Meta Platforms' AI Comeback Faces an Earnings Test—And a $10 Billion Charge

Key Points

• Meta Platforms stock sentiment has sharply improved recently, driven largely by excitement over its new Muse AI agent and models.
• Analysts expect Meta's Q3 2026 revenue of $63.34 billion and EPS of $6.58, impacted by a $10 billion legal settlement charge.
• Investors will watch Meta's Q4 guidance, capital expenditure plans, and any commentary on Muse adoption metrics for future growth signals.

Meta Platforms NASDAQ: META has recently shifted from being one of the most unloved stocks in the artificial intelligence trade to a name with strong positive sentiment behind it. In about two months, META has gone from being down more than 17% in 2026 to up several percentage points on the year.

The release of Meta’s Muse AI agent has been critical to changing the narrative around the stock, representing a new potential AI growth driver. Meanwhile, its Muse Wonder and Muse Wonder Full models are Meta’s most intelligent models yet, and have given the company a seat at the table when it comes to being a frontier model developer.

Amid these developments that have caused investors to flock to META stock, markets are eagerly awaiting the company’s Q3 2026 earnings report on Wednesday, Oct. 21. Surely, investors will want to see the company post strong financial results, but commentary around Meta’s latest AI initiatives could also be critical to how markets react to its earnings.

Meta’s Growth, Earnings, and Capital Expenditure Outlook

In Q3 2026, analysts currently expect Meta to post revenue of $63.34 billion. This figure sits near the high end of Meta’s guidance range of $61 billion to $64 billion, and would represent a growth rate of approximately 23.6% year over over (YOY).

Analysts expect Meta to post adjusted earnings per share (EPS) of $6.53, which would represent a decline of 9.9% YOY compared with the prior year's EPS excluding a one-time tax charge, but would also be a 5.7% increase compared to its Q2 EPS of $6.18. The company’s lower-than-expected Q2 EPS was a result of Meta taking several billion dollars in charges related to legal and severance fees.

In Q3, Meta expects to take a $10 billion charge for legal fees stemming from its up to $18 billion settlement with state attorneys general over youth social media concerns. Given that Meta has outlined this in advance, buy-side analysts may have already baked the figure into their forecasts, making it less likely that these charges will prompt a negative market reaction. However, it is still possible that Meta will post a significant EPS miss with respect to sell-side forecasts. Notably, Bank of America expects the firm to post EPS of $3.79 after accounting for these charges.

Meta’s guidance for Q4 will be another key factor to watch. Consensus sales estimates for Q4 are $73.6 billion, which would be an increase of approximately 23% YOY. Meta does not provide specific EPS guidance each quarter.

Investors will also likely want to see Meta keep a lid on its capital expenditure (CapEx) guidance for 2026, which currently sits between $130 billion and $145 billion. Markets could see a significant increase in this figure as a negative. However, it's also possible that investors will give Meta more leeway this quarter, given excitement around its latest products and models.

Muse Should Be in Focus, But Metrics May Take Time to Materialize

Aside from these headline figures, investors will likely want to see Meta provide encouraging commentary around its latest products like Muse. Given that Meta did not release Muse until Sept. 8, the product is unlikely to have a significant impact on the company’s Q3 financials, which show its results through the end of September. Still, the company could choose to provide metrics that demonstrate Muse’s adoption or provide further details around its strategy.

One potential metric is Muse token consumption, which is a proxy for end-user AI demand and usage. Meta has also noted that it plans to profit from Muse by collecting fees over time as the agent executes transactions for users. In turn, Meta providing data around Muse transaction volume would also aid investors.

However, investors should be aware of Meta’s tendency to provide limited information on products that are in their early stages of adoption. Considering this, the company’s Q3 commentary may not include substantive insights related to Muse. The same goes for metrics around the Meta Enterprise Platform, although information on its Meta One subscription plans could be more significant, as the company first announced these plans earlier this year and expanded their rollout in September.

Muse’s Release Shows Why Patience Is Key, But Questions Remain

Generally speaking, Meta is a difficult company to pin down when it comes to how investors will react to its earnings releases. Higher-than-expected CapEx guidance has thrown a wrench into its reports in the past, leading to substantial downside moves. Following Meta’s Q2 earnings report, sentiment was very weak. A sales guidance miss, legal and severance charges, and a CapEx guidance increase combined to leave the stock at one of its lowest levels since the beginning of 2025.

However, sentiment has turned on a dime over the past two months, showing the value of maintaining patience around this name. Going forward, the key questions are whether non-advertising initiatives like Muse positively impact Meta’s growth, over what timeline, and what underlying metrics Meta provides to prove this to investors.