Meta Q3 Net Profit Surges 264% YoY, Raises Full-Year Capex Slightly; Shares Briefly Rise Over 4% After Hours

TradingKey - Shares of Meta Platforms (META) rose over 4% at one point after releasing its Q3 2026 financial results on October 21 ET. As of press time, the gain narrowed to 2.86%, trading at $717.47.

During the period, Meta's advertising business saw gains in both volume and price, driving revenue above expectations, though litigation expenses weighed on operating profit. The company also narrowed its full-year capital expenditure guidance range. In the third quarter, Meta generated revenue of $64.601 billion, up 26% year-over-year, beating market expectations of $63.2 billion. On a constant currency basis, revenue also grew by 26%.

[Meta Stock Price Chart, Source: TradingView]

Looking at segment performance, advertising remained the main driver of revenue growth. Advertising revenue for the quarter was $63.061 billion, up 26% year-over-year, with ad impressions up 10% and average price per ad up 14%.

In September, Family Daily Active People averaged 3.64 billion, up 3% year-over-year. Revenue for the Family of Apps segment, including Facebook, Instagram, Messenger, and WhatsApp, reached $64.158 billion, with an operating profit of $17.117 billion.

Reality Labs revenue for the quarter was $443 million, down from $470 million in the same period last year. Its operating loss narrowed to $4.129 billion from $4.432 billion. The company expects the full-year loss for this segment in 2026 to be $18 billion to $19 billion, lower than in 2025, and projects it to narrow further to approximately $15.000 billion in 2027, reallocating part of its investment to priority areas such as AI.

[Source: Meta Q3 2026 Financial Report]

On the profitability side, Meta's Q3 GAAP net income was $9.860 billion, up 264% year-over-year; diluted earnings per share came in at $3.83, up 265% year-over-year.

It should be noted that this increase was affected by a high tax rate base in the same period last year. The effective tax rate dropped from 87% to 24%, and income tax expenses fell 83% year-over-year. Operating profit for the period was $12.988 billion, down 37% year-over-year, with operating margin falling 20 percentage points from 40% to 20%.

A key factor weighing on operating profit was litigation expenses. Meta disclosed that in August, it reached a settlement with 52 U.S. state attorneys general regarding youth mental health and social media litigation, agreeing to pay up to approximately $18.590 billion, of which $9.890 billion was recorded as expense in the third quarter. The company stated that excluding this expense, operating profit for the quarter would be $22.880 billion, EPS would increase by $3.57 to $7.40, and the effective tax rate would drop from 24% to 17%.

In terms of guidance, looking ahead to the fourth quarter, Meta expects revenue of $73.000 billion to $76.000 billion, with a midpoint of $74.500 billion, and anticipates foreign exchange to present an approximate 1% headwind to year-over-year revenue growth. The company raised its full-year 2026 total expense guidance to $175 billion to $179 billion to include third-quarter litigation expenses; excluding this expense, full-year operating profit is still expected to be higher than in 2025.

Regarding capital expenditures, AI investment continued to push up funding requirements. Meta slightly raised its full-year capital expenditure guidance from $130 billion–$145 billion to $135 billion–$145 billion, which includes principal payments on finance leases. Third-quarter capital expenditure was $34.910 billion, operating cash flow was $32.790 billion, and free cash flow was negative $2.120 billion.

Zuckerberg stated that the company launched products such as Muse and Muse Wonder this quarter, making significant progress toward the goal of providing personal superintelligence to everyone, while its core business remains strong. Management noted that AI investment has already generated incremental ad revenue by improving user engagement, recommendation effectiveness, and monetization efficiency, but some frontier AI investments require a longer return period than investments in core businesses.