META 10-Q — Smart Summary

Deferred revenue: Deferred revenue was $1.12 billion and $1.08 billion as of March 31, 2026 and December 31, 2025, respectively, mostly relating to advertising prepayments and credits, as well as software updates and upgrades associated with Reality Labs hardware sales, substantially all of which are expected to be realized in less than a year.

• Anti-dilutive shares: Approximately 40 million and 1 million shares were excluded from the diluted EPS calculation for the three months ended March 31, 2026 and 2025, respectively, as their inclusion would have had an anti-dilutive effect.
• Share class composition: The basic EPS denominator of 2,534 million shares (2026) includes 2,192 million Class A and 342 million Class B shares; the 2025 denominator of 2,527 million shares includes 2,184 million Class A and 343 million Class B shares.
• EPS presentation: Class A and Class B common stock are presented together given identical liquidation and dividend rights; Class B EPS is not presented separately as under the two-class method it is not meaningfully different from Class A EPS.

• Fair value hierarchy: Total assets measured at fair value on a recurring basis were $84,572 million as of March 31, 2026 (vs. $79,846 million as of December 31, 2025), with $59,791 million in Level 1, $24,668 million in Level 2, and $113 million in Level 3 at the most recent period-end; Level 3 consists entirely of other assets valued at $113 million (vs. $106 million at December 31, 2025).
• Restricted cash equivalents: Restricted cash equivalents were $7.42 billion as of March 31, 2026, including $5.00 billion of money market funds held in escrow related to a multi-year purchase agreement and restricted from general corporate use; substantially all were classified within other assets on the condensed consolidated balance sheet, expected to be released upon satisfying the underlying purchase obligations.
• Unrealized losses on debt securities: Aggregate unrealized losses on available-for-sale marketable debt securities were $86 million as of March 31, 2026 (vs. $41 million as of December 31, 2025), with $65 million on securities held less than 12 months and $21 million on securities held 12 months or greater; gross unrealized gains were $129 million as of March 31, 2026 vs. $300 million as of December 31, 2025, and the allowance for credit losses was not material for both periods.
• Marketable equity securities: Net unrealized losses on marketable equity securities were $1.57 billion for the three months ended March 31, 2026, compared to net unrealized gains of $137 million for the three months ended March 31, 2025; these are recorded within interest and other income (expense), net.

• Carrying value composition: Total carrying value of non-marketable equity investments was $28,410 million as of March 31, 2026 (vs. $27,524 million as of December 31, 2025), comprising $20,175 million under measurement alternative (initial cost $20,241 million, cumulative upward adjustments $558 million, cumulative impairment/downward adjustments $(624) million) and $8,235 million under equity method.
• Louisiana data center Venture: Entered into in October 2025, this is a co-development arrangement for a data center campus in Louisiana in which the company holds a 20% membership interest; the parties have committed to fund their respective pro rata share of approximately $27 billion in total estimated development costs; the carrying value of this equity investment was $2.37 billion as of March 31, 2026 and $1.83 billion as of December 31, 2025.
• Lease commitments and RVG: Lease agreements with the Venture covering data center campus properties will commence in 2029 with an aggregate initial lease commitment of approximately $12.31 billion; each property carries an initial four-year lease term with options to renew for up to 20 years total; residual value guarantees (RVG) carry an aggregate threshold of approximately $28 billion (decreasing over time), with RVG payments deemed not probable and no liability recorded.
• VIE exposure: Maximum exposure to loss related to the Louisiana Venture was $45.99 billion as of March 31, 2026 and $45.95 billion as of December 31, 2025 (comprising carrying value, lease commitments, estimated future funding commitments, and maximum RVG threshold); for other unconsolidated VIEs, maximum exposure to loss was $5.79 billion as of March 31, 2026 and $5.58 billion as of December 31, 2025, representing the carrying value of those investments.

• Depreciation expense: Total depreciation on property and equipment was $5.68 billion for the three months ended March 31, 2026, up from $3.84 billion for the three months ended March 31, 2025; servers and network assets alone drove $4.38 billion and $2.63 billion of those totals, respectively.
• Construction in progress: The $61,017 million balance as of March 31, 2026 (up from $50,521 million at December 31, 2025) consists mostly of costs related to construction of data centers, network infrastructure and servers.
• Held-for-sale assets: In March 2026, the company approved a plan to dispose of certain data center assets with a carrying value of $1.48 billion, consisting mostly of construction in progress and land; these assets were classified as held-for-sale within prepaid expenses and other current assets as of March 31, 2026, and the company expects to dispose of them within the next twelve months through a contribution to a third party for the purpose of co-developing data centers.

• Carrying amount: Long-term debt in the form of fixed-rate senior unsecured notes had a carrying amount of $58.75 billion as of March 31, 2026 and $58.74 billion as of December 31, 2025.
• Fair value: The estimated fair value of the outstanding Notes was $55.94 billion as of March 31, 2026, down from $57.22 billion as of December 31, 2025; fair value was determined using quoted prices at period-end and categorized as Level 2 in the fair value hierarchy.

Commitments

• Non-cancelable contractual commitments ($237.67B as of March 31, 2026): Mostly third-party cloud capacity arrangements, servers, network infrastructure, data centers, and Reality Labs consumer hardware; ~$42.25B due 2026, ~$47.65B due 2027; increased ~$24B in April 2026 via additional multi-year infrastructure contracts.
• Uncommenced lease obligations (~$182.88B as of March 31, 2026): Operating and finance leases for data centers, colocations, and network infrastructure commencing 2026–2036, with terms from greater than one year to 30 years.
• Contingent cloud capacity obligation (up to $14.72B over five years): Obligation to purchase cloud capacity may be reduced if the provider sells capacity to other customers.
• Restricted cash equivalents ($5.00B as of March 31, 2026): Money market funds reclassified as restricted cash equivalents under a multi-year purchase agreement, restricted from general corporate use until underlying purchase obligations are satisfied.

Legal Proceedings

• FTC v. Meta Platforms, Inc. (complaint Dec 2020; judgment Nov 2025; FTC appeal Jan 2026): FTC alleged anticompetitive conduct including Instagram and WhatsApp acquisitions; court granted judgment in Meta's favor on November 18, 2025; FTC filed notice of appeal January 20, 2026.
• FTC consent order / In the Matter of Facebook, Inc. (modified consent order April 2020; FTC proceeding May 2023): FTC seeks significant changes to consent order including prohibition on use of minors' data commercially; administrative proceeding stayed pending resolution of two judicial cases; district court briefing on jurisdictional issues due complete by May 2026.
• New Mexico Attorney General — youth/privacy (trial began Feb 2, 2026; jury verdict March 24, 2026): Jury ordered Meta to pay $375 million civil penalty; AG seeks ~$3.7B in abatement costs and injunctive relief; bench trial on those issues scheduled May 4, 2026; AG indicated intent to seek up to $62.85B in penalties in the separate platform/data practices case.
• In re Social Media Adolescent Addiction (centralized Oct 2022; first bellwether verdict March 25, 2026): Jury awarded $6 million in compensatory and punitive damages allocated 70% to Meta; second user bellwether trial scheduled July 27, 2026; damages sought range up to high tens of billions of dollars; over 100,000 mass arbitration demands filed beginning November 2024.
• IDPC GDPR fine (Final Decision May 12, 2023): Irish DPA found Meta Platforms Ireland's use of Standard Contractual Clauses for EEA Facebook user data transfers non-compliant with GDPR and imposed administrative fine of EUR €1.2 billion; Meta has accrued significant amounts for European regulatory loss contingencies.
• European Commission — Facebook Marketplace (decision Nov 18, 2024): EC found infringement of Article 102 TFEU relating to Facebook Marketplace practices and imposed fine of approximately EUR €798 million; Meta appealed January 28, 2025.
• European Commission — DMA "subscription for no ads" (final decision April 2025): EC found non-compliance with Article 5(2) DMA and imposed fine of EUR €200 million; Meta appealed July 4, 2025; further modifications may be imposed during appeal.
• AMI v. Meta Ireland (judgment Nov 19, 2025): Spanish court upheld unfair competition claim by 87 news media companies and awarded damages of approximately EUR €542 million; Meta has appealed.
• Flo Health / Frasco v. Flo Health, Inc. (jury verdict Aug 1, 2025): Jury found liability in favor of plaintiffs on California Invasion of Privacy Act Section 632 claim; plaintiffs seek $5,000 statutory damages per class member with up to approximately 1.6 million class members; damages amount uncertain.
• In re Facebook, Inc. Securities Litigation / In re Meta Platforms, Inc. Securities Litigation (ongoing): Consolidated securities class actions relating to platform/data practices and content enforcement; district court granted in part and denied in part motion to dismiss fourth amended complaint February 27, 2026; second amended complaint in Meta Securities Litigation filed February 13, 2026, motion to dismiss filed March 30, 2026.
• Kadrey, et al. v. Meta Platforms, Inc. (summary judgment granted June 25, 2025): Court granted Meta's motion for summary judgment on fair use as to named plaintiffs for generative AI training on copyrighted books; remaining copyright infringement claim proceeding; further summary judgment motions scheduled February 25, 2027.
• In re Facebook, Inc. Consumer Privacy User Profile Litigation (settlement final May 14, 2025): Settlement of consolidated consumer privacy class actions for $725 million payment by Meta, became final May 14, 2025.

• Share repurchase program: No shares of Class A common stock were repurchased during the three months ended March 31, 2026; $25.03 billion remained available and authorized for repurchases as of both December 31, 2025 and March 31, 2026 under the board-authorized program that commenced in January 2017 with no expiration date.
• Dividends: During the three months ended March 31, 2026 and 2025, dividends and dividend equivalents of $0.525 per share were paid, totaling $1.17 billion and $1.15 billion for Class A common stock, respectively, and $180 million in both periods for Class B common stock.
• RSU activity: The unvested RSU pool grew from 115,552 thousand shares (weighted-average grant date fair value $500.68) at December 31, 2025 to 149,763 thousand shares ($550.62) at March 31, 2026, after 54,863 thousand shares were granted at $599.20, 15,785 thousand vested at $369.16, and 4,867 thousand forfeited at $501.07; RSUs vested during Q1 2026 had a fair value of $10.10 billion and generated an income tax benefit of $2.23 billion; unrecognized RSU compensation expense stood at $79.22 billion, expected to be recognized over approximately three years.
• Stock options: In March 2026, nonstatutory stock options to purchase 19 million shares of Class A common stock were issued under the 2025 Plan at a weighted-average exercise price of $2,788 per share and weighted-average remaining contractual term of approximately five years; unrecognized compensation expense on these options was $495 million, expected to be recognized over approximately four years.
• 2025 Plan capacity: Effective January 1, 2026, the board approved an increase of 55 million shares under the automatic increase provision of the 2025 Equity Incentive Plan, leaving 446 million shares of Class A common stock reserved for future issuance as of March 31, 2026.

• Unrecognized tax benefits: Gross unrecognized tax benefits were $17.82 billion as of March 31, 2026, up from $16.45 billion as of December 31, 2025, primarily related to uncertainties with research tax credits and transfer pricing with foreign subsidiaries; if fully realized, this would yield a tax benefit of $11.98 billion within the provision for income taxes. Interest and penalties accrued were $2.83 billion as of March 31, 2026, compared to $2.60 billion as of December 31, 2025.
• CAMT discrete benefit: On February 18, 2026, U.S. Treasury issued Notice 2026-7 providing relief from the Corporate Alternative Minimum Tax related to expensing of previously capitalized U.S. research and development costs, resulting in an $8.03 billion discrete income tax benefit in Q1 2026; this partially offsets the $15.93 billion discrete charge recognized in Q3 2025 upon enactment of the One Big Beautiful Bill Act. The company expects to remain subject to CAMT for 2026 and subsequent years.
• 2010 Tax Court opinion: On May 22, 2025, the Tax Court issued its opinion in Facebook, Inc. v. Comm'r of Internal Revenue (2010 tax year), valuing the intellectual property transferred to the international subsidiary at $7.79 billion — $1.48 billion higher than reported — and the provision for income taxes increased due to remeasurement of unrecognized tax benefits; the Tax Court will review tax estimates from both parties and issue a forthcoming decision, after which both sides may appeal to the Ninth Circuit U.S. Court of Appeals.
• 2017–2019 IRS Notice: In September 2025, the IRS issued a Statutory Notice of Deficiency asserting an additional $15.89 billion in tax plus interest and penalties for the 2017 through 2019 tax years, primarily related to transfer pricing with foreign subsidiaries and other international tax adjustments; the company filed a petition with the Tax Court in December 2025 to challenge this notice and, as of March 31, 2026, believes its accrual for unrecognized tax benefits is adequate.

• Segment definitions: Family of Apps (FoA) includes Facebook, Instagram, Messenger, WhatsApp, and other services; Reality Labs (RL) includes virtual and augmented reality related consumer hardware, software, and content. Operating segments are the same as reportable segments.
• Employee compensation footnote: Employee compensation includes employee payroll, share-based compensation, bonus, and employee benefits for medical care, retirement, insurances, and other expenses.
• Other costs — FoA: Includes infrastructure, professional services, partner arrangements, marketing, facilities, legal-related costs, and other expenses.
• Other costs — RL: Includes inventory, professional services, marketing, infrastructure, facilities, and other expenses.

• Total revenue: $56.31 billion in Q1 2026, up 33% year-over-year (29% on a constant currency basis), driven by an increase in advertising revenue.
• Ad volume and pricing: Ad impressions delivered across the Family of Apps increased 19% year-over-year and average price per ad increased 12% year-over-year in Q1 2026.
• Income from operations: $22.87 billion in Q1 2026, up $5.32 billion or 30% year-over-year, driven by higher advertising revenue and partially offset by increases in infrastructure costs and employee compensation.

• Net income and EPS: Net income was $26.77 billion, with diluted EPS of $10.44 for the three months ended March 31, 2026.
• Effective tax rate: The effective tax rate was (23)% for the three months ended March 31, 2026, reflecting an income tax benefit of $8.03 billion related to the U.S. Corporate Alternative Minimum Tax transitional relief under Treasury Notice 2026-7; excluding this benefit, the effective tax rate would have been 14%.
• Capital allocation and liquidity: Capital expenditures, including principal payments on finance leases, were $19.84 billion; dividend and dividend equivalent payments were $1.35 billion; and cash, cash equivalents, and marketable securities were $81.18 billion as of March 31, 2026.
• Headcount: Headcount was 77,986 as of March 31, 2026, an increase of 1% year-over-year.

• Daily active people (DAP): Family DAP averaged 3.56 billion for March 2026, up 4% year-over-year.
• Ad impressions: Impressions delivered across the Family of Apps in Q1 2026 increased 19% year-over-year.
• Average price per ad: Average price per ad in Q1 2026 increased 12% year-over-year.

• Revenue concentration and data dependency: Substantially all revenue is generated from advertising on Facebook and Instagram, relying on targeting and measurement tools that use data signals from user activity both on third-party websites and within Meta's own products.
• Regulatory headwinds: Legislative and regulatory developments including the GDPR (and CJEU decisions), ePrivacy Directive, European Digital Services Act, Digital Markets Act, and U.S. state privacy laws have impaired ad targeting and measurement; in response, Meta changed the legal basis for behavioral advertising in the EU/EEA/Switzerland from "legitimate interests" to "consent," began offering a "subscription for no ads" alternative, and subsequently offered free users an option to see less personalized ads, which are described as less relevant and effective than premium ad offerings.
• Platform changes: Apple's 2021 iOS changes reduced the ability of Meta and other iOS developers to target and measure advertising, which has negatively impacted and is expected to continue to negatively impacting marketer budget commitments to Meta and other advertising platforms.
• Mitigation efforts and ongoing risk: Meta is investing in privacy-enhancing technologies, AI (including generative AI) for delivery/targeting/measurement, tools enabling marketers to share first-party data, onsite conversion features in business messaging, and growing formats such as Reels ads; however, management states these are expected to be long-term initiatives and that legislative, regulatory, and platform developments will continue to adversely impact advertising revenue for the foreseeable future, with policy enforcement efforts also expected to have a potentially material impact on revenue.

• Macro and geopolitical pressures: Management states that advertising budgets have been pressured by inflation, economic policies and international trade, high interest rates, and related market uncertainty, leading to reduced marketer spending; the company is currently subject to increased uncertainty from the conflict in the Middle East and volatility around international trade, which could impact financial results in future periods.
• Reels monetization gap: Reels is growing in usage but monetizes at a lower rate than Feed and Stories products, and management expects it will continue to monetize at a lower rate for the foreseeable future; the company is investing in Reels and AI initiatives, including an AI-powered discovery engine, which management states has already resulted in improved user engagement and monetization.
• Competition and user engagement: Competitive products and services have reduced some users' engagement, particularly among younger users, and fluctuations and declines in active user base size in one or more regions due to geopolitical conditions have adversely affected user growth, engagement, and advertising revenue — trends management expects to continue for the foreseeable future.
• Visibility limitations: Management notes it does not have perfect visibility into factors driving advertiser spending decisions and is unable to quantify the exact impact of each trend on advertising revenue during the periods presented, given the dynamic and interrelated nature of factors affecting advertising spend.

• Cost allocation: In the three months ended March 31, 2026, 87% of total costs and expenses were recognized in FoA and 13% were recognized in RL.
• FoA investments: FoA investments include headcount, data centers, and technical infrastructure to develop apps and advertising services, with significant increases in AI infrastructure including third-party cloud capacity arrangements, servers, data centers, and network infrastructure for generative AI and superintelligence initiatives.
• RL investments: RL investments target virtual and augmented reality devices, software for social platforms, neural interfaces, and other foundational technologies, with many efforts directed toward long-term research for products that may only be fully realized in the next decade; RL reduced overall operating profit by approximately $4.03 billion in the three months ended March 31, 2026, and management expects full-year 2026 RL operating losses to remain similar to 2025.
• Workforce optimization: As investments continue to increase, management states it is evaluating workforce and other needs across the business to optimize for business and strategic priorities.

• Geography methodology: Revenue by user geography is estimated based on where ad impressions are delivered, virtual and digital goods are purchased, or consumer hardware products are shipped; this differs from the customer-address-based disaggregation in Note 2.
• Regional growth, Q1 2026 vs. Q1 2025: Revenue increased 29% in United States & Canada, 39% in Europe, 29% in Asia-Pacific, and 40% in Rest of World.
• Monetization disparity: United States & Canada and Europe monetize at relatively higher rates due to the size and maturity of those online and mobile advertising markets; ad impression growth is primarily in geographies such as Asia-Pacific that monetize at lower rates.

• DAP growth: Worldwide DAP increased 4% to 3.56 billion on average during March 2026 from 3.43 billion during March 2025; the slight sequential decline from December 2025 (3.58 billion) was driven by internet disruptions in Iran and a restriction on access to WhatsApp in Russia.
• ARPP: Worldwide ARPP was $15.66 during the first quarter of 2026, an increase of 27% from the first quarter of 2025.
• Measurement note: DAP estimates carry an error margin of approximately 3% of worldwide DAP; figures rely on complex techniques, algorithms, and machine learning models to attribute multiple accounts to individual people.

Advertising revenue: Generated by displaying ad products on Facebook, Instagram, Messenger, and third-party mobile applications; marketers pay based on impressions delivered or actions taken (e.g., clicks), either directly or through agencies or resellers, with impression-based ads recognized in the contracted delivery period and action-based ads recognized when the user takes the contracted action.

Ad pricing and volume methodology: Average price per ad is calculated as total advertising revenue divided by the number of ads delivered; the number of ads shown varies by product (video and Reels are not currently monetized at the same rate as Feed or Stories) and may be adjusted up or down as part of product and monetization strategies.

Other revenue: Consists of revenue from paid messaging from WhatsApp, Meta Verified subscriptions, and various other sources.

• Cost of revenue: Consists of data center and technical infrastructure expenses (including depreciation on servers, network infrastructure, and buildings), employee compensation, energy and bandwidth costs, third-party cloud costs, processing fees and traffic acquisition costs, RL inventory costs (cost of products sold and estimated losses on non-cancelable contractual commitments), and content and creator costs (payments to content creators for licensed content and engagement-based incentive payments).
• Research and development: Consists mostly of employee compensation for engineering and technical teams developing new technologies and products, infrastructure expenses including third-party cloud costs, RL technology development costs, and facilities-related costs.
• Marketing and sales: Consists mostly of employee compensation for sales, sales support, marketing, business development, and customer service employees; professional services to support community and product operations; and marketing and promotional expenses.
• General and administrative: Consists primarily of employee compensation for certain executives and legal, finance, human resources, corporate communications and policy, and other administrative employees; legal-related costs (estimated fines, settlements, or other losses in connection with legal and related matters, and other legal fees); other taxes such as digital services taxes and other non-income-based tax levies; and professional services.

• Revenue growth: Revenue grew from $42,314M to $56,311M, a 33% increase year-over-year for the three months ended March 31, 2026.
• Operating leverage: Total costs and expenses rose from $24,759M to $33,439M, but remained flat at 59% of revenue, with R&D expanding from 29% to 31% of revenue while marketing and sales contracted from 7% to 5%.
• Operating income: Income from operations increased from $17,555M to $22,872M, with operating margin unchanged at 41% of revenue.
• Net income: Net income increased from $16,644M (39% of revenue) to $26,773M (48% of revenue), aided by a provision (benefit) for income taxes swinging from a $1,738M expense to a $(5,021)M benefit, while interest and other income (expense), net moved from $827M income to $(1,120)M expense.

• Overall growth: Total revenue grew 33% to $56,311 million in the three months ended March 31, 2026, from $42,314 million in the prior-year period.
• Advertising dominance: Advertising revenue of $55,024 million (up 33%) drove the vast majority of growth, while Other revenue grew 74% to $885 million.
• Reality Labs decline: Reality Labs revenue declined 2% to $402 million, compared to $412 million in the prior-year period, while Family of Apps revenue grew 33% to $55,909 million.

FoA revenue: Family of Apps revenue increased $14.01 billion, or 33%, in the three months ended March 31, 2026 compared to the same period in 2025, with the increase almost entirely driven by advertising revenue.

• Revenue growth: Advertising revenue in the three months ended March 31, 2026 increased $13.63 billion, or 33%, compared to the same period in 2025, driven by increases in both ad impressions delivered and average price per ad.
• Ad impressions: Ad impressions delivered increased 19% year-over-year in the three months ended March 31, 2026 (vs. a 5% increase in the same period in 2025), with growth in all regions, especially in Asia-Pacific, driven by increases in users, engagement, and frequency of ads shown.
• Average price per ad: Average price per ad increased 12% year-over-year in the three months ended March 31, 2026 (vs. 10% in the same period in 2025), driven by increased advertising demand attributed to ongoing improvements in ad targeting and measurement tools and a favorable foreign currency exchange impact, partially offset by a higher volume of impressions in geographies and products such as Reels that monetize at lower rates.
• Top vertical: The online commerce vertical was the largest contributor to the increase in advertising revenue in the three months ended March 31, 2026 compared to the same period in 2025.

FoA other revenue: Family of Apps other revenue increased $375 million, or 74%, in the three months ended March 31, 2026 compared to the same period in 2025, driven mostly by paid messaging from WhatsApp and Meta Verified subscriptions.

• Revenue decline: RL revenue decreased $10 million, or 2%, in the three months ended March 31, 2026 compared to the same period in 2025, driven by lower Meta Quest sales, partially offset by an increase in sales of AI glasses.

• Foreign exchange impact: Changes in foreign exchange rates had a favorable impact on revenue in the three months ended March 31, 2026 compared to the same period in 2025.
• Constant currency revenue: On a constant currency basis (using prior year's monthly exchange rates for non-U.S. dollar settlement or billing currencies), total revenue and advertising revenue for the three months ended March 31, 2026 would have been $54.56 billion and $53.29 billion, respectively — $1.75 billion and $1.73 billion lower than actual reported figures.

• Cost of revenue: Increased $2.65 billion, or 35%, to $10,218 million in the three months ended March 31, 2026 from $7,572 million in the same period in 2025, driven primarily by higher operational expenses related to data centers and technical infrastructure.
• Revenue mix: Cost of revenue held flat as a percentage of revenue at 18% in both the three months ended March 31, 2026 and the three months ended March 31, 2025.

• R&D expense: Research and development expenses grew 46% to $17,699 million in the three months ended March 31, 2026, up $5.55 billion from $12,150 million in the same period in 2025, with R&D as a % of revenue expanding from 29% to 31%.
• Cost drivers: The increase was primarily due to higher employee compensation — mainly driven by an increase in share-based compensation expense — as well as higher infrastructure costs for research and development, including AI initiatives.

• Expense increase: Marketing and sales expenses rose $151 million, or 5%, to $2,908 million in the three months ended March 31, 2026, driven mainly by higher marketing and promotional expenses and professional services related to ongoing platform integrity efforts.
• Revenue mix: Marketing and sales as a percentage of revenue declined to 5% from 7% in the prior-year period.

• G&A expense: General and administrative expenses increased $334 million, or 15%, to $2,614 million in the three months ended March 31, 2026, compared to $2,280 million in the same period of 2025, while remaining flat as a percentage of revenue at 5% in both periods.
• Key drivers: The increase was mainly due to higher legal-related costs, partially offset by a reversal of the Canadian Digital Services Tax liability following the repeal of the law.

• FoA operating income: Income from operations for the three months ended March 31, 2026 increased $5.14 billion, or 24%, compared to the same period in 2025, driven by higher advertising revenue partially offset by an increase in costs and expenses.
• Cost drivers: The increase in costs and expenses was mainly due to increases in infrastructure costs and employee compensation.

• Operating loss: Reality Labs loss from operations decreased $182 million, or 4%, in the three months ended March 31, 2026 compared to the same period in 2025, driven by lower RL costs and expenses.
• Cost driver: The decrease in RL costs and expenses was primarily due to a decrease in employee compensation.

• Overall swing: Interest and other income (expense), net declined $1.95 billion, or 235%, from $827 million in Q1 2025 to $(1,120) million in Q1 2026, driven primarily by unrealized losses on marketable equity investments (gain/(loss) on equity investments and other, net swung from $177 million to $(1,076) million, marked NM).
• FX headwind: Foreign currency exchange, net shifted from a $232 million gain in Q1 2025 to a $(226) million loss in Q1 2026, a 197% adverse change, further pressuring the line.
• Interest expense: Rose 134% from $(240) million to $(562) million, attributed to higher long-term debt balances; partially offset by interest income growth of 13%, from $658 million to $744 million.

• Discrete CAMT benefit: U.S. Treasury Notice 2026-7 (issued February 18, 2026), providing relief from the Corporate Alternative Minimum Tax related to expensing of previously capitalized U.S. research and development costs, drove recognition of an $8.03 billion discrete income tax benefit in Q1 2026, partially offsetting the $15.93 billion discrete charge recognized in Q3 2025 upon enactment of the One Big Beautiful Bill Act.
• Period-over-period swing: Provision for income taxes swung from a $1,738 million expense in Q1 2025 to a $(5,021) million benefit in Q1 2026 (not meaningful % change), with the effective tax rate moving from 9% to (23)%, almost entirely due to the Treasury Notice 2026-7 benefit.
• Forward CAMT exposure: Management expects the company to remain subject to CAMT for 2026 and subsequent years; absent changes to the tax landscape, management expects the effective tax rate for the remaining quarters of 2026 to be between 13–16%.
• Global minimum tax: In January 2026, the OECD introduced a "Side-by-Side Safe Harbor" allowing U.S. headquartered companies to remain subject only to U.S. global minimum taxes (specifically CAMT) while being exempted from Pillar Two; management does not expect these changes to have a material impact on consolidated financial statements for 2026, though acknowledges the effective tax rate and cash tax payments could increase in future years as additional jurisdictions enact legislation, transitional relief expires, and other provisions become effective.

• Liquidity position: Cash, cash equivalents, and marketable securities were $81.18 billion as of March 31, 2026, a decrease of $412 million from December 31, 2025, held across cash on deposit with banks, time deposits, money market funds, U.S. government and agency securities, investment grade corporate debt securities, and marketable equity securities.
• Uses of cash: The decrease was primarily driven by $19.84 billion of capital expenditures (including purchases of property and equipment and principal payments on finance leases), $4.42 billion of taxes paid related to net share settlement of employee RSU awards, $1.57 billion of net unrealized losses on marketable equity securities, $1.35 billion of payments of dividends and dividend equivalents, and $372 million of acquired intangible assets, partially offset by $32.23 billion of cash generated from operations.
• Restricted cash reclassification: During the quarter ended March 31, 2026, $5.00 billion of unrestricted money market funds was reclassified to restricted cash equivalents related to the terms of a multi-year purchase agreement; these funds are restricted from general corporate use and are expected to be released upon satisfying the underlying purchase obligations.

• Operating cash drivers: Cash provided by operating activities for the three months ended March 31, 2026 primarily consisted of $26.77 billion net income adjusted for non-cash items including $6.03 billion of share-based compensation expense and $6.00 billion of depreciation and amortization expense.
• Year-over-year change: The increase in cash flows from operating activities versus the same period in 2025 was driven by higher cash collections from customers reflecting revenue growth, partially offset by higher operational spending.

• Property and equipment: Cash used in investing activities for the three months ended March 31, 2026 included $19.00 billion of purchases of property and equipment, continuing investment in servers, data centers, and network infrastructure.
• Marketable securities: Net purchases of marketable securities totaled $13.80 billion during the three months ended March 31, 2026; both this item and cash paid for property and equipment drove the year-over-year increase in cash used in investing activities versus the same period in 2025.
• 2026 capex outlook: Management anticipates capital expenditures of approximately $125 billion to $145 billion in 2026 to support AI efforts and core business.

• Primary outflows: Cash used in financing activities for the three months ended March 31, 2026 consisted primarily of $4.42 billion of taxes paid related to net share settlement of RSUs and $1.35 billion of payments of dividends and dividend equivalents.
• Year-over-year change: The decrease in cash used in financing activities compared to the same period in 2025 was mostly due to a decrease in share repurchases.

• Liquidity adequacy: Management anticipates that available funds and cash flow from operations and financing activities will be sufficient to meet operational cash needs and fund cash commitments for investing and financing activities over the next 12 months and for the foreseeable future.
• Investment priorities: Named commitments include investments in infrastructure and AI initiatives, as well as any return of capital to stockholders; the company has increased investments in infrastructure and AI initiatives and expects to continue to do so.
• Additional capital: From time to time the company may seek to raise additional capital through debt, equity, or other financing arrangements, and continuously evaluates liquidity and capital resources, including access to external capital.

• Uncommenced leases: As of March 31, 2026, operating and finance leases not yet commenced totaled approximately $182.88 billion, covering data centers, colocations, and certain network infrastructure, with commencement dates running through the remainder of 2026 and 2036 and lease terms ranging from greater than one year to 30 years.
• Non-cancelable contractual commitments: As of March 31, 2026, non-cancelable contractual commitments totaled $237.67 billion (short- and long-term), mostly related to third-party cloud capacity arrangements and continued investments in servers and network infrastructure, data centers, and consumer hardware products in Reality Labs, with approximately $42.25 billion due in 2026 and $47.65 billion due in 2027; in April 2026, additional multi-year infrastructure contracts increased these commitments by approximately $24 billion.
• Contingent cloud capacity obligations: As of March 31, 2026, contingent obligations to purchase up to $14.72 billion of cloud capacity exist over a five-year period, subject to reduction if the cloud service provider sells such capacity to other customers.
• Restricted cash equivalents: $5.00 billion of money market funds were reclassified as restricted cash equivalents as of March 31, 2026 due to contractual restrictions under a multi-year purchase agreement; these funds are restricted from general corporate use and are expected to be released upon satisfying the underlying purchase obligations.

• Outstanding long-term debt: As of March 31, 2026, senior unsecured notes totaled $59.00 billion in aggregate principal, maturing from 2027 through 2065.
• Interest obligations: Short-term future interest payment obligations were $2.98 billion and long-term future interest payment obligations were $56.27 billion as of March 31, 2026.

• Repurchase activity: No shares of Class A common stock were repurchased during the three months ended March 31, 2026.
• Remaining authorization: $25.03 billion remained available and authorized for repurchases as of March 31, 2026, under the board-authorized program that commenced January 2017 and has no expiration date.

Dividends paid: Total dividends and dividend equivalents paid were $1.35 billion during the three months ended March 31, 2026.

• Forward intent: Subject to legally available funds and future declaration by the board of directors, the company currently intends to continue paying a quarterly cash dividend and dividend equivalents on its outstanding common stock.

• Cash taxes paid: Cash paid for income taxes was $541 million during the three months ended March 31, 2026.
• Long-term tax liabilities: As of March 31, 2026, long-term income tax liabilities include $9.81 billion related to deferred tax liabilities and $7.04 billion related to uncertain tax positions; due to uncertainty in the timing of resolution of uncertain tax positions, management is unable to make a reasonably reliable estimate of the timing of payments.