Key Takeaways
- Revenue rose 26% to $64.60 billion compared to the last year.
- Costs jumped 68% to $51.61 billion, mostly because of a $9.89 billion legal charge.
- Operating income fell 37% to $12.99 billion. Without the charge, it would have reached $22.88 billion.
- Net income hit $9.86 billion, and earnings per share reached $3.83.
- Meta spent $34.91 billion on capital expenditures in one quarter.
- Free cash flow turned negative, at minus $2.12 billion.
- Meta expects Q4 revenue between $73 billion and $76 billion.
The Quarter at a Glance
| Metric | Q3 2026 | Q3 2025 | Change |
| Revenue | $64.60B | $51.24B | +26% |
| Costs and expenses | $51.61B | $30.71B | +68% |
| Operating income | $12.99B | $20.54B | −37% |
| Operating margin | 20% | 40% | −20 points |
| Income tax | $3.14B | $18.95B | −83% |
| Net income | $9.86B | $2.71B | +264% |
| Diluted EPS | $3.83 | $1.05 | +265% |
Strong Growth in the Core Business
Meta’s ad business improved again. Revenue increased to $64.60 billion, and the growth rate was the same with or without currency effects.
Two things drove the gain. Meta delivered 10% more ad impressions than last year, and each ad sold for 14% more on average. More ads at higher prices explain nearly all of the revenue growth.
More people also used Meta’s apps. Daily active people across Facebook, Instagram, Messenger and WhatsApp averaged 3.64 billion in September, up 3%.
Mark Zuckerberg, Meta founder and CEO, said, “We hit major milestones this quarter toward delivering personal superintelligence for everyone – including launching Muse and Muse Wonder, our first frontier model.”
He further added, “Our investments are paying off, the core business is strong, and we’re seeing velocity across the board.”
Users grew only 3%, yet revenue grew 26%. So Meta is earning far more from each person, not just reaching more people. The company credits AI for this, saying better recommendations and stronger engagement lift ad results.
The $9.89 Billion Legal Charge
In August, Meta agreed to settle with 52 state attorneys general over teen mental health and social media. The deal allows payments of up to about $18.59 billion. Meta booked $9.89 billion of that in Q3.
The charge distorted almost every profit measure:
| Measure | Reported | Without the charge |
| Operating income | $12.99B | $22.88B |
| Operating margin | 20% | About 35%* |
| Diluted EPS | $3.83 | $7.40 |
| Effective tax rate | 24% | 17% |
Even without the charge, Meta’s profit picture is less rosy than the headline suggests. Costs would have been about $41.7 billion, up roughly 36% from last year and faster than revenue. Operating income would have grown about 11%, and the margin would have slipped from 40% to about 35%. Meta is spending heavily on AI, and the spending is outpacing sales.
The settlement allows up to $18.59 billion, and Meta booked $9.89 billion. That leaves roughly $8.7 billion. Meta did not say whether or when that amount will hit its results, so investors should watch for it in future quarters.
Why Net Income Rose 264%
Net income increased to $9.86 billion from $2.71 billion. That looks strange next to falling operating income, but last year’s tax bill explains it. In Q3 2025, Meta recorded a $18.95 billion tax provision, which pushed its effective tax rate to 87%. This year, the provision was just $3.14 billion.
The jump says more about an unusually bad comparison quarter than about a surge in earnings power. The better yardstick is operating income, which fell because of the legal charge.
AI Spending Pushes Cash Flow Negative
Meta spent $34.91 billion on capital expenditures in one quarter, which equals about 54% of its revenue.
Operations produced $32.79 billion in cash, so spending outran earnings and free cash flow landed at negative $2.12 billion.
| Cash and Capital Item | Q3 2026 |
| Cash from operations | $32.79B |
| Capital expenditures | $34.91B |
| Free cash flow | −$2.12B |
| Dividends and equivalents paid | $1.36B |
| Cash and marketable securities | $82.45B |
A negative quarter is not a crisis. Meta still holds $82.45 billion in cash and securities. But the numbers show how much the AI race costs. Meta’s full-year capex guidance of $135 billion to $145 billion means spending will stay high through year-end.
Fewer Employees, More Revenue
Headcount fell 15% from last year to 66,775. Meanwhile, revenue grew 26%.
Using our own rough math, quarterly revenue per employee rose from about $650,000 to about $970,000, an increase of nearly 50%. Meta is putting its money into chips and data centers rather than payroll.
What Meta Expects Next
| Item | Outlook |
| Q4 2026 revenue | $73B to $76B |
| Full-year 2026 expenses | $175B to $179B (includes legal charge) |
| Full-year 2026 capex | $135B to $145B (narrowed from 130B–145B) |
| Reality Labs loss, 2026 | $18B to $19B |
| Reality Labs loss, 2027 | Around $15B |
| Q4 2026 tax rate | 15% to 17% |
Meta also said that, excluding the Q3 legal charge, it still expects 2026 operating income to beat 2025. It will not give a full-year 2027 revenue forecast, but it expects “strong overall revenue growth” throughout the year. It also plans to keep investing aggressively in AI.
Meta also plans to shrink Reality Labs losses and shift that money to AI, which shows where its priorities lie. The company admits that its AI work at Meta Superintelligence Labs will take longer to pay off than its core business.
Legal Risks Remain
Meta warned that legal and regulatory pressure on youth issues continues in several markets. The company also has a number of youth-related trials scheduled in the U.S. in the coming months. It can affect its financial results.
A New Class of Stock
Meta’s Board approved a new, publicly listed, non-voting Class C common stock. It will take effect from January 19, 2027. A special committee of independent directors recommended the move, and shareholders approved it by written consent.
The committee gave three reasons:
- More ways to raise money. Meta can use the new shares to fund growth, pay employees, and make acquisitions. The committee said competing in AI takes huge investment.
- Long-term value. Meta’s stock has moved 1,700% since its IPO, while the S&P 500 rose about 495%.
- Founder leadership. The committee said Zuckerberg is the best person to lead Meta forward, and the new structure keeps the founder-led model.
Here is how the stock dividend works:
| Detail | What Meta Said |
| Dividend | One Class C share for each Class A or Class B share |
| Effective date of new class | January 19, 2027 |
| Record and payment dates | The Board will set them later |
| Market effect | Class A price should reflect a two-for-one split |
| Voting power | No change for any shareholder |
| Listing | Class C shares to list on Nasdaq; Class A keeps trading |
Meta also signed a Founder Alignment Agreement with Zuckerberg. It covers his sales of Class C shares, his service at the company and conditions for possible future Class C dividends. Moelis & Company advised the special committee, and Morgan Stanley advised Meta.
Because the new shares carry no votes, Meta can issue them without weakening Zuckerberg’s control. Expect Meta to use them to raise money or pay for deals as its AI spending grows. Existing shareholders should note that future issuance could dilute their ownership, though not their voting power.
The Bottom Line
Meta’s ad engine is running hot. Revenue is up 26%, prices are rising, and each user brings in more money. But the quarter also shows what that growth costs. A huge legal settlement cut profit, and AI spending pushed free cash flow below zero.
Investors will now watch three things: whether AI spending turns into new revenue, whether the remaining settlement cost hits future results, and how the upcoming youth-related trials unfold.