Meta third quarter 2026 earnings explained: segments, EPS and valuation multiples

Meta Platforms reported its third quarter 2026 results on October 21, 2026. Revenue for the three months ended September 30 rose 6.2% from the quarter before (Dalsna Finance calculation), but operating income and net income both fell, mainly because of a $9.89 billion legal charge. This article walks through what Meta does, how each part of the business performed and what the numbers say about its valuation. Every figure is sourced and dated, and every number worked out by us is labelled as a Dalsna Finance calculation. ^[1][2]

Meta in brief

Meta Platforms, Inc. owns Facebook, Instagram, Messenger and WhatsApp. It also makes virtual reality headsets and AI glasses. Facebook launched in 2004. Its Class A shares trade on the Nasdaq under the ticker META. Its Class B shares are not listed and carry ten votes each against one vote for a Class A share. Meta had a headcount of 66,775 at September 30, 2026, which it said was 15% lower than a year earlier. ^[1][3]

In the release, founder and chief executive Mark Zuckerberg said Meta hit major milestones in the quarter toward what it calls personal superintelligence for everyone, including the launch of Muse and Muse Wonder, which he described as its first frontier model. This is a paraphrase of his words. He added that the core business is strong. These are the company's own descriptions, as stated in its release. ^[1]

Two segments

Meta reports two segments. Family of Apps covers Facebook, Instagram, Messenger, WhatsApp and other services. It earns almost all of its money from advertising. Its other revenue includes paid messaging on WhatsApp and subscriptions. Reality Labs sells virtual and augmented reality hardware, software and content, such as Meta Quest headsets and AI glasses. ^[1][3]

Family of Apps revenue rose to $64,158 million from $60,370 million in the second quarter, but its operating income fell to $17,117 million from $23,394 million. Against the third quarter of 2025, the quarterly report says Family of Apps costs rose mostly because of infrastructure spending on data centers and third party cloud services, legal related costs, pay for engineers and AI tokens bought from third parties. Reality Labs had revenue of $443 million and an operating loss of $4,129 million, a smaller loss than the $4,619 million of the second quarter. Against a year earlier its revenue fell 6%, which the report puts down to lower Meta Quest sales, partly offset by higher sales of AI glasses. ^[1][2][3]

Where the revenue comes from

Advertising was $63,061 million of the third quarter's $64,601 million of revenue. Meta does not give the number of ads or their price in dollars. It gives the change from a year earlier instead: ad impressions across its apps rose 10% and the average price per ad rose 14%, against rises of 14% and 12% in the second quarter. The quarterly report says impressions grew in every region, especially Asia Pacific, and ties the higher price to stronger advertising demand, which Meta believes comes mostly from better ad targeting and measurement. ^[1][2][3]

Meta's main user measure is Family daily active people, the number of people who used at least one of its apps on an average day. It was 3.64 billion on average for September 2026, up 3% from a year earlier, against 3.60 billion for June 2026, as reported by Meta. ^[1][2]

The numbers, quarter over quarter

Revenue was $64,601 million in the third quarter, against $60,801 million in the second. Gross profit, which is revenue minus the direct cost of what was sold, rose 3.6% to $51,232 million. Operating income, which also takes off research, selling and administrative costs, fell to $12,988 million from $18,775 million. Net income under GAAP, the standard US accounting rules, fell to $9,860 million from $15,848 million (Dalsna Finance calculation for gross profit and the changes). ^[1][2]

Profit margin is net income as a share of revenue: 15.3% in the third quarter against 26.1% in the second (Dalsna Finance calculation: $9,860 million divided by $64,601 million, and $15,848 million divided by $60,801 million). The operating margin, operating income divided by revenue, was 20.1% against 30.9%. ^[1][2]

The fall came from inside operating costs. In August 2026 Meta agreed with 52 attorneys general across US states, territories and the District of Columbia to resolve litigation about teen mental health and social media, with payments of up to about $18.59 billion, as described by Meta. Third quarter general and administrative costs include a $9.89 billion charge for that agreement. Meta said that without the charge its operating income would have been $22.88 billion and its diluted EPS $7.40. The second quarter had charges of its own: $2.40 billion for legal proceedings and $1.18 billion of severance after a headcount reduction in May 2026. ^[1][2][3]

The agreement leaves out the cases brought by the attorneys general of Florida, New Mexico and the US Virgin Islands. The quarterly report says that on September 25, 2026 a jury in the New Mexico case found Meta liable for more than 43 million violations of the state's Unfair Practices Act. On October 21, 2026 the court ordered a civil penalty of $25 billion with 15% post judgment interest. Meta says it has accrued an amount for loss contingencies related to this matter and intends to appeal. ^[3]

Against the third quarter of 2025, revenue was up 26% from $51,242 million, as reported by Meta. Net income was $9,860 million against $2,709 million a year earlier, a quarter in which Meta's effective tax rate was 87%, which makes the two quarters hard to compare. ^[1]

Earnings per share

Earnings per share, or EPS, is profit divided by the number of shares. The diluted figure also counts shares that could be created from stock awards and similar instruments. Meta reported diluted EPS of $3.83 for the third quarter and $6.18 for the second. Dividing net income by the diluted share count gives the same figures. Meta said the legal charge took $3.57 off third quarter diluted EPS. ^[1][2]

Meta reports no adjusted net income and no adjusted EPS. Its own non GAAP measures are free cash flow and revenue excluding the effect of currency moves. Meta works out free cash flow as the cash its operations brought in minus purchases of property and equipment and principal payments on finance leases. In the third quarter operations brought in $32,786 million, property and equipment cost $33,942 million and finance lease payments were $964 million, an outflow of $2,120 million. So this article uses free cash flow as its second measure and calls it by that name. Per share, on the 2,556,241,253 shares on the cover of the latest quarterly report, it was $0.31 in the second quarter and an outflow of $0.83 in the third (Dalsna Finance calculation). It is a cash measure, not earnings. ^[1][2][3]

What the market values Meta at

Market capitalization, or market cap, is what the stock market values the whole company at: the share price times the number of shares. Meta's Class A shares closed at $614.99 on Friday, October 30, 2026, as reported by StockAnalysis. The cover of its third quarter report to the SEC lists 2,556,241,253 shares of Class A and Class B stock outstanding as of October 16, 2026. Counting both classes at the Class A price gives a market cap of about $1.57 trillion (Dalsna Finance calculation). Class B shares are not listed, so this is an approximation. Every multiple and share price below uses this one share count. ^[4][3]

After its results Meta launched two stock offerings, set out in prospectus supplements filed with the SEC on October 28, 2026. In one, banks at Meta's request offered 40,000,000 borrowed Class A shares at $625 each, $25 billion in all, under forward sale agreements that Meta settles at its discretion, subject to conditions, on or before November 19, 2027. In the other, Meta offered 250,000,000 depositary shares at $50 each, $12.5 billion in all, in a 6.50% mandatory convertible preferred stock that converts into common stock in 2029 unless converted earlier. Meta issues the forward sale shares only on settlement and the preferred converts later, so none of these shares is in the 2,556,241,253 count and the per share figures here do not include them. ^[5][6][3]

Six valuation multiples

The price to earnings ratio, or P/E, is market cap divided by a year of earnings. It shows how many dollars the market is paying for each dollar of yearly profit. Annualised means one quarter multiplied by four. On that basis Meta has a P/E of 39.9 (Dalsna Finance calculation: $1,572.1 billion divided by $9,860 million times 4, which is $39,440 million). That quarter carries the full legal charge, which is one reason this figure is high next to the others. ^[1][4][3]

The second measure divides market cap by free cash flow. We call it market cap to free cash flow, because free cash flow is not earnings. On the third quarter annualised it is not meaningful, because the quarter's free cash flow was an outflow, and dividing by a negative number says nothing about how expensive the shares are. ^[1]

A forward P/E uses an estimate of future earnings. Barchart reported on October 21, 2026, before the results, that analysts expect EPS of $27.95 for 2026. Multiplying that by the same 2,556.2 million shares gives estimated earnings of about $71,447 million and a forward P/E of 22.0 (Dalsna Finance calculation on an estimate, analyst consensus as reported by Barchart). Barchart compared it with EPS of $29.69 for 2025, while Meta reported diluted EPS of $23.49 for that year, so the estimate looks to be on an adjusted basis that we cannot match to Meta's figures. Barchart did not say whether it includes the legal charge. Two of the four quarters in that year were already reported when the estimate was made. We found no published estimate of free cash flow, so there is no forward market cap to free cash flow. ^[7][8][4][3]

A trailing P/E, sometimes called a historical P/E, uses the last four reported quarters. Net income over the twelve months to September 30, 2026 added up to $75,249 million, which gives a trailing P/E of 20.9 (Dalsna Finance calculation). Free cash flow over the same four quarters added up to $25,127 million, which gives a trailing market cap to free cash flow of 62.6 (Dalsna Finance calculation). ^{[1][2][8][4][3]}

The last four quarters

Meta's releases give net income and free cash flow for the fourth quarter of 2025 and the second and third quarters of 2026. The first quarter of 2026 is worked out by subtracting the second quarter from the first half of 2026, both from the second quarter release (Dalsna Finance calculation). Worked out the same way, the first quarter had an income tax benefit of $5,021 million, which lifted its net income. Meta's own nine month free cash flow of $11,049 million differs by $1 million from the sum of its quarters because of rounding. ^[1][2][8]

Three base cases: the third quarter held flat for a year

Suppose revenue stayed at the third quarter's level for a full year, with no growth and no decline: $64,601 million times 4, or $258,404 million. The first base case keeps the 15.3% profit margin, which gives earnings of $39,440 million, or $15.43 per share on the cover share count. This case is simply the latest quarter annualised, so at the annualised P/E it returns the October 30, 2026 close of $614.99 by construction. The other cells only show how the price moves when the same earnings are given a different multiple. ^[1][4][3]

The second base case uses the 20.1% operating margin as reported, which leaves out interest, taxes and other income: $51,952 million a year, or $20.32 per share. Operating income is counted before tax, so this is not net income. ^[1][3]

The third base case also takes out the legal charge, because Meta put a figure on it and said what operating income would have been without it. Meta gives the charge as $9.89 billion, used here as $9,890 million. Added back, third quarter operating income is $22,878 million, which Meta rounds to $22.88 billion, an operating margin of 35.4%. Held for a year that is $91,512 million, or $35.80 per share (Dalsna Finance calculation). It is still counted before tax and leaves every other cost in place. ^[1][3]

There is no free cash flow base case. The third quarter's free cash flow was an outflow, so held for a year it stays negative and no multiple can turn it into a share price. The P/E multiples apply to the three earnings rows. The market cap to free cash flow multiples do not apply to earnings, so they are left off the grid. ^[1]

What to watch

Meta's own outlook, a company projection, is fourth quarter 2026 revenue of $73 billion to $76 billion and full year 2026 total expenses of $175 billion to $179 billion, raised to take in the legal charge. It expects 2026 capital expenditures, including principal payments on finance leases, of $135 billion to $145 billion, against $34.91 billion in the third quarter alone. Free cash flow was an outflow in the third quarter, and the next report will show whether operating cash keeps pace with that spending. Meta also said it expects Reality Labs losses of $18 billion to $19 billion for 2026 and around $15 billion next year. ^[1]

The share count will change. Meta's board approved a new Class C common stock with no votes, which Meta intends to list on the Nasdaq. The board also declared a dividend of one Class C share for each Class A and Class B share, to be paid after Meta's amended certificate of incorporation takes effect, planned for January 19, 2027. Meta said it expects the Class A price to reflect the effect of a two for one stock split after the dividend is paid, so per share figures after that date will not compare directly with the ones here. Meta expects to settle the forward sale agreements by delivering shares, and the preferred stock converts into common stock, so both would add to the share count. Meta also said it continues to watch legal and regulatory matters, including youth related trials scheduled in the US in the coming months. ^[1][5][6]

How these figures were made: inputs come from Meta's earnings releases for the fourth quarter of 2025 and the second and third quarters of 2026 and its third quarter 2026 quarterly report on SEC EDGAR, plus the dated closing price and the dated consensus report named above. Calculations use unrounded inputs and are rounded only at the end, with multiples to one decimal and per share figures and prices to the cent. ^{[1][3][2][8][4][7]}