Meta Stock Rebounds After Meta Platforms Q3 Earnings and Financial Results

Quick overview

Meta shares have rebounded after third-quarter earnings after retreating from nearly $780, but a $25 billion New Mexico penalty, rising computing costs and competition from OpenAI are testing investor confidence in its growth strategy.

Meta Stock Rebounds After Q3 Earnings

Meta Platforms (NASDAQ: META) shares have recovered ahead of Wednesday’s third-quarter earnings report after falling toward $680 last week from nearly $780 in late September. Optimism surrounding the company’s Muse models and personal assistant initially supported the rally, but concerns about infrastructure spending, competition and legal liabilities have renewed selling pressure.

Investors are now looking beyond quarterly results to management’s 2027 spending plans. With advertising accounting for approximately 98% of revenue, Meta must demonstrate that its expanding product ecosystem can generate enough additional income to justify its rising investment in computing infrastructure.

Meta Q3 Earnings

“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.”

Third Quarter 2026 Financial Highlights

Agreement with U.S. State Attorneys General

In August 2026, we announced an agreement with 52 attorneys general to resolve litigation related to teen mental health and social media, which provides for payments of up to approximately $18.59 billion. Third quarter 2026 costs and expenses includes a $9.89 billion charge related to this agreement. Excluding this charge, the third quarter 2026:

• Income from operations of $12.99 billion would have increased by $9.89 billion to $22.88 billion.
• Diluted EPS of $3.83 would have increased by $3.57 to $7.40.
• Effective tax rate of 24% would have decreased by 7 percentage points to 17%.

Third Quarter 2026 Operational and Other Financial Highlights

• Family daily active people (DAP) – DAP was 3.64 billion on average for September 2026, an increase of 3% year-over-year.
• Ad impressions – Ad impressions delivered across our Family of Apps increased by 10% year-over-year.
• Average price per ad – Average price per ad increased by 14% year-over-year.
• Revenue – Revenue was $64.60 billion, an increase of 26% year-over-year on both a reported and constant currency basis.
• Costs and expenses – Total costs and expenses were $51.61 billion, an increase of 68% year-over-year. This includes the litigation charge as discussed above.
• Capital expenditures – Capital expenditures, including principal payments on finance leases, were $34.91 billion.
• Capital return program – Dividend and dividend equivalent payments were $1.36 billion.
• Cash, cash equivalents, and marketable securities – Cash, cash equivalents, and marketable securities were $82.45 billion as of September 30, 2026.
• Cash flow – Cash flow from operating activities was $32.79 billion, and free cash flow was negative $2.12 billion.⁽¹⁾
  
• Headcount – Headcount was 66,775 as of September 30, 2026, a decrease of 15% year-over-year.

CFO Outlook Commentary

We expect fourth quarter 2026 total revenue to be in the range of $73-76 billion. Our guidance assumes foreign currency is an approximately 1% headwind to year-over-year total revenue growth, based on current exchange rates.

We are raising our expense outlook to incorporate the $9.9 billion charge related to legal proceedings recognized in the third quarter. We now expect full year 2026 total expenses to be in the range of $175-179 billion.

Excluding the third quarter legal charge, we continue to expect 2026 operating income to be above 2025 operating income.

At a segment level, we now expect Reality Labs losses to decline compared to 2025 to a range of $18-19 billion.

We anticipate 2026 capital expenditures, including principal payments on finance leases, to be in the range of $135-145 billion, narrowed from our prior outlook of $130-145 billion.

Absent any changes to our tax landscape, we expect our fourth quarter 2026 tax rate to be between 15-17%.

Additionally, we continue to monitor active legal and regulatory matters that could significantly impact our business and financial results. For example, we continue to see scrutiny on youth-related issues in several markets and have a number of youth-related trials scheduled in the coming months in the U.S.

Looking beyond 2026, we are still developing our budget and capacity plans for next year, but we expect to continue investing aggressively to support both our core business and emerging AI initiatives. Our current capacity and what is scheduled to come online gives us the flexibility to allocate resources across model training, core business growth, and the development and support of new products.

Our AI investments are already delivering substantial incremental advertising revenue through stronger engagement, better recommendations, and more efficient monetization. Building on this progress, our MSL investments are creating the technology and infrastructure needed to unlock significant new revenue opportunities and strengthen capabilities across the business. While these investments will take longer to generate returns than those in our core business, the breadth of monetization opportunities and internal efficiencies gives us confidence in their long-term potential.

Looking ahead, although we are not providing a full-year 2027 revenue outlook, the benefits our AI investments are delivering to the core business, combined with emerging opportunities from model advances and product launches, position us to sustain strong overall revenue growth throughout 2027.

Separately, we remain focused on improving Reality Labs profitability and expect losses to narrow next year to around $15 billion as we reallocate investment toward other priority areas, primarily AI.

$25 Billion New Mexico Penalty Adds Pressure

A New Mexico judge ordered Meta to pay $25 billion in civil penalties following a jury finding that the company misled residents about data privacy and content moderation. The case stems from concerns associated with the Cambridge Analytica scandal.

The jury identified more than 43 million violations of the state’s unfair practices law. The original award was reportedly much larger before being reduced to $25 billion. New Mexico was not included in Meta’s nearly $17 billion nationwide settlement with state attorneys general.

Meta has disputed the ruling and said it will appeal. The company also faces separate child-safety litigation, including a reported $375 million verdict and a $567 million abatement order.

The penalty adds to legal uncertainty ahead of earnings, although the appeal means the latest judgment should not automatically be treated as a final cash expense. Investors will be watching how management assesses the potential financial impact.

Muse Growth Faces OpenAI Competition

Muse has become a key driver of investor optimism since its September 8 launch. Reports indicate that the consumer-focused assistant has attracted millions of downloads and reached hundreds of thousands of daily active users.

However, reports that OpenAI is developing a cloud-based agent capable of handling longer tasks, including continuing email-related work after users close the application, introduce another competitive challenge.

Muse’s reported architecture also relies on dedicated virtual machines, potentially increasing computing requirements as adoption grows. Downloads and engagement alone will not guarantee meaningful revenue growth, particularly if operating costs rise alongside usage.

Meta must show that Muse can strengthen advertising, support new commercial opportunities or generate additional income through subscriptions and other services.

Meta Stock Faces the Next Test

Meta’s move above $750 has strengthened the technical recovery and puts the stock firmly back in focus. However, the next phase will depend on whether the company can translate its enormous spending into sustainable revenue growth.

For now, $700 important psychological level has been overcome, while the $796 Wells Fargo target provides another reference point for investors. The rally has improved, but it didn’t reach new record highs and Meta’s rising capital requirements, legal expenses and regulatory challenges could continue to create pressure if growth fails to keep pace.

Meta Chart Weekly – September Was Great for Meta Stock

Hardware Expansion Offers Long-Term Potential

Meta Connect showcased further developments across smart glasses, virtual reality and its wider product ecosystem. These initiatives could eventually diversify revenue through hardware sales, subscriptions and digital content.

Nevertheless, their financial contribution remains uncertain. Investors will look for evidence of stronger hardware shipments, user retention and subscription conversion rather than relying solely on product announcements.

Privacy scrutiny surrounding recording capabilities in Ray-Ban Meta smart glasses also creates additional regulatory risks, particularly in Europe.

Meta Stock Faces a Higher Bar

Meta’s September rally reflected enthusiasm for Muse and its expanding product strategy, but the retreat toward $680 demonstrated how quickly sentiment can shift when costs and competition come into focus.

The rebound ahead of earnings suggests buyers are positioning for potentially encouraging results. However, the key test will be whether management can justify its 2027 spending plans while preserving profit margins and cash flow.

With legal challenges mounting and OpenAI competing for users, Meta needs to show that investment in computing infrastructure can deliver sustainable commercial returns. Otherwise, even strong revenue growth may struggle to support its elevated valuation.

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank’s local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.