Meta earnings: third quarter 2026

The quarter in brief

Meta, the owner of Facebook, Instagram and WhatsApp, had a quarter in which sales and profit went in opposite directions. Sales rose 26% to $64.6 billion, from $51.2 billion a year earlier, and the company says the rise was the same with currency effects removed.¹

Profit did not follow. Operating profit, the profit from running the business before interest and tax, fell 37% to $12.99 billion. Measured against sales, it halved from 40% to 20%, largely because of a legal charge tied to an agreement with U.S. state attorneys general.¹

Net income, the profit after everything, rose 264% to $9.86 billion. That looks spectacular, but it is a quirk of last year. The year-ago quarter carried an income tax charge of $18.95 billion, which left very little profit to compare against.¹ Profit before tax actually fell.¹

The heavy building of data centres also meant Meta spent more cash than its business brought in during the quarter.¹

The figures, as the company printed them

Against what analysts expected

Earnings per share, net income divided by the number of shares, came to $3.83. Analysts on average had expected $4.98.² Meta also gives a figure without the legal charge: $7.40, well above that forecast.¹ One figure sits below what analysts expected and the other well above it, so whether the quarter came in short or ahead depends entirely on how you treat the one-off charge.

What the company expects

For the fourth quarter, Meta expects sales of $73-76 billion, assuming that currency moves take about 1% off its growth compared with a year earlier.¹ Getting there rests on advertising, which is almost all of what Meta sells.

It has raised what it expects to spend in total in 2026 to $175-179 billion, and it says the increase reflects the $9.9 billion legal charge booked in the third quarter.¹ Leaving the charge aside, it still expects this year's operating profit to be above last year's.¹

Its expected spending on buildings and equipment this year, which includes payments on leased equipment, is now $135-145 billion, narrowed from $130-145 billion.¹ The top is unchanged; the lowest possibilities are gone.

For Reality Labs, it expects losses of $18-19 billion in 2026, lower than in 2025, and around $15 billion in 2027 as it moves money towards other priorities, mainly AI.¹ It expects its fourth-quarter tax rate to be between 15% and 17%, assuming tax rules do not change.¹

It gives no sales figure for 2027 but says it expects to sustain strong overall sales growth through the year, while continuing to invest aggressively in its core business and in AI. It is still building its 2027 budget and plans for computing capacity.¹ It also flags youth-related trials in the U.S. in the coming months as a risk.¹

The strong points

Advertising carried the quarter, and what makes its growth notable is where it came from. The number of ads shown rose 10% and the average price of each ad rose 14%, while the number of people using Meta's apps each day grew only 3%.¹ In other words, Meta is not mainly growing by finding new users. It is showing more ads to the people it already has and getting advertisers to pay more for each one. Rising prices suggest advertisers think the ads are working, and that is the point of much of Meta's AI spending: better choices about which ad to show to whom.

Meta also expects its costliest side project to cost less. Reality Labs, its virtual-reality and headset unit, lost billions this quarter on small sales.¹ The lower losses the company expects there free up money and attention for AI, the business where Meta now places its biggest bet.

The weak points

The legal charge was the single largest blow. An agreement with U.S. state attorneys general cut operating profit by $9.89 billion: without it, operating profit would have been $22.88 billion, above the $20.5 billion of a year earlier.¹ Meta sets it apart from its running costs, but it shows that legal matters around Meta's platforms can hit results directly.

Even setting the charge aside, costs grew much faster than sales. Research and development rose to $20.05 billion from $15.14 billion, and the direct cost of providing its services rose to $13.37 billion from $9.21 billion, with depreciation and share-based pay also climbing.¹ Much of this is likely the running cost of the AI push, and unlike the legal charge it does not go away with one payment. Meta itself says its newest AI spending will take longer to pay back than its core business.¹

Cash told the same story. The business produced $32.79 billion from its operations, but spending on data centres and equipment came to $34.91 billion, leaving free cash flow, the cash left after running the business and investing in it, at minus $2.12 billion.¹ That spending rose about 80% from a year earlier, while cash from operations rose only about 9%.¹ The gap is being filled partly with debt: Meta borrowed $24.9 billion in the first nine months, and its long-term debt is up about 38% since the end of 2025.¹ It bought back no shares this quarter, against $3.33 billion a year earlier, though it still paid $1.36 billion in dividends.¹

What to watch

The first thing to follow is what advertisers plan to spend. The budgets that agencies and the largest advertisers set for next year are known before Meta reports, and they show whether the price of each ad can keep climbing while Meta's spending grows. If it does, the investment is showing up where it should; if budgets stall while Meta's spending keeps rising, costs are running ahead of the payback. Price is the sharper test, because total sales can also grow simply by showing more ads.

The second signal is legal. Meta itself flags youth-related trials in the U.S. in the coming months as a risk.¹ Their verdicts, and any settlements reached before them, will arrive ahead of the company's own accounts. They would show whether this quarter's charge was a single event or the first of several, and so whether legal costs belong among Meta's regular expenses rather than its one-offs.

The third is money. Because building now runs ahead of the cash the business produces, Meta leans more on borrowing, so what lenders charge and how readily they lend matters in a way it once did not. The interest Meta has to pay on new bonds, and how easily it can sell them, would show whether that money stays cheap; if it grows dearer or scarcer, the pace of building would come under pressure. The next results will be a further check on whether ad prices and costs keep moving as they did this quarter.

Our verdict on the quarter

In all, a mixed report. The business at the heart of Meta is growing: advertising grew strongly, and the company expects strong growth to continue into 2027.¹ But profit and cash went the other way. The legal charge and AI running costs that rise much faster than sales pulled operating profit down, and heavy building left free cash flow negative.¹ The quarter shows a company selling more than ever while spending, and borrowing, at a pace whose payback it says will take time.

Notes

1. Meta's results release, 21 October 2026: sec.gov. ↩
2. Nasdaq's earnings calendar, 22 October 2026. ↩