Meta Tops Q3 Revenue Estimates, But Earnings Hit By Teen Lawsuit Settlement; Stock Split Creates Class C Shares

Meta‘s third-quarter revenue beat Wall Street expectations, but earnings took a hit from the company’s settlement of a lawsuit filed on behalf of teenage social media users.

Revenue for the July-to-September period set a new record at $64 billion, beating the consensus forecast of analysts of $63.3 billion. Earnings per share of $3.83 also beat estimates, but without the legal expenses they would have surged to $7.40.

The settlement in the case, reached last August, provides for payments to the plaintiffs and others of up to about $18.59 billion. For the quarter, the company said its report of costs and expenses includes a $9.89 billion charge related to the agreement.

CFO Susan Li said in the earnings release that the California case may not be a one-off, saying the company is closely monitoring regulatory and legal developments. “For example, we continue to see scrutiny on youth-related issues in several markets and have a number of youth-related trials scheduled in the coming months in the U.S.,” she said.

Along with the financial results, the company said it is effecting a 2-for-1 stock split and creating a new set of Class C shares. The new stock will start trading in January 2027 and will be offered to existing shareholders. Proceeds from the new issue will help fund the company’s aggressive spending on artificial intelligence.

After long struggling to assert the same dominance it has in social media in the booming field of AI, Meta has finally gained traction with the recent launch of the well-received virtual assistant Muse. It also launched a frontier model, Muse Wonder, designed to help the offering gain more scale.

The Class C maneuver will also enable CEO and co-founder Mark Zuckerberg to retain control of Meta.