Meta Platforms, Inc.

Good afternoon, my name is Krista and I'll be your conference operator today. At this time, I would like to welcome everyone to META's third quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, again press star 1. We ask that you limit yourself to one question, and this call will be recorded. Thank you very much. Rob Bavagni, Meta's Director of Investor Relations, you may begin.

Thank you. Good afternoon, and welcome to Meta Platforms' third quarter 2026 earnings conference call. Joining me today to discuss our results are Mark Zuckerberg, CEO, and Susan Li, CFO. Our remarks today will include forward-looking statements, which are based on assumptions as of today. Actual results may differ materially as a result of various factors, including those set forth in today's earnings press release and in our quarterly report on Form 10Q filed with the SEC. We undertake no obligation to update any forward-looking statement. During this call, we will present both GAAP and certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. The earnings press release and an accompanying investor presentation are available on our website at investor.atmeta.com. And now, I'd like to turn the call over to Mark.

All right. Hey, everyone. Thanks for joining today. This has been a busy and exciting few months. Our family of apps is now used by 3.64 billion people each day, and we are seeing all-time highs in engagement on both Facebook and Instagram, driven by strong growth in video. Threads has now overtaken X in monthly actives and continues to grow quickly. WhatsApp is hitting all-time highs in messaging and is becoming an increasingly important platform for agents as well. In the last few months, we have had several major milestones towards our goal of delivering personal superintelligence to everyone. We had one of our most successful launches ever with the Muse personal agent. We shipped Muse Wonder as our first frontier model, and we shipped several new glasses and gadgets with Muse integration, including coming soon to our new audio glasses. We've been discussing our vision for personal superintelligence for more than a year now, Thank you so much for joining us. There is still a lot of work ahead, but our initial position is very strong in just a month and a half. Thank you for joining us. So to put this in perspective, this is more than twice the level that Threads started at or where we believe that other AI apps started at as well. Thank you so much for joining us. Beyond shopping, the most common connectors are for personal productivity and connecting Muse to your other services like email and calendar. Now, this shows the importance of the Muse Secure VM that we've built to provide state-of-the-art privacy and security, and we're looking forward to following up soon with the Muse Confidential VM, which will make it so that even Meta cannot see your content. We've also seen that Muse Wonder improves quality engagement and retention further, which suggests that as we continue to improve intelligence, Muse will perform better and better over time. Now that Muse has clear product market fit, we are entering a new phase and a more operational phase that is focused on scaling it. The goals for this next phase play to many of Meta's strengths. We need to do three things. Scale the product, grow revenue, and optimize compute costs. We expect to grow Muse to serve billions of people. This is both our mission and our strategy. Thank you for joining us. Thank you for joining us. Thank you for joining us. This will take some time, but we're starting to work on this now. Our business model will have a few components. For most people, the product should be free, and we will build commerce tools so we get paid a fee based on the transactions that we help facilitate. We expect this will be paid for by businesses. for people who want the most advanced models or to use extra tokens. They subscribe directly and pay for business owners who want additional features to use Muse to grow their businesses or for companies that want people to use Muse for work. They will be able to subscribe directly and pay as well. And for those who want Muse to help improve the personalization and quality of their content and ads across Meta, they will be able to connect to those experiences as well. Just to clarify, the average revenue that I was talking about before is the family of apps revenue for our existing Muse users. On the compute side, we are building out the capacity to serve more than a billion people over the next few years. In the near term, Muse is very compute intensive to run, but we expect to improve its cost efficiency by more than 10x in the next year, which will enable it to be profitable once the revenue lines are at scale. If compute efficiency continues improving quickly for another few years, which we think is highly likely, then MUSE will be highly profitable over multiple years. In the near term, the strength of our core business enables us to scale the MUSE network before then, and we believe that we are the best positioned company to pursue this strategy. One other note on compute economics is that since training is a large fixed cost, now that we have leading models, we want to serve as much high margin inference demand as possible. That is why we are building the Meta Enterprise Platform led by CJ Desai. MUSE Wonder and even more advanced models that we're training can serve additional high margin services beyond the MUSE network, including our API, MUSE code, and other enterprise services. A fundamental feature of our business is that we have many good uses for this compute. It is difficult to forecast the exact growth rates for the Muse network, for our enterprise platform, and for how Muse Wonder and beyond will accelerate our core business. But through building up multiple ways to deploy these advanced models, we increase the chances that one or more of them significantly outperforms our expectations. Beyond serving other businesses, we have not yet found the limit of how effectively we can apply compute to accelerating our own core business. We have implemented an eval with Muse Wonder to improve how effectively it can autonomously improve our recommendations and ad systems. And as our upcoming models get even more advanced, I expect that we're going to see an increasing rate of improvement in these systems. All right, let's talk about the models now. Muse Wonder is state-of-the-art across many dimensions that matter for personal superintelligence. This validates the importance of training models ourselves to deliver the best experience. In addition to Muse, we have also seen that engagement per person in Meta AI has more than doubled since April when we started rolling out our new models. Thank you for joining us. Going forward with the field advancing quickly we plan to focus on both pushing the frontier of intelligence and distilling those models into much smaller and more efficient product models that will be optimized for personal agents. My view is that we will be able to build superintelligence through scaling. So we are methodically working our way up the ladder there. We are already working on larger models after MuseWonder and they're going to be very impressive and capable. We are also working on new smaller models that are coming out soon that will deliver MuseWonder level intelligence more efficiently. Moving on, our work on personal superintelligence is now also the focus of Reality Labs. Muse is coming to MetaGlasses starting next month, and that will be an important step towards this. People already love many features of the glasses already, music, calling, capturing moments, hearing assistance, and more. But over time, we expect Muse and having your personal superintelligence with you throughout the day will be the most important part of the experience. Muse is also central to the business model for the glasses. Again, our mission and strategy are to serve everyone here. We believe in putting the power of this technology in everyone's hands. So we have priced our devices not to make a large profit on the hardware, but to build a large software and super intelligence business on top of them over time. Glasses sales continue to grow rapidly. And now with Muse, we expect that paid subscriptions will increase and that this business will begin improving meaningfully from here. I also shared at Connect that we are changing our approach to virtual reality to only ship new devices when we have major breakthroughs like we had with the meta VR glasses this year, which of course are the first VR experience ever in a pair of glasses. Thank you so much for joining us. Before we conclude, I want to spend a moment on the sheer velocity that we are seeing. An important part of our approach has always been to move fast so we can learn quickly and serve people better at scale. But recently, things have accelerated. In the last year, we shipped edits, and it has already passed 50 million actives. New apps like Forum and Seller were built by small teams and are scaling quickly to serve power users. Muse went from an idea on a whiteboard to a successful product in just about eight months. And we're about to ship Muse Charm, which will have gone from concept to a hardware device in people's pockets in less than a year. I am proud of what we are building. People have all kinds of different opinions about the future, but at Meta, we believe that the future is for everyone and that putting power in people's hands is how we get there. I think that this matters. There needs to be a company out there that represents these ideas. But this isn't just about ideas. It's also about execution. So I am grateful for everyone who is working so hard to deliver all of this to billions of people around the world. And as always, thank you to everyone who is on this journey with us. And now here's Susan.