Meta third-quarter net income rises to $9.86 billion including $9.89 billion legal charge

Meta Platforms, Inc. (META) reported third-quarter 2026 revenue of $64.60 billion on Wednesday, up 26% from a year earlier.

Net income rose to $9.86 billion, the company said in a press release.

The quarter includes a $9.89 billion charge tied to an agreement with 52 U.S. state attorneys general to resolve litigation over teen mental health and social media.

The agreement, announced in August, provides for payments of up to approximately $18.59 billion.

Here's how the company did:

• Revenue: $64.60 billion vs. $51.24 billion a year earlier
• Net income: $9.86 billion vs. $2.71 billion a year earlier
• Diluted earnings per share: $3.83 vs. $1.05 a year earlier
• Income from operations: $12.99 billion vs. $20.54 billion a year earlier
• Operating margin: 20% vs. 40% a year earlier

Excluding the charge, income from operations would have risen by $9.89 billion to $22.88 billion, and diluted earnings per share would have risen by $3.57 to $7.40.

"We hit major milestones this quarter toward delivering personal superintelligence for everyone - including launching Muse and Muse Wonder, our first frontier model," said Mark Zuckerberg, Meta founder and CEO. "Our investments are paying off, the core business is strong, and we're seeing velocity across the board."

Family daily active people averaged 3.64 billion in September 2026, up 3% from a year earlier. Ad impressions across the Family of Apps rose 10% year over year, and the average price per ad rose 14%.

Family of Apps revenue was $64.16 billion, up from $50.77 billion a year earlier, and its operating income was $17.12 billion, down from $24.97 billion.

Reality Labs revenue was $443 million, down from $470 million, and its operating loss was $4.13 billion, compared with $4.43 billion a year earlier.

Total costs and expenses rose 68% to $51.61 billion, including the litigation charge.

Headcount was 66,775 as of Sept. 30, down 15% from a year earlier.

Capital expenditures, including principal payments on finance leases, were $34.91 billion. Operating cash flow was $32.79 billion.

Free cash flow, or operating cash flow less capital spending and finance lease principal payments, was negative $2.12 billion. Cash, cash equivalents and marketable securities totaled $82.45 billion as of Sept. 30.

Fourth quarter and full-year 2026 outlook

The company expects fourth-quarter 2026 total revenue of $73-76 billion. Its guidance assumes foreign currency is a headwind of about 1% to year-over-year total revenue growth at current exchange rates.

The company raised its full-year 2026 total expense outlook to $175-179 billion to include the third-quarter legal charge. Excluding that charge, it continues to expect 2026 operating income to be above 2025 operating income.

Reality Labs losses are now expected to decline from 2025 to a range of $18-19 billion. Capital expenditures for 2026 are now expected to be $135-145 billion, narrowed from the prior outlook of $130-145 billion.

The fourth-quarter tax rate is expected to be 15% to 17%, absent changes to the company's tax landscape.

The company is not providing a full-year 2027 revenue outlook. It expects Reality Labs losses to narrow to around $15 billion next year as it reallocates investment toward AI.

The company also said it has a number of youth-related trials scheduled in the coming months in the U.S.

Establishment of new Class C common stock

The board approved a new class of publicly listed, non-voting Class C common stock, effective Jan. 19, 2027. Shareholders approved the amended and restated certificate of incorporation by written consent on Oct. 20, 2026.

The board also declared a one-time stock dividend of one Class C share for each Class A and Class B share, payable after the charter takes effect. The record and payment dates will be set later.

The company expects its Class A shares to reflect a two-for-one stock split after the dividend is paid. It intends to qualify the Class C shares for Nasdaq listing upon issuance.

According to the company, the new class would help it raise capital, compensate employees, pursue acquisitions and fund other general corporate purposes.

A special committee of disinterested and independent directors unanimously recommended the change. Moelis & Company LLC served as its independent financial advisor, and Morgan Stanley & Co. LLC served as financial advisor to Meta.

Under a Founder Alignment Agreement signed Oct. 20, 2026, 80% of the Class C shares Mark Zuckerberg receives in the dividend are subject to sale restrictions, and 20% are freely saleable.

Sales of restricted shares require a corresponding sale or conversion of Class A or Class B shares. A 2.5% tranche is released each quarter while he remains employed full time on the executive team or as executive chair.