Meta Platforms NASDAQ: META reported third-quarter 2026 revenue growth of 26% as advertising demand, engagement gains and AI-driven improvements across its apps supported results, while expenses rose sharply due to a nearly $10 billion legal charge and continued infrastructure investment.
Chief Executive Officer Mark Zuckerberg said Meta’s family of apps reached 3.64 billion daily users during the quarter. Facebook and Instagram posted all-time highs in engagement, driven largely by video, while Threads surpassed X in monthly active users, according to Zuckerberg. WhatsApp also reached all-time highs in messaging activity.
The company reported total revenue of $64.6 billion, up 26% from a year earlier on both a reported and constant-currency basis. Family of Apps revenue was $64.2 billion, including $63.1 billion in advertising revenue, which also rose 26%.
Total expenses increased 68% to $51.6 billion, including a $9.9 billion charge related to Meta’s August 2026 agreement with multiple state attorneys general. GAAP operating income fell 37% to $13 billion, while the operating margin was 20%. Excluding the legal charge, Chief Financial Officer Susan Li said operating income would have risen 11% year over year.
Net income was $9.9 billion, or $3.83 per share. Capital expenditures, including principal payments on finance leases, reached $34.9 billion as Meta invested in servers, data centers and network infrastructure. Free cash flow was negative $2.1 billion for the quarter.
Advertising and engagement trends
Meta said ad impressions delivered across its services increased 10% year over year, while the global average price per ad rose 14%. Li attributed pricing gains to better ad performance and improved macroeconomic conditions compared with the prior-year period, partially offset by impression growth in lower-monetizing regions and surfaces.
Meta continued to emphasize the role of AI in improving content recommendations and ad performance. On Instagram, global time spent per user reached an all-time high and rose by double digits year over year, with growth in both Reels and Feed. Facebook Reels time spent also reached all-time highs globally and in the U.S.
Li said Instagram Reels relevance initiatives introduced during the quarter lifted Reels time spent by more than 4%. On Facebook, a new generative retrieval architecture was deployed to about one-quarter of unconnected Feed views and half of Reels views, contributing a 1% increase in Reels watch time.
In advertising, Meta said its Meta Generative Recommender system drove a nearly 2% increase in conversions across targeted Facebook Feed segments. The company also expanded its GEM ad-ranking model, which increased conversions by 1.7% for off-site conversion campaigns and 9.6% for app-ad conversion campaigns, according to Li.
Meta’s AI Business Assistant has also become a more active tool for advertisers. The company estimated that advertisers adopting its recommendations generated nearly 5% more conversions at the same cost per conversion and increased advertising spending by 9% relative to similar non-adopters.
Nearly 10 million advertisers used at least one of Meta’s generative AI advertising tools in the third quarter. Meanwhile, partnership ads surpassed a $15 billion annual revenue run rate after growing more than 97% year over year, Li said.
Muse agent expansion and monetization plans
Zuckerberg focused much of the call on Muse, Meta’s personal AI agent. He said more than 10 million people in the U.S. and Canada had set up Muse agents in roughly six weeks. About 25% of people who have set up Muse use it on a given day, according to Zuckerberg.
Shopping has been the most common Muse use case, with more than one-quarter of active users engaging in shopping and an average purchase size above $200. Zuckerberg later clarified that the commerce data includes travel purchases. Personal productivity and connections to services such as email and calendars were also among the leading use cases.
Meta has not yet launched Muse globally, with Zuckerberg citing the service’s compute intensity, the need for regional product optimization and the company’s desire to improve efficiency before broader expansion. Meta expects to improve Muse compute-cost efficiency by more than tenfold over the next year through measures including more efficient models, inference optimization and use of off-peak capacity.
The company expects Muse to remain free for most users, with revenue eventually generated through commerce fees paid by businesses, paid subscriptions for advanced models or additional token usage, and subscriptions for business features and workplace uses. Zuckerberg said the company plans to build enough capacity to serve more than 1 billion people over the next several years.
Meta is also developing enterprise offerings around its models, including an API, Muse Code and business agents. Li said Meta believes AI could create a diversified recurring revenue stream through subscriptions, usage-based APIs, messaging and other revenue sources, though the opportunity is expected to develop over multiple years.
Reality Labs, outlook and capital structure
Reality Labs revenue declined 6% to $443 million, as lower Quest headset sales were partially offset by growth in AI glasses revenue. Zuckerberg said Muse will begin coming to Meta Glasses next month and that the company expects subscriptions tied to glasses to increase.
Meta expects Reality Labs operating losses to decline to about $15 billion next year, following expected 2026 losses of $18 billion to $19 billion. Zuckerberg said the company is pacing virtual-reality investment more selectively and prioritizing personal-superintelligence initiatives.
- Fourth-quarter 2026 revenue is expected to be between $73 billion and $76 billion.
- Full-year 2026 expenses are expected to total $175 billion to $179 billion, including the legal charge.
- Full-year 2026 capital expenditures are forecast at $135 billion to $145 billion.
- Meta expects foreign exchange to represent an approximately 1% headwind to fourth-quarter year-over-year revenue growth.
The company ended the quarter with $82.4 billion in cash and marketable securities and $83.7 billion in debt. Meta also announced plans to create a new class of non-voting capital stock that will be distributed as a stock dividend, giving shareholders one non-voting share for each existing share held. The move effectively represents a two-for-one stock split, with trading expected to begin in late January 2027.
About Meta Platforms (NASDAQ:META)
Meta Platforms, Inc is a technology company that develops social networking, messaging, virtual and augmented reality, and artificial intelligence products. The company's principal platforms include Facebook, Instagram, Messenger, WhatsApp, and Threads, which enable users to connect, communicate, share content, and discover products and services.
Meta also operates Reality Labs, its division focused on virtual, augmented, and mixed reality technologies. Reality Labs develops products such as Meta Quest virtual reality headsets and related software and experiences, along with research and hardware intended to support immersive computing.
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