Meta's third-quarter 2026 10-Q, filed October 22, 2026, shows a company still growing its top line at a rate most large platforms would envy, while the cost base is growing faster than revenue. Revenue reached $64.6B, up about 26% from $51.2B a year earlier. Operating income fell to $13.0B from $20.5B, and the operating margin dropped to 20.1% from 40.1%. The gap between those two lines is the story of this quarter, and it is concentrated in one line item: general and administrative expense, which rose to $14.9B from $3.5B. All figures below are in US dollars from the company's SEC filings.
The quarterly picture: growth intact, margin falling every quarter in 2026
| ($ millions, except margin, rate and EPS) | Q3 2025 | Q1 2026 | Q2 2026 | Q3 2026 |
|---|---|---|---|---|
| Revenue | 51,242 | 56,311 | 60,801 | 64,601 |
| Operating income | 20,535 | 22,872 | 18,775 | 12,988 |
| Operating margin | 40.1% | 40.6% | 30.9% | 20.1% |
| Cost of revenue | 9,206 | 10,218 | 11,330 | 13,369 |
| R&D | 15,144 | 17,699 | 21,656 | 20,054 |
| G&A | 3,512 | 2,614 | 5,609 | 14,857 |
| Residual operating costs (not itemized in reported data) | 2,845 | 2,908 | 3,431 | 3,333 |
| Pre-tax income | 21,663 | 21,752 | 18,756 | 13,001 |
| Income tax expense (benefit) | 18,954 | (5,021) | 2,908 | 3,141 |
| Effective tax rate | 87.5% | (23.1%) | 15.5% | 24.2% |
| Net income | 2,709 | 26,773 | 15,848 | 9,860 |
| Diluted EPS ($) | 1.05 | 10.44 | 6.18 | 3.83 |
Top-line growth is decelerating in year-over-year terms, but it has not reversed. Revenue grew about 33% year over year in Q1 2026, about 28% in Q2 and about 26% in Q3. Sequentially, revenue rose about 8% from Q1 to Q2 and about 6% from Q2 to Q3.
Operating income tells a sharper story. It was up about 30% year over year in Q1 2026, down about 8% in Q2 and down about 37% in Q3. The margin peaked at 40.6% in Q1 and has fallen in each of the last two quarters, to 30.9% and then 20.1%. Costs as implied by the table rose about 68% year over year in Q3 and about 23% sequentially from Q2, against about 6% sequential revenue growth.
Where the margin went: a bridge from Q3 2025 to Q3 2026
Operating income fell by about $7.5B year over year. Revenue added about $13.4B, and the cost lines absorbed more than that:
- Cost of revenue rose about $4.2B, to 20.7% of revenue from 18.0%.
- R&D rose about $4.9B, to 31.0% of revenue from 29.6%.
- G&A rose about $11.3B, to 23.0% of revenue from 6.9%.
- The residual operating cost line rose about $0.5B.
The G&A increase alone is about 1.5 times the year-over-year decline in operating income. Put differently, if G&A had stayed at its Q3 2025 share of revenue, operating margin would have been far closer to where it was a year ago. The margin problem is not diffuse. It is a single, large step-up in one line, layered on top of R&D intensity that was already high.
G&A: the line that needs an explanation
G&A went from $2.6B in Q1 2026 to $5.6B in Q2 and $14.9B in Q3. That is more than a 2.5-fold sequential increase in a single quarter, and G&A now runs at roughly 23% of revenue. The FY2025 MD&A is the only attribution we have: it said G&A rose 25% in 2025, "mainly on legal-related costs." The available data does not include Q3 2026 MD&A text or a breakdown of the Q3 2026 G&A increase, so we cannot say from the filing data alone how much of this is legal, how much is recurring, or whether it is likely to persist.
That distinction matters for a value reader. A legal charge that does not recur would be a timing issue in the margin. A cost structure that stays at this level would be a change in the earnings base. The reader should look for the Q3 10-Q's own explanation of G&A before drawing a conclusion about which it is.
R&D and the depreciation that follows it
R&D was $20.1B in Q3 2026, down about 7% sequentially from $21.7B in Q2 but up about 32% from $15.1B a year earlier. Its share of revenue has stayed in a band of roughly 29–36% across the four quarters shown. The FY2025 MD&A attributed the 31% R&D increase that year to compensation and AI-related infrastructure. Share-based compensation in the cash-flow statement rose to $7.4B in Q3 2026 from $5.6B in Q3 2025, which is consistent with that description.
Depreciation and amortization is moving the same way. The cash-flow line rose from $6.0B in Q1 2026 to $6.4B in Q2 and $7.2B in Q3, about 44% above Q3 2025. Depreciation feeds cost of revenue and R&D, so a rising base affects margins with a lag. Management guided FY2026 capital expenditure to $115–135B in the FY2025 MD&A. The reported quarterly capex line items for 2026 sum to roughly $83B through three quarters, which implies a heavy fourth-quarter build if that guidance holds. We have not independently verified that the quarterly capex figures are not cumulative year-to-date values, so the reader should confirm them against the 10-Q directly.
Diluted EPS: operating decline versus tax effects
Year over year, diluted EPS actually rose, from $1.05 to $3.83. That is a point a simple "decline" framing obscures. Q3 2025 carried an $18.95B tax expense, an effective rate of 87.5%, which the FY2025 MD&A ties to a $15.93B charge related to the One Big Beautiful Bill Act. Pre-tax income fell about 40% year over year, but the tax comparison reversed the net result.
Within 2026, the sequence is different. Diluted EPS fell from $10.44 in Q1 to $6.18 in Q2 and $3.83 in Q3, a total decline of about $6.61. The split between operating and tax effects changes across the two steps:
- Q1 to Q3 2026: Net income fell about $16.9B. Pre-tax income fell about $8.8B, which is roughly $3.4 per diluted share. The tax line swung about $8.2B, from a $5.0B benefit in Q1 to a $3.1B expense in Q3, which is roughly $3.2 per share. Share count moved by only about 9 million shares.
- Q1 to Q2 2026: Net income fell about $10.9B, of which about $7.9B was the tax swing and about $3.0B was lower pre-tax income. The first step is mostly a tax story.
- Q2 to Q3 2026: Net income fell about $6.0B, of which about $5.8B was lower pre-tax income and about $0.2B was higher tax. The second step is almost entirely operating.
The Q1 2026 EPS of $10.44 is flattered by a $5.0B tax benefit that the reported data does not explain. As an illustration only: if Q1 had carried the Q2 effective rate of about 15.5%, diluted EPS would have been roughly $7.17. The Q3 effective rate of about 24.2% is above the 13–16% range management gave in the FY2025 MD&A for the 2026 full-year rate. The Q3 tax rate is therefore a second, smaller headwind on top of the operating decline.
Cash, debt and capital returns
Operating cash flow was steady at $32–33B in each 2026 quarter. Against the quarterly capex line of $33.9B in Q3 2026, that implies negative free cash flow of about $1.2B for the quarter, before finance-lease principal. Reported free cash flow for FY2025 was $43.6B per the MD&A, after $72.2B of capital expenditure including finance leases.
Two balance-sheet and capital-return facts stand out. Long-term debt, noncurrent plus current, was about $83.7B at September 30, 2026, against $58.7B at December 31, 2025, with the step-up occurring in Q2. Cash and current marketable securities were about $82.4B at quarter-end. And no share repurchases appear in any 2026 quarter, against $26.2B of buybacks in FY2025. Dividends continued at about $1.35B per quarter. The reader should weigh whether a company funding a higher capex base with more debt, and pausing buybacks, is the right trade-off for the next several years; that is a judgment the filing data frames but does not settle.
Valuation context
The computed trailing metrics for META are a trailing P/E of about 21.8x, EV/EBIT of about 21.6x, EV/EBITDA of about 16.4x and a free-cash-flow yield of about 1.7%. These are descriptive. The computed year-over-year EPS and net-income growth fields in the key-metrics output (about −1.6% and −3.1%) do not reconcile with the line items above, which show Q3 net income up from $2.7B to $9.9B and nine-month 2026 net income up about 39% on the same basis. We have therefore not used those growth fields. Any view on value depends on whether the Q3 G&A step-up is transitory or structural, and on what the 2027 cost base looks like once the capex build flows through depreciation.
Questions the reader should answer from the 10-Q
This is a check-in, not a verdict. The Q3 10-Q is where the answers sit, and the data used here does not include its narrative sections for 2026. The reader should look for:
- What comprised the $14.9B G&A figure, and how much of it is legal or other non-recurring items versus run-rate cost.
- Whether residual operating costs (likely marketing and sales) rose at the same pace as revenue, given that their share held near 5–6% of revenue.
- What drove the Q1 2026 tax benefit and whether the 24% Q3 rate is a timing item or the new normal relative to the 13–16% management guided.
- How the depreciation base growing from about $6.0B to $7.2B per quarter will flow through cost of revenue and R&D over the next four quarters.
- Reality Labs' 2026 operating loss, which management expected to be similar to 2025's $19.2B. Segment data for 2026 is not in the available data, so we cannot isolate it from the consolidated lines.
The margin question for Meta is not whether revenue is growing; it is. It is whether the cost base that now sits underneath that revenue is a one-quarter step or a new level. The filing will answer that more reliably than any extrapolation from three quarters of data.