Meta Q3 earnings: Revenue up 26% beating expectations, billion-dollar legal fees and AI capital expenditures both exert pressure

BlockBeats news, October 22 — Meta released its third-quarter 2026 results in the early hours of today Beijing time, with revenue of $64.601 billion, up 26% year-over-year, beating the market consensus estimate (approximately $63.3–$63.7 billion). Net income was $9.860 billion, up 264% year-over-year, and GAAP diluted earnings per share were $3.83.

Operating income fell 37% year-over-year to $12.988 billion, with the operating margin dropping to about 20% (about 40% in the same period last year), mainly due to a $9.89 billion legal charge. The charge relates to agreements the company reached with U.S. state attorneys general over lawsuits concerning teen mental health and social media, with total payments under the agreements capped at about $18.59 billion.

Meta said that excluding the charge, operating income was $22.88 billion, corresponding to adjusted diluted earnings per share of about $7.40. The sharp year-over-year increase in net income was also helped by the low base from an effective tax rate of 87% in the same period last year; the effective tax rate this quarter was 24%, and would be lower still excluding the impact of the legal charge. The advertising business kept growing, with ad impressions up 10% year-over-year and the average price per ad up 14%.

Family daily active people were about 3.64 billion, up 3% year-over-year. Family of Apps revenue was about $64.16 billion, of which advertising revenue was about $63.06 billion. Reality Labs revenue was about $443 million, with an operating loss of about $4.13 billion. Total expenses were about $51.6 billion, up sharply by 68% year-over-year, including the aforementioned legal charge.

Third-quarter capital expenditures (including principal payments on finance leases) were about $34.9 billion, free cash flow was negative $2.12 billion, and cash, cash equivalents and marketable securities at quarter-end were about $82.4 billion. The company expects fourth-quarter revenue of $73 billion to $76 billion, with the midpoint above most consensus estimates. Full-year capital expenditure guidance was narrowed to $135 billion to $145 billion (previously $130 billion to $145 billion), while full-year expense guidance was raised to $175 billion to $179 billion (previously about $165 billion to $169 billion), mainly due to the inclusion of the legal charge; excluding the charge, full-year operating income is still expected to be higher than in 2025. The company also expects Reality Labs operating losses of about $18 billion to $19 billion in 2026, with a narrowing expected next year.

According to BIT (BIT.com) market data, possibly affected by the earnings information, META shares rose 2.17% after hours.