Meta Platforms reported third-quarter results on 21 October that combined fast advertising growth with a sharp rise in costs. According to the company’s earnings release filed with the US Securities and Exchange Commission, revenue rose 26% to $64.60 billion from $51.24 billion a year earlier. Costs and expenses rose 68% to $51.61 billion, which cut income from operations by 37% to $12.99 billion and halved the operating margin from 40% to 20%. Net income was $9.86 billion, or $3.83 a share. Chief executive Mark Zuckerberg said the company had launched Muse and Muse Wonder, “our first frontier model”, and that “our investments are paying off”.
The case for Meta’s strategy rests on its advertising engine. The company said ad impressions across its apps rose 10% from a year earlier and the average price per ad rose 14%, which together account for most of the 26% revenue growth, and the number of people using at least one of its apps daily averaged 3.64 billion in September, up 3%. Meta said its artificial-intelligence investments are already delivering “substantial incremental advertising revenue through stronger engagement, better recommendations, and more efficient monetization”. It guided fourth-quarter revenue to between $73 billion and $76 billion, and said that excluding the legal charge, 2026 operating income would still be above 2025. Cash flow from operations was $32.79 billion in the quarter, and the company held $82.45 billion in cash and marketable securities at the end of September.
The case against starts with the cost of that growth. Capital expenditures were $34.91 billion in the quarter, which pushed free cash flow to negative $2.12 billion, and Meta now expects 2026 capital spending of $135 billion to $145 billion, narrowed from $130 billion to $145 billion. The quarter also included a $9.89 billion charge for an agreement in August with 52 state attorneys general to resolve litigation over teen mental health and social media, with payments of up to about $18.59 billion. Without it, earnings per share would have been $7.40 rather than $3.83. The company warned of a number of youth-related trials scheduled in the coming months in the United States. Reality Labs is still expected to lose $18 billion to $19 billion this year, and Meta said its investments in the superintelligence effort will take longer to generate returns than those in its core business. Total expenses for 2026 are now expected to be $175 billion to $179 billion, which includes the legal charge.
The numbers matter because Meta’s spending sets the pace for the whole AI supply chain, from chips to power. The company said it expects to keep investing aggressively next year, while its headcount fell 15% from a year earlier to 66,775, so spending on computing is rising at the same time as spending on people is shrinking. For advertisers, a stronger AI-driven ad system promises better targeting. For regulators and parents, the settlement shows how costly youth safety disputes have become.
Meta has shown that its ad business can fund an enormous build-out, but this quarter it did not fully cover it. The next test is whether the new models earn back the capital before the legal bills and spending forecasts grow further.
