European Investor
22 Oct 2026, 15:11
Meta Revenue Jumps 26% as AI Investments Boost Core Business, but Legal Charge and Heavy Spending Weigh on Profitability
Meta Platforms (Nasdaq: META) reported strong third-quarter 2026 revenue growth as advertising demand remained robust and the company said its AI investments were already contributing meaningfully to engagement and monetization.
Revenue increased 26% year over year to $64.6 billion, while Family daily active people rose 3% to 3.64 billion. Ad impressions increased 10% and the average price per ad climbed 14%, underscoring continued strength across Meta’s core advertising business.
Headline profitability was heavily affected by a $9.89 billion charge tied to Meta’s agreement with 52 U.S. state attorneys general over teen mental-health and social-media litigation. Including the charge, operating income fell 37% to $13.0 billion and operating margin dropped to 20% from 40%. Excluding the charge, operating income would have been about $22.9 billion and diluted EPS would have been $7.40 instead of the reported $3.83.
Spending also remained elevated. Third-quarter capital expenditures reached $34.9 billion, while free cash flow was negative $2.12 billion despite $32.8 billion of operating cash flow. Meta narrowed its 2026 capital expenditure outlook to $135 billion-$145 billion and raised its total expense forecast to $175 billion-$179 billion, reflecting the legal charge.
For the fourth quarter, Meta expects revenue of $73 billion to $76 billion. Management also said it expects strong overall revenue growth to continue through 2027, supported by AI-driven improvements in recommendations, engagement and advertising efficiency.
Reality Labs losses are expected to decline to $18 billion-$19 billion in 2026 and to around $15 billion in 2027 as Meta reallocates more investment toward AI.
Separately, Meta approved a new publicly listed, non-voting Class C share class that is expected to become effective in January 2027. The company also plans a one-for-one Class C stock dividend for existing Class A and B shareholders, which Meta said should have an economic effect similar to a two-for-one stock split while leaving shareholder voting power unchanged.
Overall, the quarter showed very strong underlying advertising and AI-driven growth, but investors are likely to focus closely on the scale of legal liabilities, aggressive capital spending and the pace at which Meta’s expanding AI infrastructure ultimately converts into incremental earnings and cash flow.
Meta Platforms (Nasdaq: META) reported strong third-quarter 2026 revenue growth as advertising demand remained robust and the company said its AI investments were already contributing meaningfully to engagement and monetization.
Revenue increased 26% year over year to $64.6 billion, while Family daily active people rose 3% to 3.64 billion. Ad impressions increased 10% and the average price per ad climbed 14%, underscoring continued strength across Meta’s core advertising business.
Headline profitability was heavily affected by a $9.89 billion charge tied to Meta’s agreement with 52 U.S. state attorneys general over teen mental-health and social-media litigation. Including the charge, operating income fell 37% to $13.0 billion and operating margin dropped to 20% from 40%. Excluding the charge, operating income would have been about $22.9 billion and diluted EPS would have been $7.40 instead of the reported $3.83.
Spending also remained elevated. Third-quarter capital expenditures reached $34.9 billion, while free cash flow was negative $2.12 billion despite $32.8 billion of operating cash flow. Meta narrowed its 2026 capital expenditure outlook to $135 billion-$145 billion and raised its total expense forecast to $175 billion-$179 billion, reflecting the legal charge.
For the fourth quarter, Meta expects revenue of $73 billion to $76 billion. Management also said it expects strong overall revenue growth to continue through 2027, supported by AI-driven improvements in recommendations, engagement and advertising efficiency.
Reality Labs losses are expected to decline to $18 billion-$19 billion in 2026 and to around $15 billion in 2027 as Meta reallocates more investment toward AI.
Separately, Meta approved a new publicly listed, non-voting Class C share class that is expected to become effective in January 2027. The company also plans a one-for-one Class C stock dividend for existing Class A and B shareholders, which Meta said should have an economic effect similar to a two-for-one stock split while leaving shareholder voting power unchanged.
Overall, the quarter showed very strong underlying advertising and AI-driven growth, but investors are likely to focus closely on the scale of legal liabilities, aggressive capital spending and the pace at which Meta’s expanding AI infrastructure ultimately converts into incremental earnings and cash flow.
