Meta Free Cash Flow Turns Negative, Adds Nonvoting Stock

Meta’s free cash flow was negative $2.12 billion in the third quarter of 2026, after capital expenditures of $34.91 billion, the company said in its results release on 21 October 2026. In the same release its board approved a new class of publicly listed, non-voting Class C common stock, which Meta says will give it “the ability to finance its growth.”

Revenue was $64.60 billion, up 26% from a year earlier and above the top of the $61 billion to $64 billion range Meta had guided to in July. Meta narrowed its 2026 capital expenditures outlook to $135 billion to $145 billion, from $130 billion to $145 billion. With $85.82 billion spent in the first nine months, the new range implies $49.18 billion to $59.18 billion in the fourth quarter, about 1.4 to 1.7 times the third quarter (our arithmetic).

Business Pill · CAPEX AND DEPRECIATION

A short explainer on capex and depreciation: how money spent on long-lived assets such as data centres turns into a cost over years. It teaches the general idea only and says nothing about Meta’s results.

Meta Q3 2026 explained · video

The quarter in about a minute and a half, from our published pieces (21 Oct 2026).

What Meta Reported

Revenue was $64,601 million, against $51,242 million a year earlier. Advertising brought in $63,061 million of it. Meta said ad impressions across its Family of Apps rose 10% from a year earlier and the average price per ad rose 14%. Family daily active people averaged 3.64 billion in September, up 3%.

Costs and expenses were $51.61 billion, up 68%. They include a $9.89 billion charge for Meta’s agreement with 52 attorneys general “to resolve litigation related to teen mental health and social media, which provides for payments of up to approximately $18.59 billion.” Income from operations fell 37% to $12.99 billion, and the operating margin was 20%, against 40% a year earlier. Meta says that, excluding the charge, operating income would have been $22.88 billion and diluted earnings per share $7.40, against the reported $3.83.

Net income rose 264% to $9.86 billion. The comparison is with a quarter in which Meta’s effective tax rate was 87%; this quarter it was 24%.

Headcount was 66,775 at 30 September, down 15% from a year earlier.

What Was Posted on X

Northbeam, which says it tracks billions in ad spend across thousands of advertisers, posted on 21 October, before Meta’s release, that Meta CPMs across the advertisers it tracks were up 25% from the same time last year, with the holiday-season spike arriving in September rather than November. Northbeam says its data cannot identify a root cause. This piece sets the post next to Meta’s own figure, average price per ad up 14%, as a separate measure over a different sample.

Semafor’s post on its report, before Meta’s release: Meta plans nonvoting shares and is eyeing more stock sales to fund its AI dreams. The release later confirmed a new non-voting Class C stock; this piece uses the post to show the report came first.

Where the Cash Went

Cash flow from operating activities was $32.79 billion. Capital expenditures, including principal payments on finance leases, were $34.91 billion: $33,942 million of purchases of property and equipment and $964 million of finance lease principal. Free cash flow, Meta’s own non-GAAP measure, was negative $2.12 billion, against positive $10.63 billion a year earlier and $784 million in the second quarter.

Over the first nine months free cash flow was $11.05 billion, against $29.51 billion in the same period of 2025. Meta’s cash flow statement shows no repurchases of Class A stock in the quarter, against $3.33 billion a year earlier. It paid $1.36 billion in dividends and held $82.45 billion in cash, cash equivalents and marketable securities at the end of September.

Capital expenditures equalled about 54% of the quarter’s revenue (our arithmetic). In plain terms, capital expenditures are the money spent on long-lived assets such as data centres, servers and network gear; free cash flow is what is left of operating cash after that spending. This quarter Meta spent more than the business brought in.

Meta’s earnings presentation puts capital expenditures at $34,906 million in the third quarter, against $19,374 million a year earlier, and at $85,824 million for the year to date, against $50,078 million. That is a rise of about 80% for the quarter and about 71% for the nine months (our arithmetic). With $85.8 billion spent so far in 2026, the fourth quarter needs $49.2 billion to $59.2 billion to land in the $135 billion to $145 billion outlook (our arithmetic).

The New Non-Voting Stock

The release says the board approved “the establishment of a new class of publicly listed, non-voting Class C common stock, with an effective date in January 2027,” on the unanimous recommendation of a special committee of independent directors. The first reason it lists: “The scale of investment required to compete, sustain growth, expand infrastructure, and pursue new strategic initiatives amidst the AI transformation taking place in the industry is significant.”

Every holder of Class A and Class B shares will receive one Class C share per share held, as a one-time stock dividend. Meta says that afterwards it expects “the market price for our Class A common stock to reflect the effect of a two-for-one stock split,” and that the dividend “will not change the voting power of any shareholder.” It has also entered into a Founder Alignment Agreement with Mark Zuckerberg, with terms on his sales of the Class C shares he receives, his service at the company and conditions for any future Class C dividends.

Semafor reported the plan earlier on 21 October, before Meta’s release. Citing people familiar with the matter, it said Meta would introduce non-voting stock that would let it issue new shares “for acquisitions, to lure top AI talent, and to pay for chips” without diluting Zuckerberg’s control, and that Alphabet made a similar move in 2014. Semafor said a Meta spokesperson declined to comment.

The Outlook

Meta expects fourth-quarter revenue of $73 billion to $76 billion and full-year 2026 total expenses of $175 billion to $179 billion, raised to include the $9.9 billion legal charge. It expects Reality Labs losses of $18 billion to $19 billion this year and “to narrow next year to around $15 billion as we reallocate investment toward other priority areas, primarily AI.”

The release gives no 2027 capital expenditures figure. It says Meta is “still developing our budget and capacity plans for next year, but we expect to continue investing aggressively to support both our core business and emerging AI initiatives.” On its Superintelligence Labs spending, it says: “While these investments will take longer to generate returns than those in our core business, the breadth of monetization opportunities and internal efficiencies gives us confidence in their long-term potential.”

Ad Prices, Seen From Two Sides

Meta’s own measure, average price per ad, rose 14% from a year earlier across its Family of Apps. Earlier on 21 October the ad-measurement company Northbeam, which says it tracks “billions in ad spend across thousands of advertisers,” posted on X about Meta CPMs, the cost of a thousand ad impressions. Across its advertisers, it said, they were at a “+25% increase in CPMs compared to the same time last year.”

The two figures measure different things over different samples: Meta’s covers every ad it served in the quarter, Northbeam’s covers the advertisers it tracks. Northbeam itself wrote that “Our data cannot identify a root cause, we can only demonstrate that something is happening.”

Update, 21 October: Zuckerberg Says 10 Million People Set Up Muse

Meta posted the prepared remarks for its earnings call on its investor site. In them, Mark Zuckerberg said: “In just a month and a half, more than 10 million people in the US and Canada have set up Muse personal agents.” He added that “About 25% of people who have set up Muse use it on any given day.”

On how people use it, he said: “The most common use case for Muse is shopping, with more than a quarter of people who are using Muse engaging in this with an average purchase size over $200.” He also said that “in the first week we had to work with Stripe to raise credit limits since the volumes were above what any of us expected.”

On scale and money: “We expect to grow Muse to serve billions of people.” And: “the average revenue per American user for our existing Family of Apps users is several hundreds of dollars annually, and we expect Muse will reach an even higher level over time due to the amount of commerce that we already see taking place.”

On devices, Zuckerberg said Meta is “about to ship Muse Charm, which will have gone from concept to a hardware device in people’s pockets in less than a year,” and that “Glasses sales continue to grow rapidly, and now with Muse, we expect paid subscriptions to increase.”

Chief financial officer Susan Li gave Meta’s explanation for the quarter’s spending: capital expenditures “were $34.9 billion, driven by investments in servers, data centers, and network infrastructure.” She added: “Free cash flow was negative $2.1 billion. We ended the quarter with $82.4 billion in cash and marketable securities and $83.7 billion in debt.” On the new non-voting stock, she said: “We expect trading to begin in late January 2027.”

These are Meta’s prepared remarks; the question-and-answer session is not included, and Meta had not posted a full call transcript when this update was written.

Connecting the Coverage

On 19 October our preview worked through Meta’s July guidance: first-half spending of $50.92 billion meant $79.1 billion to $94.1 billion would be needed in the second half to land inside $130 billion to $145 billion (our capex preview). The third quarter supplied $34.91 billion of it, and the raised low end now leaves $49.18 billion to $59.18 billion for the fourth quarter (our arithmetic).

The same day Meta said the first phase of Prometheus, its gigawatt-scale supercluster in New Albany, Ohio, was complete and that it is working toward about one million GPUs (our Prometheus piece).

On 21 October CNBC and Bloomberg Law reported that Meta must pay $25 billion in civil penalties to New Mexico in its Cambridge Analytica privacy case (our New Mexico piece). The results release, which we read in full, does not mention that ruling; its $9.89 billion charge relates to the separate agreement with 52 attorneys general.

And on 21 October we covered a report by two US advocacy groups that puts the off-balance-sheet debt of nine tech giants at at least $3.1 trillion (our off-book debt piece).

The Structural Read

As we read it, the release ties the new stock directly to the spending: its first stated reason for the Class C shares is that “The scale of investment required to compete, sustain growth, expand infrastructure, and pursue new strategic initiatives amidst the AI transformation taking place in the industry is significant.”

As we read it, the core business is carrying the build-out: revenue rose 26% to $64.60 billion, with ad impressions up 10% and average price per ad up 14%, while operating margin fell to 20% from 40%, including the $9.89 billion legal charge.

As we read it, the narrowed outlook raises the bar for the fourth quarter: $135 billion to $145 billion for the year leaves $49.18 billion to $59.18 billion after nine months, against $34.91 billion in the third quarter (our arithmetic).

Three Implications

FOR META SHAREHOLDERS As we read it, the Class C dividend changes what new stock can be issued, not who controls Meta: the release says the dividend “will not change the voting power of any shareholder,” and it shows no Class A repurchases in the quarter.

FOR ADVERTISERS Meta reports average price per ad up 14% across its apps; Northbeam, measuring the advertisers it tracks, posted CPMs up 25% from a year earlier. Both are attributed figures over different samples.

FOR AI SUPPLIERS As we read it, the fourth-quarter spending implied by Meta’s own range, at least $49.18 billion (our arithmetic), is the demand figure in this release for chip, server and data centre suppliers.

The Business Engineer Lens

This story maps onto the Business Engineer framework The AI Capex Map & The State of AI Hyperscalers.

The framework’s sizing of the cycle: “The total cycle: $725B Big Four + $50B Oracle + $13B Apple + $60B Neoclouds + $80B China + $60B Sovereigns + $48B Other = ~$1.04 trillion in 2026 compute capex.”

As we read it, Meta’s $135 billion to $145 billion is one company’s share of the “Big Four” line, and in the third quarter that spending, $34.91 billion, was larger than Meta’s $32.79 billion of operating cash flow. The framework was published in May 2026 and does not discuss this release.

What Is Not Established

The release does not say how many Class C shares Meta plans to sell, when, or at what size. The fourth-quarter capital expenditures range is our arithmetic from Meta’s nine-month spending and its full-year outlook, not a figure Meta gave. Comments from the earnings call appear in the update above, from Meta’s prepared remarks only.

Northbeam’s CPM figure is its own and is not comparable one-to-one with Meta’s price per ad. We did not contact Meta, Semafor or Northbeam.

The Bottom Line

Meta’s free cash flow was negative $2.12 billion in the third quarter of 2026 on $34.91 billion of capital expenditures, and its board approved a non-voting Class C stock that Meta says will help it finance growth amid the AI build-out. Revenue of $64.60 billion beat the top of its own guidance, and the narrowed $135 billion to $145 billion capex outlook implies $49.18 billion to $59.18 billion of spending in the fourth quarter (our arithmetic).