Meta Platforms reported third-quarter 2026 revenue of $64.601 billion on 21 October, an increase of 26 percent from $51.242 billion, but income from operations fell 37 percent to $12.988 billion because of a $9.89 billion charge. The charge relates to an agreement with 52 state attorneys general to resolve litigation over teen mental health and social media, which provides for payments of up to approximately $18.59 billion. Net income was $9.860 billion, up from $2.709 billion, and diluted earnings per share were $3.83, against $1.05. Without the charge, Meta said operating income would have been $22.88 billion and earnings per share $7.40.
The argument that the business is strong rests on advertising and cash generation before spending. Ad impressions delivered across Meta’s apps rose 10 percent and the average price per ad rose 14 percent, which together explain much of the 26 percent rise in revenue. Daily active people averaged 3.64 billion in September, up 3 percent. Cash flow from operating activities was $32.79 billion, and cash, cash equivalents and marketable securities stood at $82.45 billion. Excluding the charge, the effective tax rate would have been 17 percent, and the company said the quarter included the launch of Muse and Muse Wonder, which it called its first frontier model. Headcount fell 15 percent from a year ago to 66,775.
The counter-argument is that costs and capital spending have outrun profit. Costs and expenses rose 68 percent to $51.613 billion, and the operating margin fell to 20 percent from 40 percent. Capital expenditures including finance lease principal payments were $34.91 billion, which is more than the quarter’s operating cash flow of $32.79 billion and left free cash flow at negative $2.12 billion. The legal settlement is a large one: the charge in the quarter equals about 15 percent of revenue, a calculation from the company’s figures, and the company has raised its expected full-year 2026 total expenses to $175 billion to $179 billion to include it. Net income was flattered by a tax provision of $3.141 billion, down from $18.954 billion a year ago, when Meta had a much higher effective tax rate of 87 percent.
The report matters because it shows how much cash the largest social media company is committing to artificial intelligence while also paying for legal exposure. For the fourth quarter Meta expects revenue of $73 billion to $76 billion, which is 13 percent to 18 percent above the third quarter’s $64.6 billion, a calculation from the guidance. The company also announced the establishment of a new Class C common stock, a change to its share structure whose details were not given in the release. Dividend and dividend equivalent payments were $1.36 billion in the quarter. A year ago, income from operations was $20.535 billion on a margin of 40 percent, so the quarter’s operating profit is $7.5 billion lower despite $13.4 billion more revenue, a calculation from the company’s figures.
Meta’s advertising engine grew faster than most of its peers’ revenue, but profit and free cash flow were hit by a settlement and a record level of investment. The fourth-quarter guidance will show whether revenue can keep pace with spending.