ii view: Meta enjoys strong Q3 but hit by costly litigation

Third-quarter results to 30 September

• Revenue up 26% to $64.6 billion (£48.5 billion)
• Earnings up 265% to $3.83 per share
• Cash and equivalents held of $82.45 billion, down from $90.3 billion in Q2

Guidance:

• Expects fourth-quarter revenue of $73-76 billion
• Now expects full year 2026 capital expenditure of $135-145 billion, narrowed from a previous range of $130-145 billion estimate

Chief Executive Mark Zuckerberg said:

"We hit major milestones this quarter toward delivering personal superintelligence for everyone – including launching Muse and Muse Wonder, our first frontier model.

“Our investments are paying of, the core business is strong, and we're seeing velocity across the board."

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ii round-up:

Meta Platforms Inc Class A (NASDAQ:META) estimated stronger-than-expected sales for the current quarter, with third-quarter results impacted by the cost of litigation and a legal settlement regarding teenage mental health and social media use. 

Revenue for the three months to late September rose 26% to $64.6 billion. Wall Street had predicted $63.4 billion. Forecast sales for Q4 to late December of up to $76 billion, aided by Meta’s new AI personal assistant called Muse, exceeded analyst projections of around $73.7 billion.

Shares in the Nasdaq 100 company are currently down 6% having come into these latest numbers up 6% so far in 2026. That’s similar to fellow Magnificent Seven company and Google owner Alphabet Inc Class A (NASDAQ:GOOGL) during that time. The Nasdaq 100 index is up 18% year-to-date. 

Meta operates across the two businesses of Apps, which includes Facebook and Instagram, and Virtual Reality (VR) gaming and metaverse interests under its Reality Labs division.

The California headquartered company now expects full year capital expenditure of between $135-145 billion. That’s narrowed from a previous range of $130-145 billion estimate, with much of it going towards the buildout of its AI infrastructure such as data centres.

A legal settlement of $18.59 billion sees costs of $9.89 billion swallowed during this current quarter, with projected costs for Q4 being raised by $9.9 billion to cover the settlement.

Adjusted earnings per share for the quarter of $3.83 rose is up from $1.05 a year earlier, but would have risen to $7.40 without the litigation settlement.

A loss for the Reality Labs division of $4.13 billion reduced from $4.6 billion in the previous quarter, with Meta predicting losses for the full year of as little as $18 billion, down from 2025’s $19.6 billion.  

A new class of non-voting Class C common stock comes into effect as of 19 January 2027, with shares distributed to all existing shareholders via a dividend and effectively making for a two-for-one stock split.

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results. Fourth-quarter and full-year numbers are likely to be announced late January or early February.

ii view:

Started in 2004, Meta sales hit $200 billion in 2025, up 24% from 2024. The group’s home US market generated most sales in 2025 at 37%, followed by Asia Pacific at 27%, Europe 23%, Canada 2%, and the rest of the world 11%. In terms of product, the Family of Apps business remains dominant, generating 99% of 2025 sales.

For investors, significant investments being made by the company in AI are not guaranteed to generate higher profits. A move by Australia to impose age restrictions on the use of social media may be followed by other countries. Meta has flagged that the new non-voting class C common stock may also be used for capital raising and possible acquisitions, while government concerns globally regarding possible misinformation spread by social media have not gone away.

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On the upside, a series of apps used by consumers offers significant opportunities to potentially sell AI services such as a personal assistant like Muse, which can help with emails or browse the web for bargain prices of a particular item. AI tech to help tailor and target advertising towards its more than 3.5 billion customers is not to be overlooked. The group’s strong positioning in 3D or Virtual Reality gaming and glass wear could be significantly enhanced by AI, while the company is now paying a modest dividend. 

For now, and while risks remain, a consensus analyst fair value estimate above $815 per share appears to point toward continued optimism on Wall Street concerning long-term prospects.

Positives

• AI helping the targeting of appropriate adverts to users
• Reducing staff headcount under moves to cut costs

Negatives

• Uncertain economic outlook
• A series of scandals have previously impacted

The average rating of stock market analysts:

Buy