Retirees Holding Meta Face a New Risk Despite Strong Earnings

Meta Platforms (NASDAQ: META) reported third-quarter 2026 results after market close on October 21, delivering revenue of $64.6 billion, up 26% year over year, on diluted earnings per share (EPS) of $3.83.

In the prior quarter, shares fell about 8% after earnings per share of $6.18 missed the $7.22 estimate, and free cash flow dropped to $784 million despite record revenue the prior quarter. With Meta's earnings now released, knowing where you stand financially can help you decide whether the stock's volatility fits your investment goals.

Revenue rose 26% and beat the $63.4 billion consensus

Total revenue was $64.60 billion, up 26% on both a reported and constant currency basis, according to the SEC filing. Advertising revenue made up $63.06 billion of that, driven by a 10% increase in ad impressions and a 14% rise in the average price per ad.

WhatsApp paid messaging and subscriptions helped push other Family of Apps revenue up 59% to $1.1 billion, the filing showed. Reality Labs, which includes the Quest headset and AI glasses, brought in $443 million, down 6% from a year ago.

The US and Canada accounted for $26.22 billion, up 33%, while Europe contributed $14.02 billion and Asia-Pacific added $16.99 billion, according to the 10-Q.

A $9.89 billion legal bill slashed operating income by 37%

Total costs jumped 68% to $51.61 billion, according to the SEC filing. The biggest driver was a $9.89 billion charge tied to Meta's August 2026 settlement with 52 state attorneys general over teen mental health and social media.

That charge pushed general and administrative expenses from $3.51 billion a year ago to $14.86 billion, the filing showed. Operating income fell 37% to $12.99 billion, and the operating margin shrank to 20% from 40%.

Without the settlement, operating income would have been about $22.88 billion, as noted in the company's earnings call transcript published by Motley Fool. Meta reported quarterly net income of $9.86 billion.

Meta spent $34.9 billion in one quarter and free cash flow went negative

Capital expenditures, including principal payments on finance leases, reached approximately $34.91 billion in Q3, exceeding the $32.79 billion generated from operations. That pushed free cash flow to negative $2.12 billion, highlighting the growing cost of Meta's infrastructure investments.

Meta narrowed its full-year capital expenditure guidance to $135 billion to $145 billion, while property and equipment rose to approximately $253.2 billion from $176.4 billion at the end of 2025. The company also projected Q4 revenue of $73 billion to $76 billion.

The stock rose after only six of its previous 12 earnings reports

Meta shares gained the day after earnings in just six of the previous 12 quarters, with an average move of 0.5%, according to Schaeffer's Research. Recent earnings reactions highlight the stock's volatility:

• Q2 2026: Shares fell approximately 8% after an EPS miss, despite record revenue, Invezz reported.
• Q1 2026: The stock dropped 8.8% despite an earnings beat, as investors reacted to higher AI spending forecasts, according to Invezz.

For retirees relying on portfolio withdrawals, sharp declines in a concentrated META position could force them to sell more shares than planned to cover expenses.

Wall Street disagrees on where Meta stock is headed

Before the report, UBS raised its Meta price target to $884 from $715, citing its Business Agents rollout and growing Muse adoption. Guggenheim also increased its target to $850 from $700, according to Invezz.

Goldman Sachs took a more cautious stance, cutting its target to $762 from $860 amid concerns about rising AI infrastructure costs in 2027. The $122 difference between UBS's and Goldman Sachs' targets highlights the uncertainty surrounding Meta's spending plans.

Meta's Muse AI agents have reached 10 million users

CEO Mark Zuckerberg said more than 10 million people in the U.S. and Canada had set up Muse agents within six weeks of the September 8 launch, according to the Motley Fool earnings call transcript. Deutsche Bank analyst Benjamin Black estimated Muse could contribute up to $36 billion in annual revenue by 2030, Invezz reported.

Meta's Partnership Ads also reached a $15 billion annualized revenue run rate, growing more than 97% year over year. Meanwhile, its workforce stood at 66,775 employees at the end of September, down 15% from a year earlier, according to the earnings release.

Bottom line

Meta's revenue exceeded expectations by roughly $1.3 billion, while EPS excluding the legal charge reached $7.40. However, quarterly capital expenditures of approximately $34.9 billion were equivalent to 54% of revenue, and free cash flow turned negative as the company continued investing heavily in AI.

For retirees and near-retirees, it's worth observing whether Meta's long-term growth potential justifies its spending commitments and stock volatility, particularly for those who start investing later in life. If META represents a substantial portion of your retirement savings, reviewing your portfolio's concentration risk and withdrawal timeline could help you determine whether that exposure still makes sense.

This article is for informational purposes only and should not be considered investment advice.

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