Meta Stock Rises as Record $64.6 Billion Revenue Outweighs Surging AI Spending
Author: Daniel Carter
Date: October 21, 2026
Key Takeaways
- Meta’s third-quarter revenue increased 26% year over year to a record $64.6 billion, exceeding Wall Street’s forecast of $63.34 billion.
- Advertising revenue reached $63.06 billion, with ad impressions increasing by 10% and the average price per advertisement rising by 14%.
- Quarterly capital expenditures surged to $34.91 billion, leading to negative free cash flow of $2.12 billion.
- Meta raised its 2026 capital expenditure forecast, now expecting to spend between $135 billion and $145 billion.
- Meta stock gained approximately 5% in after-hours trading, driven by strong advertising growth and an optimistic fourth-quarter revenue forecast.
Financial Performance Overview
Meta reported a significant increase in revenue for the third quarter, totaling $64.60 billion, which is a 26% increase from $51.24 billion in the same quarter last year. This performance surpassed the analyst consensus of $63.34 billion, reinforcing confidence in Meta’s core advertising business as a means to finance its expansion into AI technologies and infrastructure.
Earnings Report Highlights
Meta's GAAP net income was reported at $9.86 billion, a substantial increase from $2.71 billion in the previous year. Diluted earnings per share rose to $3.83 from $1.05. However, this figure included a $9.89 billion charge related to a legal settlement concerning social media and teenage mental health. Excluding this charge, the operating income would have been $22.88 billion, significantly above the market consensus of approximately $6.54.
Financial Metrics Comparison
| Metric | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| Revenue | $64.60 billion | $51.24 billion | +26% |
| Operating Income | $12.99 billion | $20.54 billion | -37% |
| Net Income | $9.86 billion | $2.71 billion | +264% |
| Diluted EPS | $3.83 | $1.05 | +265% |
| Capital Expenditures | $34.91 billion | N/A | N/A |
| Free Cash Flow | -$2.12 billion | $10.63 billion | Negative |
Advertising Growth and AI Investments
Advertising revenue, which constitutes nearly 98% of Meta's total quarterly revenue, increased by 26% to $63.06 billion. This growth was driven by a 10% increase in ad impressions and a 14% rise in the average price per advertisement. Meta's Family of Apps reached 3.64 billion daily active users, reflecting a 3% year-over-year increase. The company attributed this success to its AI investments, which have enhanced content recommendations and engagement, leading to improved advertising performance.
Capital Expenditures and Future Outlook
Meta's capital expenditures for the third quarter reached $34.91 billion, with a significant portion directed towards AI infrastructure, including AI chips, data centers, and networking. The company raised its capital expenditure forecast for 2026 to between $135 billion and $145 billion. Despite strong operating cash flow of $32.79 billion, the aggressive spending resulted in negative free cash flow.
Fourth-Quarter Revenue Guidance
Meta anticipates fourth-quarter revenue between $73 billion and $76 billion, with management expecting continued resilience in advertising demand despite economic uncertainties. The company also projects full-year expenses of $175 billion to $179 billion, including the legal settlement charge.
Challenges Ahead
While Meta's results indicate strong advertising growth, challenges remain, including high capital expenditures, negative free cash flow, and ongoing losses from its Reality Labs division. The company expects Reality Labs losses to be between $18 billion and $19 billion for the full year, with a forecasted decline in losses for 2027.
New Stock Class Announcement
Meta announced the creation of a non-voting Class C common stock, which will allow the company to raise capital without diluting Mark Zuckerberg's voting control. This new stock class is expected to be effective in January 2027.
Conclusion
Meta's strong revenue growth and positive advertising trends suggest that its AI investments are beginning to pay off. However, the company faces significant risks related to its high spending and ongoing losses in certain divisions. Future performance will depend on the ability to generate returns that exceed the costs associated with its ambitious infrastructure investments.