Meta Hit With $25 Billion Judgment, Then Investors Sell on Earnings

A New Mexico judge ordered Meta to pay $25 billion on Wednesday, one of the largest financial penalties ever imposed on an American technology company.

State District Judge Francis Mathew issued the order three weeks after a jury found that Meta had violated New Mexico’s Unfair Practices Act more than 43 million times. State law allows a penalty of $5,000 per violation, which would have put the figure above $219 billion. Mathew reduced it to $25 billion.

New Mexico’s attorney general had sued the company in 2021. The case grew out of the Cambridge Analytica scandal: a British political consulting firm working on Donald Trump’s 2016 presidential campaign harvested the personal data of as many as 87 million Facebook users through a third-party app.

The state accused Meta of lying to users about who could see their data and how the company handled hate speech and misinformation. The jury sided with the state on September 25.

“Facebook’s wrongdoing — over the course of years and systematically broadcast to the public — goes to the heart of Facebook’s core business practices,” Mathew wrote in his order. He said the company had run a “coherent strategy designed to mislead the public.”

Attorney General Raúl Torrez called the ruling a warning to the industry. “For too long, powerful technology companies have operated as though their size and influence put them beyond the reach of the law,” he said.

Meta said it will appeal. “This ruling, and the Attorney General’s approach to this enforcement, makes it all but impossible to do business in the state of New Mexico,” Chief Legal Officer C.J. Mahoney said in a statement. “At its core, this lawsuit seeks to impose a tax on speech to enforce new rules for what people can say online. We are confident we will prevail on appeal.”

Record revenue, rising bill

Hours after the ruling, Meta reported third-quarter results. Revenue reached a record $64.6 billion, up 26 percent from a year earlier and ahead of Wall Street’s expectations. It was the company’s 17th straight quarter of beating sales forecasts.

Earnings told a rougher story. Net income was $9.86 billion, or $3.83 a share — well short of the $6.54 analysts expected. A $9.89 billion charge tied to a settlement with 52 state attorneys general over cases involving teenagers and social media did the damage. Without it, Meta said earnings would have been $7.40 a share.

The deeper worry was spending. Meta laid out $34.91 billion in capital expenditures during the quarter, and its free cash flow turned negative at minus $2.12 billion. The company raised the low end of its 2026 capital-spending forecast to a range of $135 billion to $145 billion, and lifted its full-year expense outlook to between $175 billion and $179 billion.

Meta also announced a new class of non-voting shares, an effective two-for-one stock split that takes effect January 19, 2027. The structure leaves Chief Executive Mark Zuckerberg’s voting control intact and would let him sell a fifth of the new shares — potentially to pay a wealth tax on California’s ballot.

The market’s answer

Investors sold on Thursday. Shares fell about 6 percent despite the revenue beat, dragging other AI-linked stocks down with them.

“We hit major milestones this quarter toward delivering personal superintelligence for everyone — including launching Muse and Muse Wonder, our first frontier model,” Zuckerberg said in the earnings release. “Our investments are paying off, the core business is strong, and we’re seeing velocity across the board.”

Zuckerberg told analysts the new Muse app has reached 10 million downloads, with a quarter of the people who set it up using it regularly.

Analysts were split. At least 13 brokerages raised their price targets after the results, according to LSEG data. Deutsche Bank analyst Benjamin Black said the AI spending was driving stronger advertising performance, creating what he called a “positive thesis creep” around the stock.

Others see the bill coming due. The New Mexico penalty and the teen-addiction settlement are separate legal blows, but both point at the same ledger: Meta is spending like a company fighting on every front at once — courts, regulators, and the AI race.