TLDR
- Meta shares climb 3.57% in after-hours trading following Q3 results and Muse AI model announcements.
- Third-quarter revenue reaches $64.6B driven by 14% growth in ad pricing and 10% increase in impressions.
- CEO unveils Muse and Muse Wonder AI models as company pursues personal superintelligence goals.
- Operating margin drops from 40% to 20% in Q3 due to $9.89B legal settlement charge.
- Capital expenditures total $34.91B, pushing free cash flow into negative $2.12B territory for the quarter.
Shares of Meta Platforms (META) experienced a strong after-hours rally Wednesday as the social media giant delivered third-quarter revenue of $64.60 billion and unveiled groundbreaking artificial intelligence initiatives. CEO Mark Zuckerberg spotlighted the company’s newest AI model releases, though a substantial legal settlement significantly impacted operating profitability despite robust advertising performance.
After-Hours Trading Surge Follows AI and Earnings Announcement
During Wednesday’s standard trading hours, Meta stock edged up 0.47% to close at $697.52. After the company disclosed its quarterly financial performance, the stock jumped 3.57% to $722.42 in extended trading. The post-market gain came as investors digested both the earnings figures and technological announcements.
Meta Platforms, Inc., META
Zuckerberg discussed the rollout of Muse and Muse Wonder models, positioning them as part of Meta’s broader push into frontier artificial intelligence. He connected these technological advances to the company’s vision of achieving personal superintelligence. These innovations were presented alongside updates on Meta’s primary business operations and platform performance.
The company’s family of applications reached 3.64 billion daily active people in September, representing a 3% year-over-year increase from September 2025. Ad impressions across Meta’s platforms grew 10%, while the average price per ad rose 14%. These combined metrics demonstrated strong momentum in both user engagement and advertising revenue generation.
Revenue Growth Outpaces Operating Expense Surge
Third-quarter revenue grew 26% compared to $51.24 billion in the prior-year period. Meta noted identical growth rates whether measured on a reported or constant currency basis. The revenue performance reflected strong advertising demand as the company invested heavily in its technological infrastructure.
Total operating expenses surged 68% to $51.61 billion from $30.71 billion, largely driven by the litigation settlement charge. As a result, operating income declined 37% to $12.99 billion from $20.54 billion. The company’s operating margin compressed significantly to 20% from 40% in the same quarter last year.
Net income jumped 264% to $9.86 billion from $2.71 billion year-over-year. Diluted earnings per share increased 265% to $3.83 from $1.05. The company’s effective tax rate came in at 24%, a substantial improvement from 87% in the previous year’s quarter.
Teen Mental Health Settlement Weighs on Profitability Despite Strong Core Business
Meta finalized an agreement in August with 52 state attorneys general addressing litigation related to teen mental health and social media platforms. The settlement requires payments totaling approximately $18.59 billion. The company recorded a $9.89 billion charge related to this settlement in its third-quarter operating expenses.
Without the legal settlement charge, operating income would have reached $22.88 billion, Meta disclosed. On an adjusted basis, diluted earnings per share would have been $7.40 rather than the reported $3.83. The company’s adjusted tax rate calculation also dropped to 17% when excluding the settlement impact.
Capital expenditures, including finance lease principal payments, totaled $34.91 billion during the quarter. Operating cash flow came in at $32.79 billion, resulting in negative free cash flow of $2.12 billion. Meta maintained $82.45 billion in cash and marketable securities, distributed $1.36 billion in dividends, and reduced its workforce by 15% to 66,775 employees.
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