A New Mexico judge imposed the largest penalty yet against the Menlo Park company, which said it would appeal, as Meta disclosed heavy A.I. spending, negative free cash flow and an agreement tying its chief executive to the state ahead of a vote on a billionaire tax.
By Staff Reporter
Meta, the Menlo Park company that owns Facebook, Instagram and WhatsApp, had a crowded Wednesday: a New Mexico judge ordered it to pay $25 billion over misleading statements about users’ data, and hours later the company reported a 26 percent jump in quarterly revenue and announced a new class of stock that comes with a commitment from Mark Zuckerberg to stay in California.
The company said it would appeal the New Mexico judgment.
The New Mexico penalty
Judge Francis J. Mathew of the First Judicial District Court in Santa Fe entered the judgment after a jury found in September that Meta had committed 43,899,725 willful violations of New Mexico’s Unfair Practices Act, in a case that grew out of the Cambridge Analytica scandal. The state accused Meta of misleading Facebook users about who could reach their personal data and about how it handled hate speech and misinformation.
Under the statute’s maximum of $5,000 per violation, the judge calculated a penalty of about $219.5 billion, then reduced it to $25 billion, according to the order as described by PPC Land, which reviewed the 20-page document. The judgment sets interest at 15 percent a year until the penalty is paid and reserves the question of injunctive relief for further briefing. It does not explain how the court arrived at $25 billion.
“Facebook’s wrongdoing — over the course of years and systematically broadcast to the public — goes to the heart of Facebook’s core business practices,” Judge Mathew wrote, according to Reuters, via NBC News.
The state had asked for $35 billion to $40 billion. Meta had urged a cap of $3.45 billion, arguing in court filings that it does not sell user data and that New Mexico had not shown that any consumer was actually misled. The jury’s count treated each member of the expected audience for a statement, either Facebook’s roughly 1.39 million monthly users in the state or its 2.1 million residents, as a separate violation, according to the order’s findings as reported by PPC Land.
Meta’s top lawyer, CJ Mahoney, said the ruling made it “all but impossible to do business in the state of New Mexico,” and that the company expected to win on appeal, the BBC reported. “At its core, this lawsuit seeks to impose a tax on speech to enforce new rules for what people can say online,” he said.
New Mexico’s attorney general, Raúl Torrez, said in a statement that the result “makes clear that no corporation is too powerful to be held accountable.” The state pursued the case on its own rather than joining a multistate settlement.
The penalty is five times the $5 billion that the Federal Trade Commission imposed on the company in 2019 over the same scandal. At 15 percent, interest would add about $3.75 billion a year, by PPC Land’s calculation, more than the cap Meta proposed for the entire penalty.
A strong quarter, with a large legal charge
After the market closed, Meta reported third-quarter revenue of $64.6 billion, up 26 percent from a year earlier, and net income of $9.86 billion. Operating income fell 37 percent, to $12.99 billion, because of a $9.89 billion charge related to its August agreement with 52 attorneys general to resolve teen mental-health litigation, which the company said provides for payments of up to about $18.59 billion. Excluding that charge, Meta said, operating income would have been $22.88 billion.
The company’s capital spending reached $34.91 billion in the quarter, and it narrowed its 2026 forecast to $135 billion to $145 billion, much of it for A.I. data centers and computing power. Free cash flow was negative $2.12 billion. Headcount was 66,775, down 15 percent from a year earlier, a figure with direct consequences for the Peninsula and South Bay, where many of those employees work.
Meta’s release did not address the New Mexico ruling. It said the company continues to monitor legal and regulatory matters “that could significantly impact our business and financial results,” and noted “a number of youth-related trials scheduled in the coming months in the U.S.” Shares rose about 4 percent in after-hours trading, Business Insider reported.
A share class, and a promise to stay
Meta also said its board had approved a nonvoting Class C common stock, to be distributed as a one-time dividend of one share for each existing share after Jan. 19, 2027. The company said the shares would give it flexibility to raise capital, pay employees and make acquisitions amid the costs of the A.I. race.
Alongside it, Meta disclosed a “Founder Alignment Agreement” with Mr. Zuckerberg. According to Reuters, Mr. Zuckerberg had told the company he was considering moving his primary residence out of California because Proposition 40, the one-time 5 percent tax on billionaires on the Nov. 3 ballot, could force him to sell voting shares to pay it. Under the agreement, he may immediately sell 20 percent of the Class C shares he receives, and in return commits to remain a resident of California, or wherever Meta is headquartered, for eight years while he remains in a full-time leadership role, Reuters reported.
The arrangement brings one of the state’s largest employers directly into the debate over Proposition 40, which turns in part on whether the state’s wealthiest residents would leave rather than pay. Reuters reported that California is home to as many as 250 billionaires worth more than $2 trillion combined, and that political analysts consider the measure’s passage far from certain.
For Sacramento, the stakes run beyond the ballot. California’s budget leans heavily on income taxes from capital gains and stock compensation, much of it earned at Bay Area technology companies. Meta’s spending plans, its legal exposure and its chief executive’s residency are each, in their way, a variable in the state’s revenue outlook.
