Meta earnings showed strong advertising growth but sharply lower operating profit in the third quarter of 2026, as a $9.89 billion litigation charge pushed expenses higher. The company reported revenue of $64.60 billion on October 21, up 26% from a year earlier and above analyst expectations, while raising its full-year expense outlook to $175 billion–$179 billion.
Key Takeaways
- Advertising impressions rose 10% and average ad prices increased 14% year over year.
- Diluted EPS was $3.83, or $7.40 excluding the litigation charge.
- Meta forecasts fourth-quarter revenue of $73 billion–$76 billion.
Table of Contents
- Meta earnings reflect advertising growth and legal costs
- Settlement charge separates reported and adjusted profit
- Fourth-quarter forecast and annual spending outlook
- Capital investment exceeds quarterly operating cash flow
- Conclusion
Meta earnings reflect advertising growth and legal costs
For the quarter ended September 30, revenue increased from $51.24 billion a year earlier. The $64.60 billion result exceeded the cited analyst consensus by $1.19 billion.
Growth reflected both more advertising delivered and higher prices per ad. Family daily active people, Meta’s measure of people using its apps, averaged 3.64 billion in September, up 3% year over year.
The stronger revenue did not translate into higher reported operating profit. Total costs and expenses rose 68% to $51.61 billion, while income from operations fell 37% to $12.99 billion. The operating margin narrowed to 20% from 40%.
| Item | Details |
|---|---|
| Q3 operating cash flow | $32.79 billion |
| Q3 capital expenditures | $34.91 billion, including principal payments on finance leases |
| Q3 free cash flow | Negative $2.12 billion |
| Q3 dividend payments | $1.36 billion, including dividend equivalents |
Settlement charge separates reported and adjusted profit
Meta’s third-quarter results announcement details a $9.89 billion charge tied to its August 2026 agreement with 52 attorneys general to resolve litigation related to teen mental health and social media. The agreement provides for payments of up to approximately $18.59 billion; the quarterly charge is not the same as that maximum payment amount.
Meta said excluding the charge would have lifted operating income to $22.88 billion and diluted EPS by $3.57 to $7.40. Reported diluted EPS of $3.83 missed the cited analyst estimate by $1.63, while the figure excluding the charge exceeded expectations by $0.60.
Net income nevertheless rose to $9.86 billion from $2.71 billion a year earlier. That increase accompanied a much lower tax provision: Meta’s effective tax rate was 24%, compared with 87% in the third quarter of 2025. The bottom-line increase therefore contrasts with the decline in reported operating profit.
Fourth-quarter forecast and annual spending outlook
Meta expects fourth-quarter revenue of $73 billion–$76 billion. The cited $73.75 billion analyst consensus falls inside that range, rather than above it. Management’s forecast assumes foreign exchange will reduce year-over-year revenue growth by approximately one percentage point.
The higher full-year expense outlook incorporates the third-quarter legal charge. Excluding that charge, management continues to expect 2026 operating income to exceed 2025 operating income.
Meta also narrowed its 2026 capital expenditure forecast, including principal payments on finance leases, to $135 billion–$145 billion from $130 billion–$145 billion. This raises the lower end without changing the upper limit. Management said it expects to continue investing aggressively in its core business and emerging artificial intelligence initiatives, but has not provided a full-year 2027 revenue outlook.
Capital investment exceeds quarterly operating cash flow
Quarterly capital expenditures exceeded cash generated from operations, leaving free cash flow negative despite the profitable quarter. Meta ended September with $82.45 billion in cash, cash equivalents and marketable securities.
Management also warned that active legal and regulatory matters could significantly affect future results, citing youth-related scrutiny in several markets and U.S. trials scheduled in the coming months.
Conclusion
The fourth-quarter results will show how revenue performs against Meta’s $73 billion–$76 billion forecast and where annual spending lands within the revised ranges. Scheduled youth-related trials remain another confirmed development to watch.
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