Meta Q3 2026 Earnings: Headcount Down About 12,000 Year-over-Year, Muse Agent Users Surpass 10 Million

Smart Things reported on October 22: In the early hours of today, Meta released its financial results for the third quarter of 2026. Its AI business is gradually entering the product and commercialization validation stage: the number of daily active users across Meta's apps reached 3.64 billion, and advertising revenue grew 26% year over year; about a month and a half after the personal agent Muse launched, more than 10 million people in the United States and Canada have configured their own agents, with a daily active usage rate of about 25%.

In this fiscal quarter, Meta's revenue reached $64.601 billion (about RMB 431.3 billion), up 26% year over year; net profit was $9.860 billion (about RMB 65.8 billion), up 264% year over year; diluted earnings per share were $3.83 (about RMB 25.57).

▲Meta's revenue and growth over the past 3 years (chart by Smart Things)

Because it recorded a $9.89 billion (about RMB 66 billion) charge related to a U.S. lawsuit over adolescent mental health, Meta's operating profit fell 37% year over year to $12.988 billion, and its operating margin dropped from 40% in the same period last year to 20%. Excluding this charge, earnings per share for the quarter were $7.40 (about RMB 49.40).

Meta's investment in AI infrastructure is also increasing rapidly. Capital expenditures for the quarter reached $34.91 billion (about RMB 233.1 billion), and free cash flow turned negative, at -$2.120 billion (about RMB -14.15 billion).

As of September 30, 2026, Meta had 66,775 employees worldwide, down 15% year over year, a decrease of about 12,000 people. Meta is concentrating more resources on AI models, data centers, smart glasses, and new product development. In addition, Meta's board of directors also approved the creation of a new publicly traded non-voting Class C common stock, expected to take effect in January 2027.

As of the close on October 21 at 4 p.m. Eastern Time, Meta was at $697.52 per share (about RMB 4,657 per share), up 0.47%, with a total market value of about $1.78 trillion (about RMB 11.88 trillion). After hours, Meta's stock price rose as much as 7% to $746.50 per share (about RMB 4,984 per share). As of 8 p.m. Eastern Time after hours, Meta's stock price was up 2.14% at $712.48 per share (about RMB 4,757 per share).

▲Meta stock price (source: msn)

1. Advertising revenue of RMB 421 billion, AI improves monetization of core business

Advertising remains Meta's most important source of revenue. Advertising revenue for the quarter reached $63.061 billion (about RMB 421 billion), up 26% year over year, accounting for about 97.6% of total revenue.

By business segment, Meta's Family of Apps revenue for the quarter was $64.158 billion (about RMB 428.3 billion), up 26% year over year; Reality Labs revenue was $443 million (about RMB 2.957 billion), down 6% year over year.

▲Meta's business revenue over the past two years (source: Meta)

From the perspective of advertising operating metrics, ad impressions across Meta's apps grew 10% year over year, and the average price per ad rose 14% year over year. As of September, the average number of daily active users across Meta's apps reached 3.64 billion, up 3% year over year. With user growth slowing, rising ad prices and higher value per user have become the main factors driving revenue growth.

Meta Chief Financial Officer Susan Li said on the earnings call that AI recommendation systems are directly improving user engagement and ad conversion. In the third quarter, average time spent per person on Instagram achieved double-digit growth globally; after Meta deployed its generative retrieval architecture to Facebook Feed and Reels, related watch time continued to increase.

Meta's research and development expenses for the quarter reached $20.054 billion (about RMB 133.9 billion), up 32% year over year; cost of revenue was $13.369 billion (about RMB 89.3 billion). Meta also migrated some content understanding models to its self-developed Muse model family; in internal tests, the related models reduced the unit content processing cost for Instagram, Threads, Facebook, and the advertising system by more than 80%.

Muse has also begun to move from a model to a product. Meta founder and CEO Mark Zuckerberg said on the call that about a month and a half after Muse launched, more than 10 million people in the United States and Canada had configured personal agents, with a daily active usage rate of about 25%. Shopping is one of the most common use cases, with more than a quarter of users participating, and an average order value of more than $200.

Reality Labs revenue for the quarter was $443 million (about RMB 2.96 billion), down 6% year over year; operating loss was $4.129 billion (about RMB 27.57 billion). Susan Li said the decline in Reality Labs revenue was mainly due to lower Quest headset sales, but AI glasses revenue is still growing rapidly. Zuckerberg said Muse will be integrated into Meta smart glasses starting next month, becoming the core of the next stage of the smart glasses experience and subscription business.

2. Capital expenditures up 80%, free cash flow turns from positive to negative

Meta's capital expenditures this quarter reached $34.91 billion (about RMB 233.1 billion), up about 80% year over year. Of this, cash spending on purchases of property and equipment was $33.942 billion, and principal payments on finance leases were $964 million, mainly for data centers, servers, and network infrastructure construction.

In the same period, Meta's operating cash flow was $32.786 billion (about RMB 218.9 billion), lower than capital expenditures, and free cash flow was negative $2.120 billion (about RMB -14.15 billion). In the same period last year, Meta's free cash flow was $10.625 billion (about RMB 70.94 billion).

▲Changes in Meta's free cash flow over the past two years (Source: Meta)

On the conference call, Zuckerberg said Muse currently has high operating costs, and the company plans to improve its cost efficiency by more than 10 times over the next year. Meta will lower costs by using smaller models, utilizing off-peak compute, improving GPU utilization, and reducing inference tokens. Management believes that as model capabilities improve, smaller and more efficient models can be used in the future to reach the intelligence level of current frontier models.

Meta is also broadening the application scenarios of AI compute. In addition to supporting Muse, it is also using it for advertising recommendations, content understanding, enterprise APIs, and Muse Code and other businesses, in order to improve compute utilization and diversify the commercialization risk of a single product.

Meta expects capital expenditures in 2026 to be between $135 billion and $145 billion (about RMB 901.3 billion to 968 billion); Reality Labs is expected to post a full-year operating loss of $18 billion to $19 billion (about RMB 120.1 billion to 126.8 billion), which is expected to narrow to about $15 billion (about RMB 100.1 billion) in 2027.

As of September 30, 2026, Meta had 66,775 employees worldwide, down 15% year over year. Meta's board of directors also approved the creation of a new publicly traded non-voting Class C common stock, expected to take effect in January 2027. Meta plans to distribute Class C shares to existing Class A and Class B common stockholders on a one-for-one basis, in order to expand future financing, employee incentive, and M&A tools while maintaining a founder-led governance structure.

Meta's third-quarter financial report shows that ad impressions, ad prices, and user scale are still growing, and AI is continuously improving recommendation, engagement, and ad conversion efficiency. The Muse app also shows potential for user growth, shopping transactions, and enterprise services.

But at the same time, investment in model inference, data centers, and smart glasses continues to push up costs, and quarterly free cash flow has already turned negative. Meta expects fourth-quarter revenue to continue growing, to $73 billion to $76 billion (about RMB 487.5 billion to 507.5 billion). The market will next focus on whether new AI revenue can cover continuously rising infrastructure investment.