Meta Takes $9.89 Billion Settlement Charge As Operating Margin Falls To 20% From 40%
Revenue rose 26% in the third quarter, and Meta also created a non-voting Class C stock tied to an agreement with Mark Zuckerberg.
Meta's third-quarter revenue rose 26% to $64.60 billion, 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 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 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 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.
Sources
- 8-K Filing — Meta Platforms, Inc. (META) — SEC EDGAR
- Exhibit meta-09302026xexhibit991.htm — Meta Platforms, Inc. 8-K exhibit — SEC EDGAR
- Meta Reports Third Quarter 2026 Results — prnewswire.com
