Meta reported a robust third-quarter revenue beat of $64.60 billion, surpassing estimates, and issued strong fourth-quarter guidance, signaling confidence in its AI-driven growth strategy, which sent its stock up 2.5%.
The company highlighted the early success and adoption of its Muse AI personal agents, despite continued significant losses in its Reality Labs division and a slight miss on daily active users. 
Key issues also included legal battles, such as a $25 billion penalty in a New Mexico privacy case and a $17 billion settlement with state attorneys general over child mental health allegations, alongside Mark Zuckerberg’s commitment to stay in California to mitigate a potential wealth tax.
Meta Platforms delivered a stronger-than-expected financial performance in its third-quarter earnings report and provided robust guidance for the current period, sending its stock up approximately 2.5% in after-hours trading. The social media giant reported earnings per share of $3.83 on revenue of $64.60 billion, surpassing analyst expectations of $63.37 billion. While a direct comparison for earnings per share to analyst estimates was not immediately clear, the company’s revenue marked a significant 26% year-over-year jump.
CEO Mark Zuckerberg highlighted the company's achievements this quarter, stating, “We hit major milestones this quarter toward delivering personal superintelligence for everyone - including launching Muse and Muse Wonder, our first frontier model.” For the fourth quarter, Meta anticipates revenue between $73 billion and $76 billion, with a midpoint of $74.5 billion, comfortably exceeding the $73.73 billion analysts polled by LSEG had projected. The successful debut of its Muse AI personal assistant in September contributed to Meta’s strongest month on Wall Street since 2022. By leveraging its vast ecosystem, including Facebook and Instagram, Meta has effectively brought AI agents to a wide audience, concurrently rolling out new foundation models like Muse Wonder.
Meta also revealed the creation of a new class of non-voting Class C common stock, set to take effect in January 2027. This stock will be distributed to existing shareholders as a dividend, effectively acting as a two-for-one stock split. The move aims to facilitate future growth financing and uphold the company’s founder-led model, reinforced by a Founder Alignment Agreement with Mr. Zuckerberg concerning his stock sales and continued service.
A notable development involves Zuckerberg’s commitment to staying in California for eight years, or in any jurisdiction where Meta’s corporate headquarters are maintained. This decision came amid concerns over California’s Proposition 40, a potential “California Wealth Tax,” which could have resulted in a multi-billion-dollar tax liability for the CEO based on his stock ownership. The new stock plan helped secure his long-term residency in the state.
Looking ahead, Zuckerberg outlined Meta’s enterprise strategy, focusing initially on charging developers for access to its proprietary foundation models and the Muse Code AI agent. The ultimate goal is to build a “business network of Muse agents” for small businesses, eventually expanding to corporate environments.
Despite strong revenue performance, Meta's workforce contracted, shrinking by 12% quarter-on-quarter to 66,000 employees. This follows substantial layoffs over the summer, which impacted approximately 8,000 jobs, as detailed by finance chief Susan Li during the earnings call.
Meta’s AI assistant, Muse, has seen rapid adoption, with over 10 million people in the U.S. and Canada setting up personal agents in the last month and a half. Engagement and retention are robust, with about 25% of Muse users active daily. Zuckerberg noted that longer usage correlates with better retention, and shopping emerged as the primary use case, with over a quarter of users engaging in purchases averaging more than $200.
Monetization efforts for Muse include $20 and $100 monthly subscription plans for power users to access Meta's latest model, Muse Wonder, and $50 or $200 monthly fees for developers using the Muse Wonder Full AI model via the Muse coding agent. These subscriptions represent a nascent push beyond online advertising, Meta’s traditional core business. Furthermore, Meta collaborated with Apple to make its open-weight AI model, Muse Spark Open, compatible with Mac computers, allowing developers free access in hopes of encouraging future paid usage of more powerful proprietary systems.
However, the Reality Labs division, responsible for VR headsets and AI-powered wearables, continued to post significant losses. In Q3, the unit generated $443 million in sales but incurred $4.13 billion in losses. While this was slightly better than analyst expectations of $513 million in revenue and a $4.54 billion loss, it highlights ongoing challenges. Zuckerberg has reallocated some Reality Labs resources toward AI-driven hardware, like the Ray-Ban Meta smart glasses, though new Meta VR Glasses, priced at $1,299, are still slated for a spring 2027 release.
Meta has also narrowed its full-year capital expenditures (capex) guidance for data center-related spending to between $135 billion and $145 billion, from an earlier range of $130 billion to $145 billion. This figure aligns closely with analyst expectations of $138.27 billion. Wall Street is closely watching Meta’s capex, given its substantial investment in AI infrastructure, with analysts from Baird Equity Research noting increased positive sentiment as the company demonstrates a clearer ROI, even without a cloud computing platform.
On the user front, Meta slightly missed expectations for third-quarter daily active people (DAP), reporting 3.64 billion users across its family of apps, short of the 3.65 billion analysts anticipated.
Despite diversification efforts, Meta remains heavily dependent on its massive online advertising business, which is expected to generate $61.87 billion in third-quarter ad revenue.
The company continues to grapple with significant legal challenges. A New Mexico district court judge imposed a $25 billion penalty on Meta in a data privacy case stemming from the 2018 Cambridge Analytica scandal, albeit reduced from an initial $219.5 billion. Furthermore, Meta agreed in August to a nearly $17 billion settlement with a group of state attorneys general over allegations that its apps, including Facebook and Instagram, contributed to child mental health harms. This settlement, including a $10 billion legal charge, could impact Meta’s Q3 earnings per share and ongoing personal injury claims and a federal case.
Analysts remain cautious yet optimistic about Meta’s AI initiatives. Bank of America anticipates a sales beat but expects Muse to be a capacity consumer without significant near-term revenue contributions in 2026-2027. Morgan Stanley echoed this, advising investors to maintain “reasonable adoption rates in perspective” for new technology habits. Meta's earnings kick off the tech earnings cycle for hyperscalers, with Alphabet, Microsoft, and Amazon set to report next week, all facing scrutiny over massive capital expenditures for AI against questions of justifying costs with revenue.
