Meta Reports $64.6 Billion Revenue and Negative Free Cash Flow, and Plans a New Class of Non-Voting Shares
Sales jumped 26 percent, but a $9.9 billion legal charge, $34.9 billion of quarterly spending and a Class C stock plan explain why the shares sold off by about 7 percent on Thursday.
Friday, October 23, 2026/2 min read
Meta Platforms posted the strongest sales growth in years on Wednesday and then watched investors sell the shares. Revenue rose 26 percent to $64.60 billion in the third quarter, but free cash flow turned negative at minus $2.12 billion, against plus $10.63 billion a year earlier, according to the company's results release.
The stock fell 6.97 percent on Thursday as the Nasdaq slid 2.6 percent, HDFC Sky's market summary shows, in a session we covered in our Wall Street report.
Why did Meta's profit look so different from its revenue?
Net income was $9.86 billion, up 264 percent, and diluted earnings were $3.83 a share. A $9.89 billion charge tied to an August agreement with 52 attorneys general over teen mental health and social media litigation cut operating income 37 percent to $12.99 billion, and halved the operating margin to 20 percent from 40 percent. Without the charge, earnings would have been $7.40 a share. Daily active people averaged 3.64 billion in September, and headcount fell 15 percent to 66,775.
How much is Meta spending on AI?
Capital expenditure, including finance lease principal, was $34.91 billion in the quarter, more than the $32.79 billion of cash generated by operations. Meta narrowed its 2026 capex forecast to $135 billion to $145 billion and guided fourth-quarter revenue of $73 billion to $76 billion. NBC News reported that a regulatory filing showed an additional $825 billion in planned AI infrastructure contracts, and that the company warned of higher spending next year. Chief executive Mark Zuckerberg said "Our investments are paying off."
The advertising engine kept humming. Ad impressions rose 10 percent and the average price per ad rose 14 percent. For 2026, Meta guided total expenses of $175 billion to $179 billion and Reality Labs losses of $18 billion to $19 billion, and it expects those losses to narrow to around $15 billion in 2027, though it gave no full-year revenue outlook for 2027.
What is the Class C non-voting stock?
Meta's board approved a new, publicly listed class of non-voting Class C shares effective 19 January 2027, with a one-time stock dividend of one Class C share for each Class A and B share. Meta expects the Class A price to reflect a two-for-one split. Stock Titan's analysis says Meta can later use the class to raise money, pay staff or buy companies, and that the change will not at first alter anyone's voting power or economic interest, though later sales would spread profits over more shares. A founder agreement with Zuckerberg covers his sales of Class C stock.
The next test is the first full year of AI costs against a business still growing at this pace. Investors will want proof, before January, that spending can turn back into cash.
Published in The Outspoken Digest
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