Meta Revenue Jumps 26% to $64.601 Billion in Third Quarter
Key Facts
Meta reported third-quarter results on October 21 for the period ended September 30, posting revenue of $64.601 billion, up 26% year over year, according to its earnings release. Revenue topped Wall Street analysts’ estimate of $63.34 billion, according to The Associated Press. Net income rose to $9.86 billion, or $3.83 per share, compared with $2.71 billion and $1.05 per share a year earlier. But the comparison was affected by a $9.89 billion legal charge the company included in quarterly expenses. Meta said earnings per share would have been $7.40 excluding the impact of the charge, underscoring the strength of adjusted earnings alongside the rise in reported costs.
Meta attributed revenue growth to higher advertising revenue, supported by a 10% increase in ad impressions and a 14% rise in the average ad price compared with the same period a year earlier. The figures show that advertising activity grew through both an increase in ad views and an improvement in average pricing. Meanwhile, quarterly costs and expenses rose to $51.613 billion from $30.707 billion a year earlier, an increase of 68%. Operating income fell to $12.988 billion from $20.535 billion, and operating margin dropped to 20% from 40%. The divergence between sales growth and lower operating income reflects the impact of the surge in expenses, led by the legal charge recorded by the company.
Meta said the $9.89 billion charge was tied to an agreement announced in August with 52 state attorneys general, involving payments of up to about $18.59 billion. In its quarterly results disclosure, the company attributed part of the increase in expenses to the charge. On liquidity, cash flow from operations was $32.79 billion during the quarter, while free cash flow was negative $2.12 billion. Cash, cash equivalents and marketable securities totaled $82.45 billion on September 30. These figures come as the company increases investment, putting cash flow and liquidity at the center of tracking Meta’s ability to finance its plans.
Meta raised the low end of its 2026 capital expenditure forecast to $135 billion, while keeping the high end at $145 billion, compared with a previous range starting at $130 billion, according to Reuters. The range covers capital expenditure, while actual costs and expenses in the quarter totaled $51.613 billion. At the same time, the company forecast fourth-quarter revenue of between $73 billion and $76 billion. The midpoint of that range exceeds analysts’ average estimate of $73.65 billion, according to The Associated Press. The guidance thus combined indications of continued sales growth with higher investment allocations during the year.
On artificial intelligence, Mark Zuckerberg said the company launched Muse and Muse Wonder, describing Muse Wonder as “our first frontier model.” He added that the company’s investments “are paying off, and the core business is strong,” according to the earnings release. Zuckerberg said more than 10 million people in the United States and Canada had created accounts on Muse, and that about 25% of them use it on a typical day. He also said the company expects to improve the cost efficiency of serving users by more than 10-fold over the following year. The expansion in usage links product development plans to the challenge of operating costs, as Meta continues to spend on AI.
The stock initially moved higher, closing up 0.5% in regular trading on Wednesday, October 21, then rising 2.9% after the close following the results, according to The Associated Press. But it fell by more than 7% on Thursday, October 22, while five-year credit default swaps reached a record 114.79 basis points, according to Reuters. Reuters attributed the reaction to concerns about the cost of expanding AI and how to finance it. EL7 data showed the stock closed at $705.44 on October 19, $697.52 on October 21, then $648.85 on October 22 and $642.62 on October 23. Meta expected strong revenue growth to continue through 2027, driven by AI investments and new products, but did not provide a full-year revenue forecast, according to its statement.