Meta Q3 2026: Revenue Up 26%, a $9.89 Billion Settlement Charge, and Non-Voting Class C Shares

Meta reported results for the quarter ended September 30, 2026 after the market closed on October 21. Revenue was $64.60 billion against $51.24 billion a year earlier, a 26% increase on both a reported and a constant-currency basis. In July the company had guided to $61-64 billion, so the quarter closed $0.60 billion above the top of its own range.

Advertising volume and price both contributed. Ad impressions across the Family of Apps rose 10% and the average price per ad rose 14%; 1.10 times 1.14 is 1.254, which accounts for about 25 of the 26 points of revenue growth. Family daily active people averaged 3.64 billion in September, up 3%, so impressions per person, not the number of people, drove most of the volume growth.

Costs and expenses were $51.61 billion, up 68%. That figure includes a $9.89 billion charge for the August 2026 agreement with 52 state attorneys general over teen mental health and social media, which provides for payments of up to approximately $18.59 billion. Income from operations was $12.99 billion, down 37% from $20.54 billion; net income was $9.86 billion, up 264%; diluted EPS was $3.83, up 265%.

Headcount was 66,775, down 15% year over year. Cash, cash equivalents and marketable securities were $82.45 billion at quarter end, and dividend payments were $1.36 billion.

The reported operating margin was 20%, half of the 40% a year earlier. The charge explains most of the gap but not all of it. Excluding the $9.89 billion, operating income was $22.88 billion, up 11.4% on the $20.54 billion of Q3 2025, and the margin was 35.4%. Costs excluding the charge were $41.72 billion, up 35.9%, against revenue up 26%: expense growth ran about 10 points ahead of revenue growth before any legal cost.

The full-year outlook shows the same split. In July Meta expected 2026 total expenses of $165-169 billion; it now expects $175-179 billion and states that the increase incorporates the $9.9 billion charge. Net of the charge, the expense outlook is unchanged. Management continues to expect 2026 operating income, excluding the charge, to be above 2025 operating income, and it now expects Reality Labs losses of $18-19 billion this year and around $15 billion next year.

Read for materiality rather than headline magnitude, the quarter has two components. The settlement is a single charge, recognized in this quarter. The 4.7-point compression in the underlying margin comes from the cost base and is visible before the charge.

The two headline percentages point in opposite directions because the comparison quarter is unusual. Q3 2025 recorded a $18.95 billion provision for income taxes at an 87% effective tax rate, which left net income of $2.71 billion and diluted EPS of $1.05. Q3 2026 recorded $3.14 billion of tax at a 24% rate.

So the 265% EPS increase is mostly a tax base effect, and the 37% operating-income decline is mostly the settlement. Neither headline describes the operating business on its own. Meta's own adjustment puts EPS at $7.40 and the effective tax rate at 17% with the charge removed; the fourth-quarter tax rate is guided at 15-17%.

Operating activities generated $32.79 billion of cash in the quarter. Capital expenditures, including principal payments on finance leases, were $34.91 billion, or 106% of that figure. Free cash flow, as Meta defines it, was negative $2.12 billion, against positive $10.63 billion in Q3 2025: a swing of $12.75 billion in one year. For the first nine months of 2026, free cash flow was $11.05 billion against $29.51 billion in the same period of 2025.

The capex range has moved upward in each of the last two quarters. It was $125-145 billion before July, $130-145 billion after the second quarter, and is now $135-145 billion. The top of the range has not changed; the floor has risen by $10 billion. Looking past 2026, management said it expects to continue investing aggressively in 2027 and did not give a full-year 2027 revenue outlook.

The settlement adds a cash item the quarter's free cash flow does not yet show in full. The release states payments of up to approximately $18.59 billion under the agreement and does not give their timing.

The release leads with product: the launch of Muse and Muse Wonder, described as Meta's first frontier model, and the statement that the company's investments are paying off. The outlook says AI is already producing incremental advertising revenue and that Meta is positioned to sustain strong revenue growth through 2027.

The cash statement describes the same quarter differently. Revenue grew 26% and reported EPS 265%, while free cash flow fell from positive $10.63 billion to negative $2.12 billion and capital spending exceeded operating cash flow. The divergence between the two readings is the measurable part of the event: a narrative built on growth and model launches, and a cash profile in which capital spending absorbed all of the quarter's operating cash.

Fourth-quarter guidance of $73-76 billion sits between the two. Against Q4 2025 revenue of $59.89 billion it implies growth of 21.9% to 26.9%, against 26% in the third quarter.

On October 19 the board approved a restated certificate of incorporation that creates a new class of listed, non-voting Class C common stock, on the unanimous recommendation of a special committee of independent directors. Shareholders approved it by written consent on October 20. The charter takes effect on January 19, 2027, and the board declared a one-time dividend of one Class C share for each outstanding Class A and Class B share, payable after that date; record and payment dates are still to be set. Meta expects the Class A price to reflect the effect of a two-for-one split, and the dividend does not change any holder's voting power.

The special committee gave three reasons: a share class for capital raising, employee compensation, potential acquisitions and other corporate purposes, given the scale of investment the AI build-out requires; long-term value for all shareholders; and continuity of the founder-led model. The Founder Alignment Agreement sets terms on Mark Zuckerberg's Class C shares: 20% are freely saleable, and each sale of the other 80% generally has to be matched, within two business days of settlement, by a sale of a Class A or Class B share or a conversion of a Class B share into Class A.

The closest precedent is Google in 2014, which distributed one non-voting Class C share for each Class A and Class B share, with a record date of March 27 and a payment date of April 2, 2014. Litigation over that distribution was settled with an adjustment mechanism: after the first year of trading, Google determined that $522 million was due to Class C holders, an amount based on the percentage difference between the prices of the voting and non-voting classes over that year.

Non-voting stock: a share class with the same economic rights as common stock but no vote on corporate matters. Meta intends to list its Class C on Nasdaq alongside the voting Class A, as Alphabet's Class C trades alongside its Class A.

Stock dividend: a distribution of new shares instead of cash. A one-for-one stock dividend doubles the share count and is expected to halve the price per share, like a two-for-one split, without changing each holder's share of the company.

Free cash flow: operating cash flow minus capital expenditures. Meta subtracts both purchases of property and equipment and principal payments on finance leases.

Effective tax rate: income tax expense as a share of pre-tax income. A one-time tax charge raises it for the quarter it is recorded in, which distorts year-over-year EPS comparisons.

Ex-charge figures: results recalculated without the $9.89 billion legal charge, as Meta presents them in the release. They are not GAAP measures.