Excluding currency effects, Meta’s third-quarter revenue grew 26% year over year, slightly below the 27% recorded in the second quarter. Operating income excluding legal costs beat market expectations by about 13%, but the reported margin was significantly weighed down by settlement costs.
Original source：Evercore ISIFirst published on Unhidea：Original source date：
Key takeaway
Evercore ISI considers Meta’s third-quarter fundamentals solid: both advertising revenue and operating income excluding legal costs exceeded market expectations, but legal settlement costs significantly reduced reported profit.
Third-quarter revenue beat expectations, but how fast did it grow?
Meta’s third-quarter revenue was 64.6 billion dollars, about 2% above market expectations. Excluding currency effects, it grew 26% year over year, slowing by 1 percentage point from 27% in the second quarter.
Advertising revenue was 63.1 billion dollars, up 26% year over year excluding currency effects and about 2% above market expectations. Evercore ISI considers Meta the fastest-growing large-scale advertising platform in the internet sector.
Why did profit beat expectations while the reported margin was only about 20%?
Excluding 9.89 billion dollars in legal costs related to settlements with US state attorneys general, third-quarter operating income was 22.9 billion dollars, with an operating margin of about 35%. Operating income was about 13% above the market expectation of 20.2 billion dollars.
Including this expense, operating income under US generally accepted accounting principles was 13 billion dollars, with a margin of about 20%. Thus, the better-than-expected result excluding the expense coincided with a lower reported margin.
What changed in fourth-quarter revenue and full-year spending guidance?
Meta expects fourth-quarter revenue of 73 billion to 76 billion dollars, a range that includes the market consensus of about 73.6 billion dollars, with the midpoint about 1% higher. The guidance includes an adverse currency effect of about 1 percentage point on the year-over-year growth rate.
To account for approximately 9.9 billion dollars in third-quarter legal costs, the company raised its 2026 total expense guidance from 165 billion–169 billion dollars to 175 billion–179 billion dollars, and narrowed its capital expenditure guidance to 135 billion–145 billion dollars.
The company reiterated that 2026 operating income, excluding third-quarter legal costs, will be higher than in 2025. Evercore ISI rates Meta “Outperform” with a price target of 860 dollars.
