Meta’s Almost $10 Billion Legal Costs Take Huge Toll on Q3 Earnings, Wall Street Shrugs

Meta Platforms faced a turbulent third quarter in 2026, as the fallout from a massive legal settlement significantly impacted its earnings. Despite this, the company demonstrated robust revenue growth, signaling resilience amid financial and regulatory challenges.

During Q3, Meta recorded revenue of $64.6 billion, marking a 26% increase year-over-year and surpassing analyst forecasts. This growth reflects continued strength in the company’s core business operations and product offerings, even as its profitability took a hit from unprecedented legal expenses.

The company’s net income for the quarter reached $9.86 billion, a steep increase of 264% from the previous year. However, earnings per share (EPS) fell short of Wall Street expectations, registering $3.83 compared to the anticipated $5.46. The discrepancy was largely attributed to nearly $10 billion in costs related to an $18 billion settlement reached earlier in the year with state attorneys general.

This landmark agreement resolved claims that Meta’s Instagram platform exposed minors to harmful content and addictive features, alongside accusations of misleading the public about platform safety. The settlement, involving 52 states, led to a substantial spike in Meta’s quarterly expenses, pushing total costs to $51.6 billion.

Adding to Meta’s legal woes, a separate ruling from a New Mexico judge imposed a $25 billion penalty after a jury found the company liable for deceptive practices regarding Facebook’s data privacy and content moderation policies. These legal developments, though financially burdensome, did not dampen investor confidence, as Meta’s stock price rose by 5% following the earnings announcement.

Beyond its financial performance, Meta used the earnings report to highlight its renewed focus on artificial intelligence (AI) technologies. The company unveiled its personal AI agent, Muse, and introduced a range of Muse-integrated products including a specialized gadget and Meta-branded eyewear. These innovations represent a strategic pivot towards AI as a core growth driver.

CEO Mark Zuckerberg emphasized the company’s vision of creating personalized AI tools that empower users across various aspects of life—from shopping and productivity to creativity and business development. According to Meta’s CFO Susan Li, Muse has already attracted over 10 million users in North America, with a significant portion engaging with the AI daily.

The company plans to sustain its free core app experience while developing subscription services that offer enhanced AI capabilities and new revenue streams focused on consumer AI agents. This approach aims to balance broad accessibility with monetization of advanced features.

Meta’s strategy centers on building a network of interconnected AI agents, envisioned as a form of “personal superintelligence” accessible to the masses. This concept, initially outlined by Zuckerberg in a recent essay, underscores the company’s commitment to fostering individual empowerment and equitable distribution of technological benefits.

While the substantial legal costs weigh heavily on Meta’s current financials, the company’s investment in AI technology and steady revenue growth suggest a long-term strategy designed to maintain its competitive edge and adapt to evolving digital landscapes. Details regarding ongoing legal proceedings and future fiscal impacts remain limited as the situation develops.