Haverhill Financial Research · Analysis · Big Tech · October 22, 2026
The short version
Meta's third-quarter report, out after Wednesday's close, had two stories in it. Revenue grew 26%, with both ad volume and ad prices up. At the same time, Meta spent $34.9 billion on data centers and equipment, more than the $32.8 billion of cash its operations produced. Free cash flow was negative $2.1 billion.
The ad engine is fine
Advertising revenue was $63.06 billion, up from $50.08 billion. Ad impressions rose 10% and the average price per ad rose 14%. When both move up together, it usually means advertisers are getting results and are willing to pay more for them, not just that Meta found more places to show ads. Daily active people across its apps reached 3.64 billion, up 3%.
| Measure | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| Revenue | $64.60B | $51.24B | +26% |
| Ad impressions / price per adYear-over-year change | +10% / +14% | — | — |
| Operating incomeIncludes $9.89B legal charge | $12.99B | $20.54B | −37% |
| Operating income, ex chargeCompany figure | $22.88B | $20.54B | +11% |
| Research and development | $20.05B | $15.14B | +32% |
| Operating cash flow | $32.79B | $30.00B | +9% |
| Capital spendingIncludes finance lease principal | $34.91B | $19.37B | +80% |
| Free cash flow | $(2.12)B | $10.63B | — |
| Headcount | 66,775 | — | −15% |
Reading past the one-offs
Both this year and last year have a large one-time item, so the reported comparisons don't say much. This quarter includes a $9.89 billion charge for the August agreement with 52 state attorneys general over teen mental health litigation, booked in general and administrative expense. Without it, operating income would have been $22.88 billion and the operating margin about 35%, down from 40% a year ago. The year-ago quarter had an 87% tax rate because of a one-time tax charge, which is why reported EPS appears to have more than tripled. Excluding the legal charge, Meta says EPS would have been $7.40.
The cash
Operating cash flow vs. capital spending, $ billions. Source: Meta third-quarter 2026 earnings release.
Capital spending rose 80% from a year ago, while operating cash flow rose 9%. Meta didn't buy back any stock in the quarter, after $3.33 billion a year earlier, though it kept paying its dividend ($1.36 billion). It still had $82.45 billion of cash and marketable securities at the end of September, so this isn't a balance sheet problem. For now, though, the cash is going into computing capacity rather than back to shareholders.
What Meta expects
Fourth-quarter revenue: $73 billion to $76 billion, with about a 1% currency headwind.
2026 capital spending: $135 billion to $145 billion, narrowed from $130 billion to $145 billion.
2026 total expenses: $175 billion to $179 billion, now including the legal charge.
Reality Labs: losses of $18 billion to $19 billion this year, narrowing to about $15 billion in 2027.
2027: no revenue guidance, but Meta expects strong growth to continue and plans to keep investing heavily in AI.
Our take
Demand isn't the question. A 14% rise in the price per ad says the product is working for advertisers. The question is what Meta earns on the hundreds of billions it is putting into AI infrastructure, and that won't be answered for a couple of years. In the meantime, the 15% headcount cut and the smaller Reality Labs loss show management is trying to pay for some of it elsewhere. We'd watch two things next quarter: whether ad pricing growth holds up, and whether free cash flow turns positive again.
Sources and disclosures
Figures come from Meta's third-quarter 2026 earnings release. The ex-charge operating margin and percentage changes are our calculations.
Disclosures. Haverhill Financial Research is a publisher of general financial commentary. This article is not personalized investment advice and does not consider any reader's financial situation; readers should do their own research. Nothing here is a recommendation to buy or sell any security. Company figures and guidance can change. The author of this post does not hold positions in Meta Platforms or the other companies named. Data as of October 22, 2026.
