Meta Platforms (META) recorded a $9.89 billion charge in the third quarter related to an August agreement with 52 U.S. state attorneys general to resolve litigation over teen mental health and social media, an arrangement that provides for payments of up to approximately $18.59 billion.

The social-media company said the charge lifted general and administrative expenses to $14.86 billion and compressed operating margin to 20% from 40% a year earlier. Income from operations was $12.99 billion. Excluding the charge, the company said operating income would have been $22.88 billion and diluted earnings per share would have been $7.40 instead of the reported $3.83.

Net income was $9.86 billion, or $3.83 a share, compared with $2.71 billion, or $1.05 a share, a year earlier. The effective tax rate was 24%. Excluding the charge, the company said the tax rate would have been 17%.

Revenue growth slowed. Revenue was $64.60 billion, up 26% year-over-year on both a reported and constant-currency basis, after 28% growth in the second quarter and 33% in the first. Founder and Chief Executive Officer Mark Zuckerberg said the company hit milestones toward “personal superintelligence,” including launching Muse and Muse Wonder, its first frontier model.

Advertising remained the core of the business. Family of Apps revenue was $64.16 billion. Advertising revenue was $63.06 billion. Ad impressions delivered across the Family of Apps increased 10% year-over-year, after 14% in the second quarter and 19% in the first. Average price per ad rose 14% year-over-year, up from 12% in both of the two prior quarters. Family daily active people were 3.64 billion on average in September, up 3% year-over-year.

Family of Apps operating income was $17.12 billion. Reality Labs revenue was $443 million and the segment posted a $4.13 billion operating loss.

Capital spending continued to climb. Capital expenditures, including principal payments on finance leases, were $34.91 billion, up from $31.08 billion in the second quarter and $19.84 billion in the first. Cash flow from operating activities was $32.79 billion. Free cash flow was negative $2.12 billion, after $784 million in the second quarter and $12.39 billion in the first. Cash, cash equivalents, and marketable securities were $82.45 billion as of September 30.

Headcount was 66,775 as of September 30, a 15% year-over-year decrease, after 75,472 at June 30 and 77,986 at March 31. The second-quarter release had said approximately 8,000 employees affected by a May 2026 reduction would largely no longer be reflected in headcount by the end of the third quarter.

The company now expects fourth-quarter 2026 total revenue of $73 billion to $76 billion, versus a third-quarter guide of $61 billion to $64 billion issued in July. That outlook assumes foreign currency is an approximately 1% headwind to year-over-year total revenue growth. Full-year 2026 total expenses are now expected to be $175 billion to $179 billion, raised from $165 billion to $169 billion to incorporate the $9.9 billion legal charge. Excluding the third-quarter charge, the company said it continues to expect 2026 operating income above 2025 operating income.

Capital-expenditure guidance for 2026 was narrowed to $135 billion to $145 billion from $130 billion to $145 billion. Reality Labs losses are now expected to decline versus 2025 to a range of $18 billion to $19 billion for 2026, and the company said it expects those losses to narrow next year to around $15 billion as it reallocates investment toward other priority areas, primarily AI. The company said it is still developing its 2027 budget and capacity plans and expects to continue investing aggressively in both the core business and emerging AI initiatives.

The board approved a new class of publicly listed, non-voting Class C common stock, effective January 2027, following a unanimous recommendation from a special committee of independent directors. Meta intends to file an amended certificate of incorporation in Delaware, with an effective date of January 19, 2027, and has declared a one-time stock dividend of one Class C share for each outstanding Class A and Class B share. After the dividend, the company said it expects the Class A market price to reflect a two-for-one split. The company also entered into a Founder Alignment Agreement with Zuckerberg covering sales of Class C shares received in the dividend, his service at the company, and conditions for potential future Class C dividends.