Revenue of $64.60 billion beat the $63.34 billion estimate by 2.0%, and diluted EPS of $7.40 excluding the $9.89 billion attorneys-general charge beat the $6.54 estimate by 13.1%.
Fourth quarter revenue is guided to $73-76 billion with about 1% of currency headwind; full-year expenses were raised to $175-179 billion to absorb the charge, and capital expenditures were narrowed upward to $135-145 billion from $130-145 billion.
Reality Labs is still the funded loss: a $4,129 million segment operating loss on $443 million of revenue, guided to $18-19 billion of losses this year and around $15 billion in 2027.
The one thing that matters: revenue accelerated to 26% growth, but free cash flow turned negative $2.12 billion on $34.91 billion of quarterly capital expenditure, and the board approved a new non-voting Class C class explicitly to finance that build - the growth is no longer self-funding.
Key metrics
Metric
Reported
Prior year
Change
Revenue
$64.60 billion
$51,242
26%
Operating margin
20%
40%
—
Average price per ad
+14% year-over-year
—
+14% year-over-year
Capital expenditures, including principal payments on finance leases
$34.91 billion
—
—
Free cash flow
negative $2.12 billion
$ 10,625
—
Family daily active people (DAP), September 2026 average
3.64 billion
—
+3% year-over-year
Guidance changes
Item
New guidance
Prior guidance
Fourth quarter 2026 total revenue
$73-76 billion
—
Full year 2026 total expenses
$175-179 billion
—
Full year 2026 Reality Labs losses
$18-19 billion
—
Full year 2026 capital expenditures, including principal payments on finance leases
$135-145 billion
$130-145 billion
Fourth quarter 2026 tax rate
between 15-17%
—
2027 Reality Labs losses
around $15 billion
—
Quality of earnings
The profit collapse is one charge, not the business. Income from operations of $12,988 million fell 37% while revenue rose 26%; excluding the $9.89 billion litigation charge, operating income would have been $22.88 billion and diluted EPS $7.40 against the reported $3.83.
The 264% rise in net income is a tax artifact. Net income of $9,860 million against $2,709 million came on a 24% effective tax rate versus 87% a year ago, while income before income taxes fell to $13,001 million from $21,663 million.
Growth has turned cash-consuming. Operating cash flow of $32,786 million was more than absorbed by $33,942 million of property and equipment purchases and $964 million of finance-lease payments, taking free cash flow to negative $2,120 million from positive $10,625 million.
Gotchas & watch items
The $9.89 billion charge is an instalment, not the resolution: the agreement with 52 attorneys general provides for payments of up to approximately $18.59 billion, and further youth-related trials are scheduled in the coming months.
Headcount fell 15% to 66,775 while total costs and expenses rose 68% to $51.61 billion - the money is going into infrastructure, with one quarter of capital expenditure at $34.91 billion equal to more than half of quarterly revenue.
The revenue line is increasingly priced rather than delivered: average price per ad rose 14% against 10% growth in ad impressions, with daily active people up only 3% to 3.64 billion.
The balance sheet is already carrying the build: long-term debt of $80,922 million against $58,744 million at December 31, 2025, and the new Class C stock is presented as a vehicle for capital raising, employee compensation and acquisitions.