Meta beats expectations but legal penalties hit profit amid AI race

Meta reported stronger-than-expected revenue for the third quarter, but its profits were hampered by a $18 billion legal settlement with nearly all US states. The company disclosed a $9.9 billion charge related to the settlement, resulting in $9.86 billion in profits for the period. Further financial penalties were announced later, including a $25 billion payment to New Mexico, following a jury finding that Meta had deceived users in a case linked to the Cambridge Analytica scandal.

CFO Susan Li warned that the company still faces multiple youth-related trials in the coming months. Meta is heavily investing in AI, with CEO Mark Zuckerberg stating that they expect Reality Labs, their hardware division, to improve and become profitable in the future. Reality Labs is developing AI-powered glasses, and the company announced new AI wearables during their annual Meta Connect conference.

Meta spent $35 billion on capital expenditures in the September quarter, below expectations, but still estimates spending over $145 billion annually, nearly double their 2025 spending. The company has issued a new class of non-voting shares to raise funds for their ambitious AI roadmap, providing a potential avenue for CEO Mark Zuckerberg to maintain his influence in California due to potential tax implications under Proposition 40.