Meta’s AI Push Continues as $9.9 Billion Legal Charge Hits Operating Income

Meta appears to be reaping the rewards of its AI ambitions, but its latest earnings report tells a more complicated story.

In July 2025, Meta CEO Mark Zuckerberg announced Superintelligence Labs (MSL), a new unit focused on building what the company calls personal superintelligence. And that marked a shift in its AI strategy as it now competes with rivals like OpenAI and Google.

A year later, Meta says that investment is beginning to deliver results.

“We hit major milestones this quarter toward delivering personal superintelligence for everyone — including launching Muse and Muse Wonder, our first frontier model,” Zuckerberg said during the company's third-quarter earnings announcement.

Meta's revenue jumped 26% to $64.6 billion, while net income climbed to $9.86 billion from $2.71 billion a year earlier.

But behind that growth was a significant financial setback. A legal settlement related to teen mental health and social media added a $9.89 billion charge to the quarter's expenses, dragging down operating income.

Meta is making more money than ever, but the cost of its past decisions is becoming harder to ignore.

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Advertising is doing the heavy lifting

Meta's third-quarter revenue reached $64.6 billion, up from $51.24 billion a year earlier. Advertising remained the main driver, bringing in $63.06 billion, or nearly all the company's revenue.

The business is benefiting from stronger engagement and improved advertising performance across Facebook and Instagram. Ad impressions across Meta's platforms rose 10% year over year, while the average price per ad increased 14%.

Net income reached $9.86 billion, equivalent to $3.83 per share, compared with $2.71 billion, or $1.05 per share, in the same quarter last year.

However, the headline profit figure does not tell the whole story. Meta recorded a $9.89 billion charge related to its settlement with US state attorneys general. Without that expense, diluted earnings would have been $7.40 per share, well above the $5.46 analysts expected.

The charge pushed total costs and expenses up 68% to $51.61 billion. Operating income consequently fell 37%, from $20.54 billion to $12.99 billion.

The legal battles are getting expensive

The largest expense in Meta's third-quarter results came from an agreement reached in August with 52 US state attorneys general over allegations involving social media and teen mental health.

That agreement provides for payments of up to approximately $18.59 billion, according to Meta's earnings release. The company recorded $9.89 billion of that amount as a charge in the third quarter.

It’s also expected to bring changes to how Meta handles younger users on its platforms, including measures related to age restrictions and protections for teenagers.

But that settlement is not the company's only legal headache.

On the same day Meta released its earnings, a New Mexico judge reportedly ordered the company to pay $25 billion following a separate case involving allegations of deception over user privacy. Meta did not include that amount in its third-quarter results, meaning the ruling represents a potential additional financial burden rather than an expense reflected in the reported figures.

The $9.89 billion charge has already reduced Meta's reported operating income, while the separate New Mexico ruling could add further pressure depending on the outcome of any legal challenges and subsequent proceedings.

For a company investing aggressively in AI infrastructure, these liabilities could complicate decisions about how quickly it can expand that spending.

Meta's on Muse and superintelligence

Despite the legal pressure, Meta is pushing ahead with its AI ambitions.

More than 10 million people in the US and Canada have signed up for Muse, its personal AI agent launched in August. Zuckerberg said around 25% of those who set up accounts use the service daily.