<\/p>\n
If you own an S&P 500 index fund, you own a slice of Meta Platforms. That means the company’s next earnings report lands in your retirement account whether you follow the stock or not.<\/p>\n
This one comes with an unusual line item. It’s a bill for how Facebook and Instagram treated teenagers.<\/p>\n
Meta Platforms (META) will release third-quarter results after the market closes on Oct. 21, the company said in a release. The company brought in about $201 billion in revenue in 2025, the Associated Press reported, which makes it one of the biggest earners inside the funds millions of Americans hold for retirement.<\/p>\n
Wall Street has been warming to its artificial intelligence push. “Introducing Muse, the personal agent that understands your goals and works 24\/7 to get things done for you,” said CEO Mark Zuckerberg when Meta launched the Muse agent on Sept. 8.<\/p>\n
However, the bill for Meta’s past is arriving at the same moment as the bill for its future. Both will show up in the numbers you see on Oct. 21.<\/p>\n
According to a Bank of America research report dated Oct. 16 and reviewed by TheStreet, Meta’s third-quarter profit is likely to look far weaker than Wall Street expects, even as its ad business keeps growing at a healthy clip.<\/p>\n
What Bank of America expects on Oct. 21<\/p>\n
BofA expects revenue of $63.8 billion, ahead of the $63.3 billion consensus and near the top of Meta’s own guidance range of $61 billion to $64 billion. That would mean roughly 25% growth from a year earlier.<\/p>\n
Profit is a different story. BofA cut its third-quarter earnings estimate to $3.79 a share from $7.08, below the Street’s $6.08, because it expects Meta to book a one-time $10 billion legal charge in the quarter.<\/p>\n
More Artificial Intelligence:<\/p>\n
Bank of America sees 40% upside in AI’s next bottleneck<\/p>\n
Micron stock faces unexpected trouble despite sold-out AI factory<\/p>\n
Samsung’s AI glasses make a bold bet against Meta<\/p>\n
“We see upside potential to 3Q revenues given solid ad checks,” wrote BofA analyst Justin Post in the note, titled “3Q Preview: Back on offense with AI.” Post said his estimates sit above the Street, once the one-time charge is stripped out.<\/p>\n
Here’s what that means in plain terms. Earnings that would have come in near $7 for every share you own, now land closer to $4 for the quarter, almost entirely because of one legal bill.<\/p>\n
The BofA research note points to several other numbers worth watching:<\/p>\n
Instagram’s global daily users rose six percent from a year earlier in the third quarter, while Facebook’s fell eight percent, according to Sensor Tower data.<\/p>\n
U.S. users spent an average of 58 minutes a day on Instagram in September, up 12%, versus 34 minutes on Facebook, down ten percent.<\/p>\n
Muse passed 8.9 million downloads and 2.23 million daily active users, as of Oct. 12.<\/p>\n
BofA expects Meta to guide fourth-quarter revenue to between $71.5 billion and $74.5 billion, up 19% to 24% from a year earlier.<\/p>\n
Bank of America forecasts Meta’s Q3 revenue at $63.8 billion, topping Wall Street estimates.<\/p>\n
Bloomberg \/ Getty Images<\/p>\n
Why an $18 billion teen-safety deal hits this quarter<\/p>\n
The charge traces back to late August. Meta agreed to pay more than $18 billion over the next decade to settle claims from 52 attorneys general, Gray Media reported, ending a trial over whether its apps were built to hook young users. Meta denied wrongdoing.<\/p>\n
If you’re a parent, the deal changes your kids’ apps, too. Meta agreed to daily screen-time limits teens can’t switch off, overnight blocks and muted notifications during school hours, Gray Media reported.<\/p>\n
Related: Zuckerberg says Meta’s AI bet only fails if all AI fails<\/p>\n
There’s a catch built into the payout. About 30% of it, roughly $5.3 billion, reaches states only if YouTube and TikTok adopt similar protections and pay a matching amount, the AP reported.<\/p>\n
The agreement “institutes real change, real transparency, real protections for children and teens across the country,” California Attorney General Rob Bonta said, according to the AP.<\/p>\n
For Meta’s balance sheet, the math is smaller than the headline. Spread over ten years, $18 billion works out to about $1.8 billion a year, by my math. Against $201 billion in annual revenue, that’s like someone earning $100,000 paying about $900 a year.<\/p>\n
Given that backdrop, it’s easy to understand why Post sees a silver lining. He wrote that the settlement “reduces regulatory uncertainty” and removes the risk of a large jury verdict.<\/p>\n
Muse, AI spending and Meta’s 2027 cash crunch<\/p>\n
The bigger long-term cost is computing power. BofA raised its 2027 capital spending estimate for Meta to $205 billion, up from $192 billion and above the Street’s $195 billion.<\/p>\n
That’s about $560 million a day on data centers, chips and servers. It’s also roughly triple the $69.7 billion Meta spent in 2025, according to BofA’s figures.<\/p>\n
As a result, BofA projects Meta’s free cash flow, the cash left after paying for those investments, will swing to about negative $29.6 billion in 2027. That compares with a positive $46.1 billion in 2025.<\/p>\n
Muse is part of the reason. Meta gives free users up to 100 million AI tokens a week, and BofA estimates a user who maxes that out could cost Meta about $50 a week to serve. That’s far more than the $20 a month its cheapest paid plan charges.<\/p>\n
“If Muse continues to ramp, there may not be opportunity to lease capacity to 3rd parties and drive near-term revenue upside,” wrote Post.<\/p>\n
Much will likely depend, however, on how many Muse users ever pay. Downloads are easy to count, but subscriptions are what fund a $205 billion budget.<\/p>\n
I’d also note that BofA trimmed its 2027 earnings estimate by one percent even as it kept its revenue forecast above the Street. For now, the spending is outrunning the sales.<\/p>\n
For your portfolio, patience is the price of admission. Meta’s dividend yields about 0.3%, or roughly $30 a year on a $10,000 position, so most of your return rides on whether these AI bets pay off.<\/p>\n
Post still rates Meta a Buy with an $810 price target, about ten percent above the Oct. 16 price of $736.72, and wrote that he sees the company with the “least risk of AI disruption to core business in our coverage.”<\/p>\n
Related: Meta’s new teen limits have a loophole parents can’t ignore<\/p>\n
#Meta039s #billion #teensafety #deal #hit #earnings<\/p>\n","protected":false},"excerpt":{"rendered":"
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