META's Q3 was mixed: revenue and ad revenue beat but operating income missed after about $10 billion of legal costs distorted results; Reality Labs revenue missed. Q4 guidance midpoint tops consensus, 2026 capex is in line, and its non-dilutive share class is seen as a smart way to fund AI without adding debt.

All right, so let's take a look at at Meta here and the move that we're seeing right now. The move is net positive, not by a lot, but let's break these numbers down. EPS is coming in at $3.83.

The range was very wide here, anywhere from about 345 up to 650 in terms of what that EPS number might have been because it was hard to weigh those legal expenses here for the third quarter. But it is coming in as a beat here.

Their revenue as we look over the entire quarter of the third quarter 64.6 billion. It's better than the 60 63.3 billion that was expected. Their ad revenue coming in at 63.06 billion also better than the 61.85 that was expected.

Operating income 12.9 billion 20.85 was the expectation there.

Reality Labs, this one always has a question mark around what its loss is going to be. as we look at the reality labs here. Uh the family of apps revenue 64.16. That is better than the 62.75.

And there's that family of apps. Their operating income at 17.12 billion estimate was looking for 23 uh.3 there. So I mean as we look over this, you've got a beat on the earnings.

Their family apps revenue coming in better than expected.

Reality Labs revenue did miss the mark coming in at 443 million that they were looking for 517.7.

Operating income coming in below the estimates both overall for the third quarter and for the family of apps that missed as well. Uh they did narrow their loss though on the reality labs.

It narrowed to 4.13. That was better than the estimate looking uh for a loss of 5.13.

And as far as their guidance going forward, they're guiding for Q4 revenue between 73 and $76 billion versus the 73.57 billion estimate. So that's better than the midpoints here. The midpoint is higher.

They're also setting their 2026 capital expenditure guidance at 135 to 145 billion, which is right exactly dead on the money where it was expected to be. We're up almost 4% right now.

What's the big driver behind it? Is it that we don't have an uptick in capex? Is it that we beat on the top and the bottom? Where are you seeing the most positivity here?

Yeah, they actually just released a bunch of information today. So, I would say from a capex standpoint, kind of depending on the estimates that you're looking at here. It seems like that was kind of in line with the street's expectations.

It does appear that they're actually also going to declare a one-time stock dividend for one share of class C common stock for each outstanding class share class A share common stock and class B common stock.

Let's see what that actually entails. Once again, we're just reading the headlines here, but is this going to look similar to a structure like Google where they have a voting rights for the class A and then they also have the C shares.

Is Meta going down that same path? From the headline standpoint, it does sound like that is going to be the case. Maybe that's an effort to be able to raise a little bit of capital here.

What's also very interesting with this report, it does not appear that they are going to provide a fiscal year 2027 revenue outlook. That's something that we would receive on the conference call.

Usually the guidance that they have is on the conference call for the most part. It doesn't look like they're going to issue that revenue guidance.

It seems like the street is kind of shrugging that off and it continues to power higher here. uh and they continue to double down when it comes to artificial intelligence.

So, I would say this is kind of a mixed report. You have a one-off item that is also distorting a lot of the uh the numbers that you kind of went over, but if you're looking at the daily active users and things of that nature, it seems like it wasn't a big shock to the street.

I think it's just the fact that we are seeing the stock dividend here. Let's see how that all pans out. We'll get more details uh throughout the uh afternoon here when it comes to that announcement.

Yeah, and Sam, I mean, that that oneoff issue that's weighing on uh some of these numbers here is their legal expenses were about $10 billion uh related to their settlement with those I think uh what did it end up being?

52 attorneys generals I believe is how many were involved by the end when that settlement came out.

I mean, and depending on which which source you were using and whose metrics you were looking at, it is a beat across some of them, but it was hard to make uh a comparison against the year ago because of those heavy expenses.

As you look through this and all the conversations that we had about Meta coming forward, what is sticking out to you the most

>> just on that charge? I mean I had heard some conversations that going into that there was some expectations that the bottom line was going to have a lot of noise around it because of the recent multi-state sentiment uh settlement.

So I think you know some of that had been priced in.

Uh there had been some conversations around maybe this could be an overhang moving forward. Not just this settlement because that seems to be somewhat behind it now but the other things sort of going in but going on in the background but uh some have been saying that they had been largely priced into the stock.

Um what I'd been hearing is mostly around the capex. I mean obviously just 3 months ago there were questions about the spend. Now you've had the success of news. We learned this morning we're looking at 10 million downloads in 40 days according to the data.

We know that the advertising or at least the expectations around the advertising is expected to be pretty good around that.

But um you know there is a big question now for the broader market as to whether this would be a clearing event for the AI trade just obviously given this is one of the big spenders in the space and many are looking for that proof of monetization.

One thing just before I uh finish up here that an analyst told me this morning was that as far as the language tonight on that call, they would like to hear uh Zuckerberg kind of take the same approach as Elon Musk did with the SpaceX type of um conversation around Grockbot talking about how this in his eyes would be the fastest growing product he's ever seen in his life.

If they get comments like that coming from Meta, uh then that could be certainly very positive for the stock moving forward.

Just to check back in with Meta. We're up 4% still.

All right. And and KG, I know I got a message here from you to go back to Meta for something that you've noticed. And I'm wondering if it's the news alert that just came across, but I'll let you get to it. If it's not that, I'll share it.

It is not that. And I just saw that too. So you actually have probably the cooler headline than I do. But I just wanted to highlight the fact that this uh new class of shares that are going to be released here.

It sounds like 20% of this uh new issuance, if you will, will be held inhouse to the owners. 80% will be available for uh the market over time. And this is actually very unique because this does not dilute current shareholders.

And I think that's another reason why you are seeing a pretty strong bid here. And if mechanically the A shares and the C shares should not disconnect too much uh when it comes to price action.

So this is actually a very very smart and unique way to actually raise capital to fund the AI space without putting more debt on your balance sheet as well as not diluting your shareholders when it comes to value as well as voting rights.

So you know kudos to Meta for looking at this strategy in an environment that's really critical on the the debt raises.

All right. And then I'll get to that other headline that it wasn't. Uh, and the headline is Mark Zuckerberg coming out and saying he may relocate from California if Prop 40 passes.

Prop 40, of course, the billionaire tax that's going to impose at least a 5% tax on certain taxpayers with assets over a billion dollars. So, what that would mean uh for Meta going forward, we don't know.

Of course, this hasn't passed yet. Uh but quite a stance as we're seeing a lot of uh opposition against that potential billionaires tax in California.