Meta reported third-quarter results after the bell on Wednesday, October 21, and the Meta stock split stole part of the spotlight. Revenue came in at $64.6 billion, up 26% from a year earlier, according to Meta’s earnings release. But operating income fell 37% to $13 billion because of a $9.89 billion legal charge. Forbes reported the shares rose more than 3% after hours. So which story is bigger, the growth or the bill?
What Meta reported
The business itself is strong, and the mix matters. Ad impressions grew 10% and the average price per ad rose 14%, so growth didn’t come from a single lever. Family daily active people averaged 3.64 billion in September, up 3%. Costs and expenses jumped 68% to $51.6 billion, and the legal charge is a big piece of that jump.
Meta is doing this with fewer people. It ended September with 66,775 employees, down 15% from a year earlier, per the release. Payroll is shrinking while spending on chips and data centers keeps climbing. Much of the tech sector is making the same trade.
Operating margin fell to 20% from 40% a year ago. Strip out the charge and, by Meta’s own count, operating income was $22.88 billion and diluted earnings were $7.40 per share. Those are adjusted figures. The reported number was $3.83 a share, against $1.05 a year earlier, and that comparison looks better than it is because, as Forbes notes, the prior-year quarter carried a large one-time tax charge.
The legal charge
Here’s the hit. A $9.89 billion charge, tied to an August deal with 52 state attorneys general over teen mental health and social media suits. Payments under the agreement could reach about $18.59 billion in total, the release says. And a Motley Fool transcript of the call has CFO Susan Li saying Meta still faces scrutiny on youth issues, with more trials ahead. This chapter isn’t closed.
Where the cash went
The spending is the bigger story. Meta put $34.91 billion into capital projects in one quarter. Operating cash flow was $32.79 billion, so free cash flow slipped to negative $2.12 billion, versus positive $10.63 billion a year ago. Multiply the quarter by four and you’re near $140 billion a year, right in the guided range. With $82.45 billion in cash and securities, this isn’t a liquidity scare. It’s a measure of how expensive the AI buildout has become.
On guidance, Meta narrowed 2026 capex to $135 billion to $145 billion, from $130 billion to $145 billion, and lifted its expense outlook to $175 billion to $179 billion to cover the charge. There’s no 2027 revenue forecast, though Meta expects strong growth next year. Our earnings preview asked whether ad growth could keep up with that spending. This quarter’s answer is yes, for now. Reality Labs lost $4.13 billion on $443 million of revenue, and Meta expects its 2026 loss to land between $18 billion and $19 billion.
How the Meta stock split works
Here’s the part many readers will want explained. Meta’s board created a new class of non-voting Class C stock and declared a one-time dividend of one Class C share for every Class A and Class B share. Meta says it expects Class A’s price to reflect a two-for-one split once the dividend is paid. That’s why people call it a Meta stock split, though the mechanics differ from a classic one.
As for timing, the new class arrives in January 2027. The amended certificate takes effect on January 19, 2027, and Meta hasn’t set record or payment dates yet. Voting power stays the same for current holders. Meta plans to list Class C on Nasdaq, and it signed a Founder Alignment Agreement with Mark Zuckerberg that covers his sales of the Class C shares he receives.
What does the split mean for a shareholder? On its own, not much. You’d end up with twice the shares at roughly half the price, so the value of your stake doesn’t change just because of the split. The more interesting part is the new share class. This is general information, not investment advice.
Why do it? Meta’s special committee pointed to capital-raising needs, long-term value creation, and continuity of founder leadership. The first reason is the one to watch. A non-voting share is a currency Meta can use without diluting Zuckerberg’s control, which is our reading rather than anything the company spelled out. Li said there are no specific financing plans yet.
The Muse numbers
Zuckerberg spent part of the call on Muse, Meta’s personal AI agent. According to the Motley Fool transcript, more than 10 million people in the U.S. and Canada set up Muse agents in about six weeks, and roughly a quarter of them use it on a given day. He said he expects to improve its compute cost efficiency by more than 10 times within a year. Those are company claims, and the transcript summary has a few inconsistencies, so they’re worth checking against the filings. The transcript doesn’t say how many of those users generate revenue yet, and usage isn’t the same as profit.
What to watch next
The question for investors isn’t whether Meta can afford the buildout. With $82.45 billion in cash, it can. It’s whether returns show up before spending climbs again. Our look at the Prometheus cluster in Ohio shows where some of that money lands.
Four things to watch. Whether the Q4 revenue range of $73 billion to $76 billion holds, including about a 1% currency headwind. Whether capex creeps back toward the top of the range. How the youth-related trials play out. And when Meta sets the record date for the Meta stock split dividend, since that’s the date that decides who receives the new Class C shares.
Editor’s take
Meta’s ad engine is doing its job, and the Meta stock split will get the headlines, but the cash flow line is the one to watch. The split is a calendar item for January. Negative free cash flow in a 26% growth quarter says the AI bill is outrunning even strong profits. The legal charge is a one-quarter hit. The spending isn’t.
