AI Industry
Meta Bets Up to $145B on AI as Muse Tops 10M Accounts
Oct 22, 2026·4 min read·By Rahish Saifi
Meta on October 21, 2026 posted Q3 results that pair a still-strong ad business with an AI bill that is now eating free cash flow. Revenue rose 26%, but nearly $35 billion of quarterly capex flipped free cash flow negative, even as a $9.89 billion legal charge weighed on operating margin, which fell to 20% from 40%. CEO Mark Zuckerberg said Muse passed 10 million account setups in the US and Canada in about six weeks, while Meta raised the low end of its 2026 capex outlook to a range topping out at $145 billion. Shares rose more than 4% after hours, Reuters reported via Mint.
Key numbers
| Metric | Q3 2026 | Notes |
|---|---|---|
| Revenue | $64.60B | Up 26% YoY (Q3 2025: $51.24B) |
| Costs & expenses | $51.61B | Up 68% YoY; includes $9.89B charge for August 2026 agreement with 52 state AGs on teen mental health (payments up to ~$18.59B) |
| Operating margin | 20% | vs 40% a year earlier |
| Net income | $9.86B | Diluted EPS $3.83 ($7.40 excluding the charge) |
| Capex (incl. finance lease principal) | $34.91B | Primary driver of cash burn |
| Free cash flow | −$2.12B | vs +$10.63B a year earlier |
| Cash & marketable securities | $82.45B | Balance sheet cushion |
| Headcount | 66,775 | Down 15% YoY |
| Family daily active people | 3.64B | Up 3% |
| Ad impressions | — | Up 10% YoY |
| Average price per ad | — | Up 14% YoY |
| 2026 capex outlook | $135–145B | Narrowed from $130–145B (lower end raised) |
| 2026 total expenses | $175–179B | Full-year guide |
| Q4 revenue guidance | $73–76B | Holiday-quarter outlook |
| Reality Labs 2026 losses | $18–19B | Expected to narrow to ~$15B next year as investment shifts toward AI |
What Meta reported
In its Q3 2026 press release, Zuckerberg said: “We hit major milestones this quarter toward delivering personal superintelligence for everyone - including launching Muse and Muse Wonder, our first frontier model. Our investments are paying off, the core business is strong, and we're seeing velocity across the board.”
Operating margin fell to 20% from 40% a year ago after the teen mental-health settlement charge and AI infrastructure costs. Diluted EPS was $3.83, or $7.40 excluding the charge. Meta guided Q4 revenue to $73–76 billion and said it will keep investing aggressively in 2027. CFO Susan Li told analysts AI businesses should begin contributing incremental revenue in 2027 and become “a meaningful source of revenue diversification over time,” per Reuters via Mint.
Muse: 10 million accounts in six weeks
On the earnings call, Zuckerberg said more than 10 million people in the US and Canada set up Muse accounts in a month and a half, and he expects Muse could eventually serve “billions of people.” On pricing, he said: “Part of the reason why we're not just charging everyone up front to use this is we want to establish this Muse network, and we think that it's going to be more valuable for people at scale when there are a lot of people and businesses using Muse.” Muse costs more to run than many past products, he added, and Meta will monetize it “somewhat sooner on this than our normal playbook.”
Muse Wonder and Muse Wonder Full launched October 12, 2026 on the Meta Model API and Muse Code—see our Muse Wonder launch write-up. AP also reported Muse topping 10 million accounts. Reuters noted some enterprises are restricting agent access over security concerns, echoing bank blocks on agents like Muse.
Where the money goes
Q3 capex hit $34.91 billion (including finance lease principal), driving −$2.12 billion free cash flow versus +$10.63 billion a year earlier. Full-year 2026 capex is guided to $135–145 billion (floor raised from $130B), with total 2026 expenses of $175–179 billion.
Reality Labs losses should reach $18–19 billion in 2026, narrowing to ~$15 billion in 2027 as spend tilts toward AI. Headcount is 66,775, down 15% YoY, while $82.45 billion in cash and securities provides runway—even as markets watch whether Muse scale turns into revenue before the next infrastructure wave.
Why the new Class C stock matters
Meta will issue non-voting Class C common stock via a one-time dividend of one Class C share per Class A/B share—effectively a two-for-one split on the Class A price with voting power unchanged—with the charter amendment effective January 19, 2027; record and payment dates for the dividend are not yet set. The company said Class C supports capital raising, employee comp, and acquisitions while keeping Zuckerberg's founder-led control—useful currency when a single year's capex can approach $145 billion.
What to watch
- Q4 revenue vs the $73–76B guide and post-settlement margins.
- Muse monetization timing after Zuckerberg's “somewhat sooner” comment.
- 2027 AI revenue from Susan Li's incremental-contribution forecast.
- Capex and free cash flow into 2027 as Meta keeps investing aggressively.
- Enterprise security limits on Muse access (Reuters).
- Class C liquidity after the January 2027 effective date.
Bottom line
Meta's Q3 story is spend now, scale agents fast, and fund the buildout from a still-massive balance sheet. Muse's 10 million North American accounts and a $145 billion capex ceiling show how seriously Meta is playing the AI race; Class C stock adds another lever to pay for it without giving up control. The after-hours rally will last only if 2027 brings the AI revenue line Li promised.
Sources
- Meta: Meta Reports Third Quarter 2026 Results — Oct. 21, 2026
- Reuters via Mint: Meta puts Muse agent at heart of AI strategy, plans new stock to power investments — Oct. 22, 2026
- Meta Newsroom: Introducing Muse Wonder and Muse Wonder Full: Frontier Models for Agents — Oct. 12, 2026
- AP News: Meta Q3 revenue tops estimates and Zuckerberg says Muse accounts have topped 10 million — Oct. 21, 2026