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- Connor Quincy via Forbes
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Meta Revenue Hits $64.6 Billion as Legal Costs and AI Spending Weigh on Profit
ReMeta Revenue Hits $64.6 Billion as Legal Costs and AI Spending Weigh on Profit
Meta's third-quarter revenue rose 26% to $64.6 billion, beating analyst forecasts, but operating income fell sharply as legal settlements and record capital spending squeezed margins. The company also announced a stock split creating Class C shares.
Meta Platforms reported third-quarter revenue of $64.6 billion, a 26% increase from a year earlier and a new record for the company, beating the $63.3 billion consensus forecast from analysts surveyed by Visible Alpha. The results, released Wednesday, also included an announcement that Meta will carry out a stock split creating a new class of Class C shares, a move that follows a strong month for the company's stock, which recently reached its highest point of the year after several months of turbulence.
Despite the revenue beat, profitability took a significant hit. Net income came in at $9.9 billion, or $3.83 per share, compared with $2.7 billion, or $1.05 per share, in the same period last year. Operating income fell to $13 billion from $20.5 billion a year earlier, well below the $16.9 billion analysts had expected. The operating margin narrowed to 20%, down from 31% in the previous quarter and 40% a year ago.
The decline was driven largely by legal costs. A $10 billion charge stemmed from a settlement with a group of state attorneys general over youth safety, under which Meta will pay about $18 billion to the states over the next decade, depending on cooperation from TikTok and Google's YouTube. Hours before the earnings release, a New Mexico judge ordered the company to pay $25 billion in penalties related to the Cambridge Analytica data privacy scandal, after a jury found more than 43 million violations. Meta plans to appeal that ruling. Without the settlement charge, operating income would have been $22.9 billion and earnings $7.40 per share.
Capital expenditures continued to climb, reaching $34.9 billion in the quarter, compared with $31 billion in the second quarter and $19.4 billion a year earlier. Meta slightly raised the low end of its full-year capital spending guidance to a range of $135 billion to $145 billion, from $130 billion to $145 billion. The spending surge reflects the broader industry push into artificial intelligence infrastructure. Melissa Otto, global head of Visible Alpha research at S&P Global, noted that consensus capital expenditure for 2026 had risen more than $14 billion since April to about $140 billion, nearly double the 2025 level. Across the tech sector, infrastructure spending is expected to reach $790 billion in 2026 and $1.2 trillion in 2027, according to Otto.
Free cash flow turned negative at $2.1 billion, compared with $784 million in the second quarter and $10.6 billion a year earlier, a metric that has been a persistent concern for investors. The results also followed the public launch of Muse Wonder, the first frontier model from Meta's Superintelligence Labs, a week before the earnings report. Wall Street appeared to shrug off the earnings miss, with the stock holding steady as investors focused on revenue growth and the company's AI ambitions.
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