Meta Platforms (NASDAQ: META) shares rose in after-hours trading after the company reported third-quarter revenue of $64.60 billion and Chief Executive Mark Zuckerberg highlighted new artificial intelligence models. Strong advertising growth supported the results, although a major legal charge reduced operating profit and pushed free cash flow into negative territory.

Shares Rise After Earnings and AI Announcements

Meta stock gained 0.47% to $697.52 during Wednesday’s regular session before the company released its third-quarter earnings. After the report, shares advanced 3.57% to $722.42 in after-hours trading.

Zuckerberg highlighted the recent launches of Muse and Muse Wonder as Meta expanded its ambitions in frontier AI development. He connected the new models with the company’s goal of delivering personal superintelligence. Meta presented the AI developments alongside progress in its core business and technology operations.

The company’s family of applications averaged 3.64 billion daily active people in September, a 3% increase from September 2025. Advertising impressions rose 10%, while average prices per advertisement increased 14%. The figures reflected growth in both advertising activity and pricing across Meta’s platforms. For an advertising-supported business, gains arriving from both volume and pricing indicate growth powered by two levers at once rather than by a single one.

Revenue Climbs 26% as Expenses Increase

Quarterly revenue rose 26% from $51.24 billion in the comparable period a year earlier. Meta reported the same 26% growth rate on both a reported and constant-currency basis. The constant-currency measure strips out foreign exchange effects, indicating currency movements neither inflated nor dampened the reported growth rate.

Total costs and expenses increased 68% to $51.61 billion from $30.71 billion, including a litigation-related charge. Operating income consequently fell 37% to $12.99 billion from $20.54 billion, while the operating margin declined to 20% from 40% in the year-earlier period. Expenses thus grew at more than twice the pace of revenue, with the litigation charge standing out as the quarter’s largest single cost item.

Net income rose 264% to $9.86 billion from $2.71 billion a year earlier. Diluted earnings per share increased 265% to $3.83 from $1.05. Meta reported an effective tax rate of 24%, compared with 87% in the prior-year period. That swing in the tax rate explains how net income could climb sharply in the same quarter that operating income fell.

Legal Charge and Capital Spending Weigh on Cash Flow

In August, Meta an agreement with 52 attorneys general concerning litigation related to teen mental health and social media. The agreement calls for payments of up to approximately $18.59 billion. Meta recorded a related charge of $9.89 billion in its third-quarter costs and expenses.

Excluding that charge, Meta calculated that operating income would have been $22.88 billion and diluted earnings per share would have been $7.40 instead of the reported $3.83. The adjusted calculation also reduced the effective tax rate to 17%. On that adjusted basis, operating income would have exceeded the year-earlier $20.54 billion, meaning the reported decline is attributable to the litigation charge under Meta’s own calculation.

Meta spent $34.91 billion on capital expenditures, including principal payments on finance leases. Operating cash flow was $32.79 billion, while free cash flow was negative $2.12 billion. The negative free cash flow reflects capital spending outpacing operating cash generation, a gap set against the company’s $82.45 billion in cash and marketable securities. The company paid $1.36 billion in dividends, and reduced its headcount by 15% to 66,775 employees, equivalent to roughly 11,800 fewer roles than a year earlier.

Source: Blockonomi