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# Meta Takes $9.89 Billion Settlement Charge As Operating Margin Falls To 20% From 40%
- URL: https://www.bullished.co/meta-takes-9-89-billion-settlement-charge-as-operating-margin-falls-to-20-from-40-4299f5da/
- Published: 2026-10-21T20:28:42.000Z
- Updated: 2026-10-28T19:00:53.000Z
- Description: Revenue rose 26% in the third quarter, and Meta also created a non-voting Class C stock tied to an agreement with Mark Zuckerberg.
- Author: Matteo Parrino
- Tags: Earnings, META, Industry: Technology

[Meta](https://www.bullished.co/tag/meta/)'s third-quarter revenue rose 26% to [$64.60 billion](https://www.sec.gov/Archives/edgar/data/0001326801/000162828026066700/meta-09302026xexhibit991.htm?ref=bullished.co), but a $9.89 billion charge for a settlement with 52 state attorneys general cut operating margin to 20% from 40%. The same [8-K](https://www.sec.gov/Archives/edgar/data/0001326801/000162828026066700/meta-20261019.htm?ref=bullished.co) discloses a new class of non-voting Class C stock and a Founder Alignment Agreement with CEO Mark Zuckerberg.

## The quarter: growth in ads, a hit from the settlement

Revenue was $64.60 billion against $51.24 billion a year earlier, up 26% on both a reported and constant-currency basis, according to the company's press release. Ad impressions rose 10% and the average price per ad rose 14%. Daily active people averaged [3.64 billion](https://www.prnewswire.com/news-releases/meta-reports-third-quarter-2026-results-302915964.html?ref=bullished.co) in September, up 3%.

Costs and expenses rose 68% to $51.61 billion. Operating income fell 37% to $12.99 billion. In August, Meta announced an agreement with [52 attorneys general](https://www.prnewswire.com/news-releases/meta-reports-third-quarter-2026-results-302915964.html?ref=bullished.co) to resolve litigation over teen mental health and social media, with payments of up to about $18.59 billion. The third-quarter charge for it was $9.89 billion, booked in general and administrative expenses.

Without the charge, the company said, operating income would have been $22.88 billion and diluted earnings per share $7.40, against the reported $3.83\. Net income was $9.86 billion, versus $2.71 billion a year earlier, when the tax provision was $18.95 billion against $3.14 billion now.

Capital expenditures, including finance-lease principal payments, were $34.91 billion. Operating cash flow was $32.79 billion, and free cash flow was negative $2.12 billion, versus positive $10.63 billion a year earlier. Headcount was 66,775, down 15% from a year earlier.

## Guidance and the new share class

Meta expects fourth-quarter revenue of $73-76 billion, assuming currency is a roughly 1% drag on growth. Full-year 2026 expenses are now forecast at $175-179 billion, raised to include the legal charge. Capital expenditures are guided to $135-145 billion, narrowed from $130-145 billion. The company said it expects Reality Labs losses of $18-19 billion this year, and warned of youth-related trials scheduled in the coming months in the U.S.

The board approved a non-voting Class C common stock, backed by shareholder written consent, with an effective date of January 19, 2027\. It declared a one-time dividend of one Class C share for each Class A and Class B share. The record and payment dates are still to be set by the board. The company said it expects Class A's price to then reflect a two-for-one split, and that the dividend does not change anyone's voting power. Meta said the stock would give it a currency for capital raising, employee pay and possible acquisitions.

## What the Founder Alignment Agreement limits

Under the agreement, signed October 20, 20% of the Class C shares going to Zuckerberg and his permitted transferees can be sold freely. The other 80% are "stapled": each one sold generally requires selling or converting one Class A or Class B share within two business days, which reduces his voting power.

Those stapled shares are released at 2.5% of his dividend allotment per quarter, so long as he stays in a full-time executive role, and all are released after 32 qualifying quarters. He also committed to remain a California resident for eight years, absent unforeseen circumstances.

Further Class C dividends are owed when the Class C 30-day average price reaches successive doublings of the $580.60 Class A price on September 10, 2026, and annualized shareholder return is at least 10%. If Meta repurchases Class A shares, the board must use best efforts to buy at least as many Class C shares.

The restated charter takes effect January 19, 2027, and the board has yet to set the record and payment dates for the Class C dividend.

Learn

- [Item 2.02: results of operations →](https://www.bullished.co/learn/8-k-items-explained/#item-202-results-of-operations)  
From 8-K Items Explained: What Every Item Code From 1.01 To 9.01 Tells You, With Examples

### Sources

- [8-K Filing — Meta Platforms, Inc. (META)](https://www.sec.gov/Archives/edgar/data/0001326801/000162828026066700/meta-20261019.htm?ref=bullished.co) — SEC EDGAR
- [Exhibit meta-09302026xexhibit991.htm — Meta Platforms, Inc. 8-K exhibit](https://www.sec.gov/Archives/edgar/data/0001326801/000162828026066700/meta-09302026xexhibit991.htm?ref=bullished.co) — SEC EDGAR
- [Meta Reports Third Quarter 2026 Results](https://www.prnewswire.com/news-releases/meta-reports-third-quarter-2026-results-302915964.html?ref=bullished.co) — prnewswire.com

### More on Meta Platforms

- [Meta Prices $25 Billion Stock Sale At $625 A Share, With No Cash Due Until Settlement](https://www.bullished.co/meta-prices-25-billion-stock-sale-at-625-a-share-with-no-cash-due-until-settlement-020eb17a/)
- [Meta's 10-Q Shows A $25 Billion New Mexico Penalty Ordered The Day Before Filing](https://www.bullished.co/metas-10-q-shows-a-25-billion-new-mexico-penalty-ordered-the-day-before-filing-bb89686b/)
- [Zuckerberg: Muse Stays Free For Most People, With Meta Taking A Fee On Transactions](https://www.bullished.co/zuckerberg-muse-stays-free-for-most-people-with-meta-taking-a-fee-on-transactions-c1dc9869/)

[All Meta Platforms (META) coverage →](https://www.bullished.co/tag/meta/)