicted through algorithms.
The lawsuit, filed in Australia’s second-highest court by law firm MinterEllison this month, could be the first in Australia to blame social media for harming its users, particularly children and teenagers. It was filed on behalf of eight plaintiffs, who allege they were harmed by Meta while they were under the age of 18, and are seeking compensation.
Separately, Meta signalled it was getting ready to bet more aggressively on the AI market, with chief executive Mark Zuckerberg telling investors that a pricey wager on artificial intelligence is delivering results.
During its quarterly earnings report Wednesday, the social-media giant boosted its capital spending plans for the year and announced a new class of nonvoting stock that could ultimately be used to help pay for acquisitions and other expenses.
After struggling to persuade investors to accept ballooning costs, Meta has made headway with its technology in recent months, especially with a new AI agent called Muse. Zuckerberg pointed to that progress as reason to keep ploughing ahead.
“Our investments are paying off, the core business is strong, and we’re seeing velocity across the board,” Zuckerberg said in Wednesday’s report.
Capital expenditures for the year will be in the $135 billion to $145 billion range, Meta said, raising the bottom end of the range from $130 billion.
The new class of shares will be distributed to existing investors through a stock dividend. Holders will get one share of the new stock in what will essentially be a two-for-one stock split, Meta said. It expects trading of the new shares to begin in January.
The stock will also be a tool to help further Meta’s expansion. It will be used for capital fundraising, employee compensation and potential takeovers, Meta said.
It will also allow Zuckerberg, who is the sixth richest person according to Forbes, to potentially fund a multi-billion-dollar tax bill in the event voters pass a wealth tax proposal next month. The company struck a deal with Zuckerberg in exchange for a commitment to remain a resident of California, or wherever Meta maintains its headquarters, for eight years.
Zuckerberg, who has a net worth of about $240 billion (€213.54 billion), can immediately sell 20 per cent of the Class C shares he receives, representing 10 per cent of his overall economic stake in the company, allowing him to pay a potential tax bill without losing voting control.
Zuckerberg touted the success of Muse during a conference call with analysts, saying that more than 10 million people have used the service in the US and Canada over its first six weeks.
“Now that Muse has clear product-market fit, we are entering a new phase and a more operational phase that is focused on scaling it,” Zuckerberg said.
Over the last year and a half, Zuckerberg has refocused the company’s efforts on advancing in the AI race. The push has included committing hundreds of billions of dollars to build out the infrastructure needed to support its models and overhauling its AI unit under head Alexandr Wang.
Earlier this month, Meta launched Muse Wonder, a long-awaited new AI model with “frontier capabilities” that its leadership said put it on par with OpenAI’s ChatGPT and Anthropic PBC’s Claude when it comes to coding or working through financial or legal questions. If Meta’s claims hold up to outside testing, and Muse Wonder gains traction with researchers and developers, it would mark a significant turnaround for the company, whose models last year fell flat in Silicon Valley.
The Muse personalised AI assistant debuted in September. It is designed to automate a range of tasks for consumers, including shopping, buying movie tickets and scheduling appointments. Muse quickly rose to the top of mobile app charts.
But that success has come with a cost. Meta noted that the AI agent requires a great deal of computing power. That’s one of the reasons the company hasn’t launched the agent globally yet.
Zuckerberg said that Muse should remain free for most people, with Meta making money through transaction fees paid by businesses, subscriptions for heavy users and customers who want access to the most advanced models, and paid tools for companies that rely on Muse at work. “If compute efficiency continues improving quickly for another few years, which we think is highly likely, then Muse will be highly profitable over multiple years,” he added.
Meta still has a lot of spending left to do before the end of the year. Even though the midpoint of its capital expenditures outlook is $140 billion, the company has only spent about $86 billion through the first nine months.
Meta also signalled that it will take longer to see returns from some of its newer AI investments, even as its core business helps absorb the cost.
“While these investments will take longer to generate returns than those in our core business,” chief financial officer Susan Li said, “the breadth of monetisation opportunities and internal efficiencies gives us confidence in their long-term potential.”
Meta is cutting costs elsewhere as it bulldozes money into AI. Headcount was down 15 per cent year over year following significant job cuts, and the company has pledged to narrow losses at Reality Labs, its hardware division.
Meta expects Reality Labs losses of as much as $19 billion this year, before falling to around $15 billion in 2027 as it reallocates spending toward other priorities – “primarily AI”. - Bloomberg, Reuters
