Meta tops Q3 revenue forecasts as legal charge hits profit

Meta Platforms ↗ 0.84% reported third-quarter revenue of $64.6 billion on Wednesday, October 21. That was up 26% from a year earlier and above Wall Street forecasts. A $9.89 billion charge tied to a teen mental health settlement with state attorneys general cut operating income by 37%, to $12.99 billion, and halved the operating margin from 40% to 20%, according to Meta's earnings release. Investors paid more attention to the revenue beat and the early traction of the company's Muse AI assistant, and the shares rose in after-hours trading, Fortune reported.fortune.com+1

Revenue beat, profit miss

Revenue topped the $63.37 billion analysts expected, according to LSEG London Stock Exchange Group plc estimates cited by CNBC Comcast Corporation ↘ 2.24%. Operating income came in well below analyst estimates of $18.66 billion, Proactive reported. Earnings were $3.83 per share. Without the charge, they would have been $7.40 per share, and operating income would have been $22.88 billion, Meta said.investor.atmeta.com+2

The charge relates to an agreement Meta reached in August with 52 attorneys general. The deal calls for payments of up to about $18.59 billion. Meta also raised its full-year expense outlook to $175 billion to $179 billion to include the charge. For the fourth quarter, Meta forecast revenue of $73 billion to $76 billion. It narrowed its 2026 capital spending forecast to $135 billion to $145 billion, from $130 billion to $145 billion. Capital spending in the quarter was $34.9 billion, and free cash flow was negative $2.1 billion, Fortune reported.fortune.com+1

Muse gains early users

On the earnings call, Zuckerberg said about 25% of people who have set up Muse use it "on any given day." He said more than 10 million people in the U.S. and Canada have set up Muse personal agents in the past month and a half, CNBC reported. "Our investments are paying off, the core business is strong, and we're seeing velocity across the board," Zuckerberg said in the earnings release.cnbc.com+1

Ad impressions rose 10% and the average price per ad rose 14%. Daily active people across Meta's apps reached 3.64 billion, slightly below the 3.65 billion analysts expected.investor.atmeta.com+1

New share class and more legal costs

Meta's board approved a new non-voting Class C stock, effective in January 2027. It will be given to existing shareholders as a one-for-one stock dividend, which works like a two-for-one split. Meta said the shares could be used for raising capital, paying employees and making acquisitions.investor.atmeta.com

Meta's legal problems did not end with the settlement. Hours before the results, a New Mexico judge ordered the company to pay $25 billion in a data privacy case that grew out of the Cambridge Analytica scandal. Meta plans to appeal, Fortune reported.fortune.com