Meta Revenue Beats at $64.60 Billion as a $9.89 Billion Legal Charge Cuts Profit and Class C Shares Fund the AI Push

Meta Platforms reported third-quarter results after the close on Wednesday, Oct. 21 that pulled in three directions at once. The advertising business beat expectations, a legal charge booked in the quarter cut reported profit hard, and the board approved a new class of non-voting stock built to fund the artificial intelligence expansion without touching Mark Zuckerberg's control.

Meta's release, distributed via PR Newswire, put third-quarter revenue at $64.601 billion, up 26 percent from $51.242 billion a year earlier on both a reported and constant-currency basis. That cleared the $63.37 billion average estimate compiled by LSEG, according to Reuters. Diluted earnings per share were $3.83. Shares rose more than 4 percent in extended trading, according to Reuters, after the company also guided fourth-quarter revenue above Wall Street estimates.

A legal charge, not the ad business, did the damage

Total costs and expenses jumped 68 percent to $51.613 billion, and $9.89 billion of that increase was a single item: the charge for Meta's August 2026 agreement with 52 state attorneys general resolving litigation over teen mental health and social media, an agreement that provides for payments of up to approximately $18.59 billion. Income from operations fell 37 percent to $12.988 billion and the operating margin compressed to 20 percent from 40 percent. Meta's own arithmetic shows the underlying quarter: excluding the charge, operating income would have been $22.88 billion, diluted EPS would have been $7.40 rather than $3.83, and the effective tax rate would have been 17 percent rather than the reported 24 percent.

The growth rates on the bottom line need the same care in the other direction. Net income of $9.860 billion was up 264 percent and diluted EPS up 265 percent, but those percentages measure distance from a depressed base: the third quarter of 2025 carried an 87 percent effective tax rate and an $18.954 billion tax provision, which held that quarter's net income to $2.709 billion. The honest comparison is the ex-charge operating picture, not the headline growth rate.

The AI build-out pushed free cash flow below zero

Capital expenditures, including principal payments on finance leases, reached $34.91 billion in the quarter, and purchases of property and equipment alone were $33.942 billion. Operating cash flow was $32.786 billion, so free cash flow was negative $2.120 billion, against positive $10.625 billion a year earlier. The balance sheet absorbed it: cash, cash equivalents and marketable securities stood at $82.45 billion on Sept. 30, and dividend and dividend-equivalent payments were $1.36 billion. Headcount was 66,775, down 15 percent year over year.

The segments split the same way the quarter did. Family of Apps revenue was $64.158 billion, of which advertising contributed $63.061 billion, and Family of Apps operating income was $17.117 billion, down from $24.967 billion a year earlier. Reality Labs lost $4.129 billion on revenue of $443 million, a narrower loss than the $4.432 billion of a year earlier. Family daily active people averaged 3.64 billion in September, up 3 percent; ad impressions rose 10 percent and the average price per ad rose 14 percent.

Guidance raises the spending floor again

Meta guided fourth-quarter revenue to $73 billion to $76 billion, assuming roughly a 1 percent foreign-exchange headwind; Reuters put the consensus estimate at $73.73 billion, so even the low end of the range sits near expectations. Full-year 2026 total expenses were raised to $175 billion to $179 billion to incorporate the legal charge, while the company repeated that operating income excluding the charge should still finish 2026 above 2025. The 2026 capital expenditure range narrowed to $135 billion to $145 billion from $130 billion to $145 billion. Reality Labs losses for 2026 are now expected at $18 billion to $19 billion, below 2025, narrowing to around $15 billion in 2027 as investment is reallocated toward AI. The fourth-quarter tax rate is expected at 15 to 17 percent.

Class C stock: a funding currency that leaves control untouched

The second half of the release was structural. Meta's board approved a new class of publicly listed, non-voting Class C common stock, and the company intends to file an amended and restated Delaware certificate of incorporation effective Jan. 19, 2027. The board declared a one-time stock dividend of one Class C share for each outstanding Class A and Class B share, contingent on the certificate taking effect, and Meta expects the Class A price to adjust afterward in a way that reflects the effect of a two-for-one stock split. The dividend changes no shareholder's voting power, the certificate has been approved by shareholder written consent, and a Founder Alignment Agreement with Zuckerberg sets terms for his Class C sales, his service and possible future Class C dividends.

The stated purpose is funding flexibility: a Special Committee of independent directors, which recommended the change unanimously, concluded the new class gives Meta a currency for capital raising, employee compensation and potential acquisitions tied to the AI build-out without diluting Zuckerberg's voting control. Moelis & Company advised the Special Committee and Morgan Stanley advised Meta. Zuckerberg framed the quarter itself in the release: "We hit major milestones this quarter toward delivering personal superintelligence for everyone - including launching Muse and Muse Wonder, our first frontier model," he said, adding that "our investments are paying off, the core business is strong, and we're seeing velocity across the board." Those are the company's claims; the figures above are what the release documents.

A separate $25 billion New Mexico penalty is not in these numbers

One legal item must not be confused with the charge in the results. Earlier on Wednesday, a New Mexico judge ordered Meta to pay a $25 billion penalty after a jury found the company misled consumers in the case arising from the Cambridge Analytica data harvesting, according to Reuters. That penalty is not the $9.89 billion attorneys-general charge, it was not accrued in the third-quarter figures reported above, and the two matters involve different plaintiffs, different conduct and different courts.

Judge Francis Mathew wrote that a penalty of more than $219 billion was warranted under state law but reduced the figure to $25 billion, Reuters reported. Jurors on Sept. 25 had found 26 of 29 company statements misleading and counted more than 43 million violations of New Mexico consumer-protection law; the state's attorney general sued in 2021, after revelations that a third-party app let Cambridge Analytica harvest data on as many as 87 million Facebook users. "Facebook's wrongdoing — over the course of years and systematically broadcast to the public — goes to the heart of Facebook's core business practices," Mathew wrote, according to Reuters. Meta's chief legal officer, C.J. Mahoney, said the company is confident it will win on appeal, according to Reuters.

What to watch: the appeal clock, the charge payments and the Class C filing

Three clocks now run alongside the operating business. First, the New Mexico appeal: a $25 billion judgment, even one Meta expects to overturn, will shape legal provisioning and disclosure until it resolves. Second, the payment schedule under the August attorneys-general agreement, which allows for up to approximately $18.59 billion over time against the $9.89 billion already charged. Third, the Class C mechanics: the Form 8-K and information statement Meta says it will file, the record and payment dates for the stock dividend, and whether the new class actually gets used for the acquisitions and compensation the committee described. The fourth-quarter print will test the other promise in this release — that excluding the charge, the core business still grows operating income while absorbing a $135 billion to $145 billion capital program.