Meta Costs Jump 68% to $51.613 Billion as Operating Margin Falls to 20%

Key Facts

Meta's costs and expenses totaled $51.613 billion in the third quarter of 2026, up 68% year over year, according to the company's results filing with the U.S. Securities and Exchange Commission. Operating income, meanwhile, fell 37% to $12.988 billion. The operating margin declined to 20%, compared with 40% in the same quarter of 2025. The figures show expenses weighing more heavily on operating results during the quarter. This came as advertising activity across the company's apps grew.

Ad impressions delivered across Meta's apps rose 10% year over year in the third quarter, while the average price per ad increased 14%, according to the company. The family of apps had 3.64 billion daily active users in September 2026, up 3% from the same period a year earlier. The figures point to growth in both ad volume and average prices, alongside an expanding base of active users. But stronger advertising activity did not prevent operating income and margin from declining during the period. The contrast highlights the gap between performance in the core business and the pressure costs put on operating profitability.

Net income was $9.860 billion in the third quarter of 2026, compared with $2.709 billion a year earlier, according to official figures. The income tax provision was $3.141 billion in the current quarter, versus $18.954 billion in the third quarter of 2025. The effective tax rate was 24%, compared with 87% in the year-earlier period. The comparison shows a substantial difference in the tax provision and rate between the two periods, alongside the change in net income. The year-over-year increase in net income therefore came amid a change in the tax line as operating income declined.

Meta generated $32.79 billion in cash from operations in the third quarter, but free cash flow was negative $2.12 billion. Capital expenditures and finance lease principal payments totaled $34.91 billion during the period. At the end of September, cash, cash equivalents and marketable securities stood at $82.45 billion. The company raised the lower end of its 2026 capital spending outlook to $135 billion, while keeping the upper end at $145 billion. Its previous range was $130 billion to $145 billion, so the change was limited to a higher floor.

Reuters reported that Meta shares fell more than 7% on October 22 amid the new annual capital spending outlook and the free cash flow deficit. Reuters also reported that the shares fell 8%, their biggest decline since July, as part of a broader retreat in stocks tied to the AI trade. Free cash flow was negative $2.12 billion in the third quarter, compared with positive cash flow a year earlier, Reuters reported. The market reaction came the day after the results were announced, with attention focused on investment costs and funding. Advertising activity growth thus coincided with investor concerns about elevated cash spending.

In a shareholder filing, Meta announced a distribution of one Class C share for each outstanding Class A and Class B share, with the charter amendments taking effect on January 19, 2027. The company said the new class could be used to raise capital, compensate employees, fund acquisitions or serve general corporate purposes. It added that issuing Class C shares would not dilute the voting power of existing shareholders. Meta intends to qualify the class for listing on Nasdaq when it is issued through the distribution, but had not issued or listed the class at the time of the filing. Meta did not announce a specific financing offering or target amount to raise.

Mark Zuckerberg said more than 10 million people in the United States and Canada had created accounts on the Muse app as of October 21, 2026. He added that about 25% of those who had created an account use it on a given day. The company expected to improve the app's cost efficiency by more than 10 times over the following year. For its Reality Labs unit, Meta expects losses to fall to about $15 billion in 2027 as it redirects investment to other priority areas, particularly AI. The company did not provide a fiscal 2027 revenue forecast, while fourth-quarter results remain the next follow-up, with no specific calendar date given in the available sources.