Meta tops Q3 forecasts as AI spending drives first negative free cash flow in over a decade

Meta Platforms Inc. beat third-quarter estimates on Wednesday, but its spending on artificial intelligence infrastructure pushed free cash flow negative for the first time in more than a decade.

Capital expenditures, including finance lease payments, reached $34.9 billion in the quarter, exceeding the $32.8 billion Meta generated from operations and leaving free cash flow at negative $2.12 billion.

It is Meta’s first negative quarter since the first half of 2012, according to StockTitan data.

The results themselves came in ahead of forecasts. Revenue rose 26% to $64.6 billion, above the roughly $63.3 billion analysts expected, and advertising revenue was $63.06 billion.

Diluted earnings were $3.83 a share, beating the $3.57 consensus and up 265% from a year earlier, when results included a one-time non-cash tax charge.
Shares rose nearly 2% in after-hours trading, according to Yahoo Finance data.

The average price per ad rose 14%, ahead of expectations, while ad impressions grew 10%, short of forecasts. Family daily active people averaged 3.64 billion in September, up 3%. Headcount fell 15% to 66,775.

Legal charge halves operating margin as spending outlook rises

Operating income fell 37% to $13 billion, cutting operating margin to 20% from 40% a year earlier, mainly because of a $9.89 billion legal charge.

The charge stems from an August agreement with 52 state attorneys general to resolve litigation over teen mental health and social media, which provides for payments of up to about $18.59 billion. Excluding the charge, Meta earned about $7.40 a share.

Meta narrowed its 2026 capital expenditure forecast to $135 billion to $145 billion, from $130 billion to $145 billion, and raised its full-year expense outlook to $175 billion to $179 billion to include the legal charge.

For the fourth quarter, it expects revenue of $73 billion to $76 billion, which brackets the roughly $73.7 billion analysts had forecast.

The company also plans to create a new Class C stock, distributed through a one-time stock dividend in January 2027 that works like a two-for-one split.

Tokenized Meta jumps before paring gains with the stock

Tokenized Meta shares and perpetual contracts tracked the stock’s after-hours moves following the earnings release.

The Meta perpetual on Hyperliquid briefly jumped as high as $748.69 after the release before paring gains in line with the stock. About 113,000 addresses hold tokenized Meta across issuers including xStocks, according to Token Terminal data.