Meta Stock Rises as Record $64.6 Billion Revenue Outweighs Surging AI Spending

Key Takeaways

• Meta’s third-quarter revenue increased 26% year over year to a record $64.6 billion, exceeding Wall Street’s $63.34 billion forecast.
• Advertising revenue reached $63.06 billion as ad impressions increased 10% and the average price per advertisement rose 14%.
• Quarterly capital expenditures surged to $34.91 billion, contributing to negative free cash flow of $2.12 billion.
• Meta raised the lower end of its 2026 capital expenditure forecast and now expects to spend between $135 billion and $145 billion.
• Meta stock gained approximately 5% in after-hours trading as investors focused on strong advertising growth and an upbeat fourth-quarter revenue forecast.

Meta stock rose after the social media company reported record third-quarter revenue and demonstrated that artificial intelligence was already improving advertising performance, helping investors look beyond rapidly increasing infrastructure spending and negative quarterly free cash flow.

The Facebook and Instagram owner generated revenue of $64.60 billion in the three months ended September 30, up 26% from $51.24 billion a year earlier. The result exceeded the $63.34 billion analyst consensus and reinforced confidence that Meta’s core advertising business can finance its costly expansion into AI models, data centers and computing infrastructure.

Meta shares advanced about 5% in extended trading following the report. The stock had closed the regular session at $697.52.

Meta Earnings Beat Wall Street Forecasts

Meta reported GAAP net income of $9.86 billion, compared with $2.71 billion in the same quarter last year. Diluted earnings per share increased to $3.83 from $1.05.

However, the headline earnings figure included a $9.89 billion charge associated with Meta’s agreement with 52 US attorneys general to resolve litigation involving social media and teenage mental health.

Excluding that charge, Meta said operating income would have been $22.88 billion and diluted earnings would have reached $7.40 per share. That was comfortably above the market consensus of approximately $6.54.

The legal charge caused total costs and expenses to increase 68% to $51.61 billion and reduced the reported operating margin from 40% to 20%. Excluding the charge, Meta’s underlying operating performance was considerably stronger than the GAAP figures suggested.

Advertising Growth Shows AI Investments Are Paying Off

Advertising remained the main driver of Meta’s performance. Advertising revenue increased 26% to $63.06 billion, accounting for nearly 98% of total quarterly revenue.

The improvement came from both higher advertising volume and stronger pricing:

• Ad impressions across Meta’s Family of Apps increased 10%.
• The average price per advertisement rose 14%.
• Family daily active people reached 3.64 billion in September, up 3% from a year earlier.

The combination suggests Meta is using AI-powered recommendations and targeting tools to increase engagement while helping advertisers achieve better results.

Meta said its AI investments were already generating incremental advertising revenue through stronger content recommendations, higher engagement and more efficient monetization. The company is also using AI to improve its Reels recommendation system and automate advertising creation, targeting and campaign optimization.

CEO Mark Zuckerberg said the quarter included major progress toward Meta’s goal of developing “personal superintelligence,” including the release of Muse and the Muse Wonder frontier model.

The critical question for investors is whether these improvements can continue growing revenue quickly enough to justify Meta’s unprecedented level of infrastructure investment.

Meta Raises Its AI Capital Spending Forecast

Meta spent $34.91 billion on capital expenditures during the third quarter, including finance lease payments. Purchases of property and equipment alone reached $33.94 billion, up from $18.83 billion in the same period last year.

The company raised the lower end of its full-year capital expenditure outlook. Meta now expects 2026 spending of $135 billion to $145 billion, compared with its previous forecast of $130 billion to $145 billion.

The money is primarily being directed toward:

• AI chips and servers;
• data-center construction;
• electricity and networking infrastructure;
• frontier-model training;
• AI products for consumers and advertisers.

Operating cash flow remained strong at $32.79 billion, but infrastructure investment pushed free cash flow to negative $2.12 billion. Meta generated positive free cash flow of $10.63 billion in the corresponding quarter last year.

The reversal illustrates the financial scale of the company’s AI strategy. Meta currently holds $82.45 billion in cash, equivalents and marketable securities, giving it substantial financial capacity, although long-term debt has increased to $80.92 billion from $58.74 billion at the end of 2025.

Meta expects to continue investing aggressively in 2027. Management did not provide a formal capital expenditure forecast but said it was still developing next year’s budget and computing-capacity plans.

Fourth-Quarter Revenue Guidance Signals Continued Growth

Meta expects fourth-quarter revenue between $73 billion and $76 billion. The company anticipates that currency movements will reduce year-over-year growth by approximately one percentage point.

Management also expects full-year expenses of $175 billion to $179 billion, including the legal settlement charge. Excluding that charge, Meta continues to forecast higher operating income in 2026 than in 2025.

The guidance indicates that advertising demand remains resilient despite elevated interest rates, energy-price volatility and uncertainty surrounding the global economy.

Meta also expects its AI investments to support strong overall revenue growth during 2027, although management acknowledged that some emerging AI products will take longer to generate returns than improvements made to the established advertising business.

Reality Labs Losses Remain a Concern

Meta’s Reality Labs division generated only $443 million of quarterly revenue, down from $470 million a year earlier. Its operating loss narrowed slightly to $4.13 billion from $4.43 billion.

The company expects full-year Reality Labs losses of between $18 billion and $19 billion. It then forecasts losses declining to approximately $15 billion in 2027 as resources are redirected from virtual and augmented reality toward AI.

The planned reduction could reassure shareholders who have repeatedly questioned Meta’s spending on the metaverse. Nevertheless, Reality Labs remains a significant drain on group profitability and continues to generate only a small percentage of Meta’s total revenue.

Meta Announces New Non-Voting Class C Stock

Alongside its earnings, Meta announced the creation of publicly traded, non-voting Class C common stock.

Subject to the required corporate steps, shareholders will receive one Class C share for every outstanding Class A or Class B share. Meta expects the distribution to have an economic effect similar to a two-for-one stock split, although the new shares will not carry voting rights.

The Class C structure will allow Meta to issue shares for capital raising, employee compensation and potential acquisitions without proportionally reducing Mark Zuckerberg’s voting control.

Meta said the structure would provide greater financial flexibility as it funds increasingly expensive AI infrastructure and pursues new strategic initiatives. The new stock class is expected to become effective in January 2027.

What Comes Next for Meta Stock?

Meta’s results strengthened the bullish argument that the company’s AI spending is improving its existing business rather than simply funding distant and unproven projects.

Advertising growth, stronger pricing and the fourth-quarter revenue forecast all support that view. The approximately 5% after-hours increase showed that investors were willing to tolerate higher spending while the company continued delivering revenue growth above 20%.

However, several risks remain. Capital expenditures are consuming nearly all of Meta’s operating cash flow, free cash flow turned negative, and the company expects to maintain an aggressive investment pace next year. Regulatory litigation, rising debt and continued Reality Labs losses add further uncertainty.

For Meta stock, future performance may depend less on whether the company can build advanced AI models and more on whether those models can generate returns that exceed the enormous cost of the infrastructure supporting them.

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