Meta Platforms reported third-quarter revenue of $64.6 billion, up 26% from a year earlier and ahead of the $63.3 billion analysts had expected, according to a Visible Alpha consensus from S&P Global Market Intelligence. But the company's profit lines told a different story, as legal penalties and a steep rise in artificial intelligence spending weighed on operating income and free cash flow.
Net income came in at $9.9 billion, or $3.83 a share, compared with $2.7 billion, or $1.05 a share, in the same period last year. Operating income, the profit from Meta's core business, fell to $13 billion from $20.5 billion a year ago, well below the $16.9 billion analysts had forecast. The operating margin narrowed to 20%, down from 31% in the prior quarter and 40% a year earlier.
Hours before the results were released, a New Mexico judge ordered Meta to pay $25 billion in penalties tied to the Cambridge Analytica data privacy scandal. A jury had previously found more than 43 million violations, a count that could have exposed the company to penalties approaching $220 billion. Meta said it plans to appeal the ruling.
The quarter also included a charge related to a separate $10 billion settlement Meta reached with a group of state attorneys general over youth safety. Under the terms, Meta would pay about $18 billion to the states over the next decade, contingent on cooperation from TikTok and Google's YouTube. Excluding that charge, operating income would have been $22.9 billion and earnings $7.40 a share, rather than $13 billion and $3.83.
Capital expenditures reached $34.9 billion, up from $31 billion in the second quarter and $19.4 billion a year ago. Meta slightly narrowed its full-year capital spending guidance to a range of $135 billion to $145 billion, from $130 billion to $145 billion. The results followed the public launch of Muse Wonder by Meta's Superintelligence Labs about a week earlier, described as the company's first frontier model.
Investors have been pressing for clarity on how the AI buildout will translate into shareholder returns. Melissa Otto, global head of Visible Alpha research at S&P Global, noted in a pre-results commentary that consensus capital spending for 2026 had climbed more than $14 billion since April to about $140 billion, nearly double the 2025 level. Across the technology infrastructure sector, capital expenditures are expected to reach $790 billion in 2026, almost double the $404 billion projected for 2025, and to rise further to $1.2 trillion in 2027, according to Otto. That would put total spending on the AI buildout at nearly $2 trillion over two years.
Free cash flow, a persistent weak point for Meta, was negative $2.1 billion, compared with positive $784 million in the second quarter and $10.6 billion a year ago. The combination of legal charges, rising infrastructure costs and a shrinking operating margin left the company with a quarter in which top-line growth outpaced bottom-line performance, a contrast that is likely to keep attention on how aggressively Meta funds its AI ambitions while absorbing the cost of its legal battles.