Meta Q3 2026: revenue up 26% to $64.60B, but free cash flow turned negative at −$2.12B

Meta sells advertising across Facebook, Instagram, Messenger and WhatsApp, which together the company calls the Family of Apps, and loses money on Reality Labs, its headset and glasses business. In Q2 the question was whether a 28% revenue grower could keep funding a capex budget that had grown faster than revenue. Free cash flow that quarter was $784 million, below the dividend.

Q3 changed the shape of the answer. Ad growth now leans on price rather than volume, a one-off legal settlement took about 15 points off the operating margin (our arithmetic), and even without it costs grew faster than revenue. The sections below take the charge out to see the underlying business, then follow the cash and the financing that followed the quarter.

Meta Q3 2026 results at a glance

$ millions, except per share and %	Q3 2026	Q2 2026	Q3 2025
Revenue	64,601	60,801	51,242
Advertising revenue	63,061	59,363	50,082
Total costs and expenses	51,613	42,026	30,707
Income from operations	12,988	18,775	20,535
Operating margin	20%	31%	40%
Net income	9,860	15,848	2,709
Diluted EPS	$3.83	$6.18	$1.05
Capex incl. finance-lease principal	34,906	31,078	19,374
Free cash flow	(2,120)	784	10,625

The year-ago net income and EPS include a one-time, non-cash tax charge of $15.93 billion tied to the One Big Beautiful Bill Act, which is why Q3 2026 net income shows a 264% increase while operating income fell 37%. Capex here is purchases of property and equipment plus principal payments on finance leases, the definition Meta uses for free cash flow.

Where did Q3 revenue land against guidance?

Above the top of the range. In its July 29 release Meta guided Q3 revenue to $61–64 billion; the quarter came in at $64.60 billion, about $0.60 billion above the high end (our arithmetic). Growth was 26% on both a reported and a constant-currency basis, against 28% in Q2.

The mix behind it changed. Ad impressions grew 10%, slower than the 14% of Q2, while the average price per ad rose 14%, faster than Q2’s 12%. Together they reconcile to the 26% advertising growth (1.10 × 1.14 ≈ 1.25, our arithmetic). Family daily active people averaged 3.64 billion in September, up 3%. Other revenue, which comes from outside advertising (paid messaging, subscriptions and other sources), rose to $1,097 million from $690 million.

A $9.89B legal charge cut the margin to 20%

Costs and expenses rose 68% to $51.61 billion. General and administrative expense alone was $14,857 million, against $3,512 million a year earlier, and it includes a $9.89 billion charge for the agreement Meta announced in August with 52 state attorneys general to resolve teen mental health and social media litigation. The release says that agreement provides for payments of up to approximately $18.59 billion; the 10-Q puts charges for it at $11.89 billion over nine months.

The release does the adjustment itself. Excluding the charge, Q3 operating income would have been $22.88 billion instead of $12.99 billion, diluted EPS $7.40 instead of $3.83, and the effective tax rate 17% instead of 24% (the 10-Q says part of the charge is not expected to be tax-deductible). On that basis the operating margin was about 35% (our arithmetic), still below the 40% of a year earlier. Diluted EPS of $7.40 compares with the $7.25 the Q3 2025 release gave excluding its own tax charge, about 2% higher (our arithmetic).

The charge is not the only reason costs grew. Excluding it, costs and expenses rose about 36% (our arithmetic), faster than revenue. Cost of revenue rose about 45% to $13,369 million and research and development about 32% to $20,054 million (our arithmetic). The 10-Q names infrastructure for data centers and third-party cloud services, plus third-party AI token costs, alongside the legal costs. Depreciation and amortization was $7,154 million, up about 44% (our arithmetic); depreciation on servers and network assets alone was $5.34 billion against $3.60 billion.

By segment, Family of Apps earned $17,117 million on $64,158 million of revenue, a margin of about 27% against about 49% a year earlier (our arithmetic). The 10-Q’s segment note lists legal-related costs among Family of Apps expenses. Reality Labs lost $4,129 million on $443 million of revenue, a smaller loss than the $4,432 million of Q3 2025 and the $4,619 million of Q2.

Capex of $34.91B outran $32.79B of operating cash

Cash, $ millions	Q3 2026	Q2 2026	Q3 2025
Net cash from operating activities	32,786	31,862	29,999
Purchases of property and equipment	(33,942)	(30,116)	(18,829)
Principal payments on finance leases	(964)	(962)	(545)
Free cash flow	(2,120)	784	10,625
Dividends and dividend equivalents	(1,361)	(1,353)	(1,330)

Operating cash flow grew about 9% from a year earlier (our arithmetic), while capex including finance leases rose about 80% to $34.91 billion, or about 54% of revenue (our arithmetic). That is how a quarter with $32.79 billion of operating cash ended with free cash flow of negative $2.12 billion, before $1.36 billion of dividends. Meta bought back no Class A shares in the first nine months of 2026, per the 10-Q, against $3,327 million of repurchases in Q3 2025.

The balance sheet moved with it. Cash, cash equivalents and marketable securities were $82.45 billion at September 30, down from $90.26 billion at June 30. That figure leaves out restricted cash equivalents of $12.83 billion, of which $10.80 billion is money market funds the 10-Q says are held in escrow under multi-year infrastructure purchase agreements and expected to be released between 2028 and 2030. Long-term debt was $80,922 million. Non-cancelable contractual commitments reached $454.52 billion, with about $121.41 billion due in 2027.

Class C shares, preferred stock and $15B of notes

The 8-K that carried the results also announced a new, publicly listed, non-voting Class C common stock, effective January 19, 2027. Every Class A and Class B share will receive one Class C share as a one-time stock dividend; the release says the dividend does not change anyone’s voting power and that, after it is paid, Class A shares should reflect the effect of a two-for-one split. The special committee’s stated reasons start with capital raising, employee compensation and acquisitions. A Founder Alignment Agreement restricts how Mark Zuckerberg can sell the Class C shares he receives: 20% are freely saleable, and the other 80% can generally be sold only alongside a matching sale or conversion of voting shares, or released at 2.5% a quarter while he stays in a full-time leadership role.

Filings after the quarter show the funding arriving. Per the 8-K filed October 29, Meta sold 250,000,000 depositary shares, each a 1/20th interest in its 6.50% Series A mandatory convertible preferred stock with a $1,000 liquidation preference, about $12.5 billion of liquidation preference (our arithmetic), with an option for 37,500,000 more. It also entered forward sale agreements on 40,000,000 Class A shares, raised to 46 million when the underwriters exercised their option on November 4; Meta receives nothing until it settles them, which it can do by November 19, 2027. Per the 8-K filed November 5, it then sold five tranches of senior notes due 2031 to 2056, $15.0 billion in total (our arithmetic).

The outlook: Q4 revenue $73–76B, capex $135–145B

• Q4 revenue of $73–76 billion, assuming about a 1% currency headwind. Against Q4 2025 revenue of $59,893 million, that is growth of about 22% to 27% (our arithmetic).
• 2026 total expenses of $175–179 billion, raised from $165–169 billion to include the charge. Nine-month expenses were $127,077 million, which leaves about $47.9–51.9 billion for Q4 (our arithmetic).
• 2026 capex of $135–145 billion, narrowed from $130–145 billion. Nine-month capex including finance leases was $85,824 million (our arithmetic: $83,055 million plus $2,769 million), so Q4 needs about $49.2–59.2 billion (our arithmetic), well above any quarter so far.
• Reality Labs losses of $18–19 billion for 2026, down from 2025’s $19,193 million, and around $15 billion in 2027.
• No 2027 revenue outlook. The release says Meta is still developing its 2027 budget and capacity plans and expects to “continue investing aggressively.”

What to watch in Q4

• Free cash flow. A Q4 capex of $49–59 billion against Q3’s $32.79 billion of operating cash would widen the gap unless operating cash rises sharply. The Q4 release will show how much of it the new preferred and notes covered.
• The settlement payments. The release puts the attorneys general agreement at up to about $18.59 billion and the charges so far at $11.89 billion; the next filings should show how much of it has been paid.
• Price vs volume in ads. Impression growth slowed to 10% while price per ad rose 14%. Which of the two carries Q4 growth matters for how durable the 22–27% outlook is.
• Operating income against 2025. Excluding the Q3 charge, Meta still expects 2026 operating income above 2025’s $83,276 million. Nine-month operating income excluding the Q3 charge was $64,525 million, so Q4 needs more than about $18.75 billion (our arithmetic).
• The Class C timeline. The stock dividend is to be paid within five business days after January 19, 2027, under the Founder Alignment Agreement; record and payment dates are still to be set by the board.

Quick answers

Why did Meta’s operating income fall in Q3 2026?

Costs and expenses rose 68% to $51.61 billion, including a $9.89 billion charge for the August 2026 agreement with 52 attorneys general. Income from operations fell 37% to $12.99 billion; excluding the charge, the release puts it at $22.88 billion.

Why was Meta’s free cash flow negative in Q3 2026?

Capital expenditures including finance-lease principal were $34.91 billion, more than the $32.79 billion of operating cash flow, which left free cash flow at negative $2.12 billion. A year earlier it was positive $10.62 billion.

What is Meta’s new Class C stock?

A non-voting, publicly listed share class effective January 19, 2027. Each Class A and Class B share gets one Class C share as a stock dividend, and Meta expects Class A shares to reflect the effect of a two-for-one split; voting power does not change.

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Sources and method. Company figures for the quarter — the income statement, segment results, balance sheet, cash flows and free-cash-flow reconciliation, ad metrics, DAP, headcount, the attorneys general charge and the figures excluding it, the CFO outlook and the Class C announcement — are Meta’s own disclosures in Exhibit 99.1 to the Form 8-K filed 2026-10-21 (accession 0001628280-26-066700) for the quarter ended 2026-09-30, read directly from SEC EDGAR and linked above. The Class C stock dividend and Founder Alignment Agreement terms come from Item 1.01 of the same 8-K. The filing was accepted at 16:03 ET on 2026-10-21 (EDGAR filing index), after the US market closed; the release scheduled its call for 4:30 p.m. ET the same day. Restricted cash and the infrastructure escrow, contractual commitments, depreciation detail, the absence of share repurchases, the nine-month attorneys general charges and the cost drivers come from the Form 10-Q filed 2026-10-22 (accession 0001628280-26-066773). The preferred stock and forward sale terms come from the Form 8-K filed 2026-10-29 (accession 0001193125-26-438017), and the notes offering and the exercised forward option from the Form 8-K filed 2026-11-05 (accession 0001193125-26-450074). The Q3 guidance, the prior expense outlook and the Q2 comparatives come from the second-quarter release (accession 0001628280-26-050596); the year-ago tax charge and figures excluding it from the Q3 2025 release (accession 0001628280-25-047114); and Q4 2025 revenue and full-year 2025 operating income and Reality Labs loss from the Q4 2025 release (accession 0001628280-26-003832).

No consensus estimate is included, so this piece makes no claim that the quarter beat or missed expectations; the only comparisons are with Meta’s own guidance and with prior periods. This piece makes no claim about the share-price reaction.

Our arithmetic, labelled as such: revenue about $0.60 billion above the top of the guidance range; the 1.10 × 1.14 ≈ 1.25 ad reconciliation; the operating margin of about 35% excluding the charge ($22.88 billion of $64.60 billion), so the charge accounts for about 15 of the 20-point drop; EPS excluding charges about 2% above the year-ago $7.25; costs excluding the charge up about 36% ($41,723 million against $30,707 million); the growth in cost of revenue (about 45%), R&D (about 32%), D&A (about 44%) and operating cash flow (about 9%); Family of Apps margins of about 27% and 49%; capex including finance leases of $34,906 million, $31,078 million and $19,374 million (purchases of property and equipment plus finance-lease principal), up about 80% from a year earlier and about 54% of revenue; the roughly $12.5 billion of preferred liquidation preference (250,000,000 depositary shares × $50) and the $15.0 billion notes total ($3.25 billion + $3.25 billion + $4.00 billion + $1.75 billion + $2.75 billion); the implied 22% to 27% Q4 growth; the implied Q4 expenses of about $47.9–51.9 billion; nine-month capex of $85,824 million and the implied Q4 capex of about $49.2–59.2 billion; and nine-month operating income excluding the Q3 charge ($54,635 million + $9,890 million = $64,525 million) and the roughly $18.75 billion Q4 hurdle. These are approximations built on the disclosed figures, not reported numbers. The interpretation — that the charge explains the margin drop but not all of the cost growth, and that the quarter’s defining figure is capex running ahead of operating cash, now being funded with preferred stock and debt — is our analysis, not a company statement, and is not a forecast.

Related: Meta Q2 2026, the prior quarter; Alphabet Q3 2026, the other large ad platform whose capex outran operating cash this quarter; Netflix Q3 2026, another consumer internet company reporting the same quarter; and SpaceX Q3 2026, whose capex also ran ahead of operating cash flow.