Meta reported Q3 results on October 21, and on the surface the numbers looked complicated. Total revenue for the quarter was $64.60 billion, an increase of 26% compared to the third quarter of 2025, driven by advertising. Ad impressions increased 10% and the average price per ad rose 14%, meaning both volume and pricing supported the growth. Strip out a $9.9 billion legal charge tied to Meta’s August 2026 multistate attorneys general agreement on youth safety claims, and adjusted earnings per share came in at $7.40, well ahead of the $6.54 consensus.
After-hours shares climbed roughly 3% after the release. The story underneath that move is more complicated, and it matters more than the headline beat.
Capital spending reached $34.9 billion in the quarter, and free cash flow turned negative at minus $2.1 billion. Meta now pegs full-year 2026 capital spending at $135 billion to $145 billion, narrowing its previous range of $130 billion to $145 billion. That is roughly 3.6 to 3.9 times what the company spent in all of 2024. The question every investor has to answer is whether the output justifies the input.
Muse Wonder is the answer Meta is offering. Earlier this month, Meta launched Muse Wonder, a new AI model with frontier capabilities that leadership said put it on par with OpenAI’s ChatGPT and Anthropic’s Claude for coding and financial or legal questions. Muse Wonder is available to developers through Meta’s API at $4 per million input tokens and $20 per million output, roughly in line with the top models from OpenAI and Anthropic.
Meta has also begun moving content-understanding workloads onto Muse, and in offline evaluations those models outperformed previous systems while reducing per-unit content-processing costs by more than 80% across Instagram, Threads, Facebook, and ads. That is the cleaner near-term argument: Muse cuts costs on existing operations before it has to generate new revenue on its own.
The harder part is monetization. Zuckerberg told analysts that Muse is currently very compute-intensive to run, but that the company expects to improve cost efficiency by more than 10 times in the next year, which would enable it to be profitable once revenue lines scale. The compute problem is real: Meta cited heavy computing power as the reason Muse has not rolled out globally yet.
Meta guided Q4 revenue to $73 billion to $76 billion. The midpoint of $74.5 billion sits above the analyst consensus. Users grew only 3%, yet revenue grew 26%, meaning Meta is earning far more from each person, not just reaching more people. The company credits AI for better recommendations and stronger engagement lifting ad results.
The spend is enormous and the payoff is not yet fully visible. That combination puts pressure on every subsequent quarter. What keeps the bull case intact is that the core advertising engine is still accelerating while Muse builds. If those two lines converge, the capex looks prescient. If Muse stalls, it will look like the most expensive experiment in social media history.