Third-quarter revenue rose 26% to $64.6bn ($63.4bn expected). The number of people using at least one of Meta's apps on a daily basis rose 3% to 3.64bn. Ad impressions increased 10%, and average price per ad rose 14%.
Excluding a $9.9bn charge relating to its agreement with US State Attorneys General, operating income rose 11% to $22.9bn, with margins declining from 40% to 35%.
Free cash flow was negative $2.1bn, down from a $10.6bn inflow in the same period last year, as capital expenditure rose to $34.9bn. Net debt, including lease liabilities, was $29.6bn.
Fourth-quarter revenue is expected to be in the range of $73-76bn ($74.4bn expected). Full-year capital expenditure guidance now stands at $135-145bn (previously $130-145bn).
Meta also announced a new class of non-voting shares, which will give it another way to raise capital.
The shares rose 2.2% in after-hours trading.
Our view
Meta delivered another strong quarter, with revenue up 26% and guidance pointing to faster growth in the final three months of the year. Stripping out a near-$10bn legal charge, margins were better than expected, and early numbers for Muse gave investors the first real evidence that AI can do more than sharpen ad targeting. The question now is the bill, with spending set to climb aggressively next year and a new share class paving the way to raise fresh capital.
Advertising remains Meta's engine room, spanning Facebook, Instagram, WhatsApp and Threads. Growth in North America picked up, engagement is rising, and AI-driven improvements to content recommendations and ad targeting still look to be in the early stages. That supports both ad volumes and pricing, reinforcing the value of Meta's enormous user base.
Muse is off to a strong start, reaching 2.5mn daily users within around six weeks, with shopping emerging as the most popular use. Engagement and retention are running ahead of where Threads was at the same stage. But early adopters are among Meta's most valuable users, so while we’re encouraged, we need to see continued growth.
Muse also gives Meta more shots on goal. Business agents for the c.500mn small businesses on its apps, tools for marketing and sales teams, subscriptions and smart glasses all offer routes to make money from AI. These are still a small slice of the group, but there are tangible signs that the investment is starting to find paying customers.
Spending remains the main concern. The bottom end of this year’s capex range moved up $5bn to $135-145bn, and management expects to spend aggressively again in 2027 as long as Muse keeps gaining traction. Rising depreciation and third-party cloud costs point to more pressure on margins, and free cash flow has already turned negative.
That leaves a funding gap. A new class of non-voting shares gives Meta a way to raise equity without weakening Zuckerberg's control. A raise could clear the path for the next leg of growth, but it's also a reminder of just how big this investment cycle has become.
All in, Meta has one of the strongest core businesses in the market and arguably the clearest AI story among the big internet names. But with next year's investment bill still unknown, a possible equity raise, and an earnings multiple that has now rebounded from previous lows, the near-term balance of risk and reward looks more even.
Environmental, social and governance (ESG) risk
The technology sector is generally medium/low risk in terms of ESG, though some segments are more exposed, like Electronic Components (environmental risks) and data monetisers (social risks). Business ethics tend to be a material risk within the tech sector, ranging from anti-competitive practices to intellectual property rights. Other key risks include labour relations, data privacy, product governance and resource use.
According to Sustainalytics, Meta’s overall management of material ESG issues is average.
Meta's dual class share structure continues to limit the influence of minority shareholders, and the new class of non-voting shares, created to help fund its AI spending, adds to that concern. Legal risk also remains high. A New Mexico judge has ordered Meta to pay $25bn after a jury found it misled users about data privacy, in a case linked to the Cambridge Analytica scandal. Meta plans to appeal, but the ruling comes just months after its $18bn settlement with 48 other states. Several youth-related trials are also due in the US over the coming months. We think that any revenue impact from new teen protections will be limited, but these cases are a reminder that data privacy and platform safety remain live risks.
Meta key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember that yields are variable and not a reliable indicator of future income. Keep in mind that key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.