What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-01-29 compared with 2025-01-30 · 116 added, 110 removed, 353 unchanged (39% of the section changed)

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Total revenue for 2025 was $200.97 billion, an increase of 22% compared to 2024, due to an increase in advertising revenue.

Revenue on a constant currency basis would have increased 23% compared to 2023.

Ad impressions delivered across our Family of Apps in 2025 increased 12% year-over-year, and our average price per ad increased 9% year-over-year.

Income from operations for 2025 was $83.28 billion, an increase of $13.90 billion, or 20%, compared to 2024, driven by an increase in advertising revenue, partially offset by an increase in costs and expenses.

The increase in costs and expenses was mainly due to increases in operational expenses related to our data centers and technical infrastructure and employee compensation, partially offset by lower restructuring and legal-related costs.

The increase in costs and expenses was mainly due to increases in employee compensation and infrastructure costs.

Consolidated and Segment Results

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FoA includes Facebook, Instagram, Messenger, WhatsApp, and other services.

RL includes our virtual, augmented, and mixed reality related consumer hardware, software, and content.

RL includes our virtual and augmented reality related consumer hardware, software, and content.

Family of Apps Reality Labs Total

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• Effective tax rate was 30% for the year ended December 31, 2025.

This includes the effects of the implementation of the One Big Beautiful Bill Act during the third quarter of 2025.

Absent the valuation allowance charge as of the enactment date, our 2025 effective tax rate would have decreased by 17 percentage points to 13%.

• Headcount was 78,865 as of December 31, 2025, an increase of 6% year-over-year.

Beginning in February 2024, we declared and paid four quarterly cash dividends, including dividend equivalents, totaling $2.00 for each share of common stock during the year ended December 31, 2024.

Total dividends and dividend equivalents paid were $4.38 billion and $691 million for Class A and Class B common stock, during the year ended December 31, 2024, respectively.

Family of Apps Metrics

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In particular, legislative and regulatory developments such as the General Data Protection Regulation, including its evolving interpretation through decisions of the Court of Justice of the European Union, ePrivacy Directive, European Digital Services Act, Digital Markets Act, and U.S.

state privacy laws including the California Consumer Privacy Act, as amended by the California Privacy Rights Act, have impacted our ability to use data signals in our ad products, and an increasing

number of laws have been introduced limiting or prohibiting the provision of our services to younger users.

state privacy laws have impacted our ability to use data signals in our ad products, and an increasing number of laws have been introduced limiting or prohibiting the provision of our services to younger users.

We expect these and other developments will have further impact in the future.

As a result, we have implemented, and we will continue to implement, whether voluntarily or otherwise, changes to our products and user data practices, which reduce our ability to effectively target and measure ads and may negatively impact our advertising revenue and user engagement.

For example, in response to regulatory developments in Europe, we announced our plans to change the legal basis for behavioral advertising on Facebook and Instagram in the European Union, European Economic Area, and Switzerland from "legitimate interests" to "consent," and began offering users in the region a "subscription for no ads" alternative.

We subsequently began offering users in the region who elect to continue using our services free-of-charge, supported by ads, an option to see less personalized ads, which are expected to be less relevant and effective than our premium ad offerings.

Switzerland from "legitimate interests" to "consent," and began offering users in the region a "subscription for no ads" alternative.

We subsequently began offering users in the region who elect to continue using our services free-of-charge, supported by ads, an option to see less personalized ads, which are less relevant and effective than our premium ad offerings.

We are engaging with regulators on our consent model.

In addition, mobile operating system and browser providers, such as Apple and Google, have implemented product changes and/or announced future plans to limit the ability of websites and application developers to collect and use these signals to target and measure advertising.

In addition, mobile operating system and browser providers, such as Apple and Google, have implemented product changes and/or announced plans to limit the ability of websites and application developers to collect and use these signals to target and measure advertising.

For example, in 2021, Apple made certain changes to its products and data use policies in connection with changes to its iOS operating system that reduce our and other iOS developers' ability to target and measure advertising, which has negatively impacted, and we expect will continue to negatively impact, the size of the budgets marketers are willing to commit to us and other advertising platforms.

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Other global and regional business, macroeconomic, and geopolitical conditions also have had, and we believe will continue to have, an impact on our user growth and engagement and advertising revenue.

In particular, we believe advertising budgets have been pressured from time to time by factors such as inflation, high interest rates, and related market uncertainty, which has led to reduced marketer spending.

While we saw improvement in business and macroeconomic conditions in recent periods, continued business, macroeconomic, and geopolitical uncertainty remains, which could impact our financial results in future periods.

In particular, we believe advertising budgets have been pressured from time to time by factors such as inflation, economic policies and international trade, high interest rates, and related market uncertainty, which has led to reduced marketer spending.

We are currently subject to increased business, macroeconomic, and geopolitical uncertainty, including as a result of volatility around international trade, which could impact our financial results in future periods.

In addition, competitive products and services have reduced some users' engagement with our products and services.

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We also have seen fluctuations and declines in the size of our active user base in one or more regions from time to time due to geopolitical conditions, which have adversely affected our user growth and engagement.

These trends adversely affected advertising revenue in 2024, and we expect will continue to affect our advertising revenue in the foreseeable future.

These trends have adversely affected our advertising revenue and we expect will continue to adversely affect our advertising revenue in the foreseeable future.

Although we regularly evaluate a variety of sources to understand trends in our advertising revenue, we do not have perfect visibility into the factors driving advertiser spending decisions and our assessments involve complex judgments about what is driving advertising decisions across a large and diversified advertiser base across the globe.

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Investment Philosophy

We expect to continue to build on the discipline and habits that we developed in 2022 when we initiated several efforts to increase our operating efficiency, while still remaining focused on investing in significant opportunities.

We remain focused on operating efficiently while investing in significant opportunities.

In 2025, 82% of our total costs and expenses were recognized in FoA and 18% were recognized in RL.

Our FoA investments include expenses relating to headcount, data centers, and technical infrastructure as part of our efforts to develop our apps and our advertising services.

These efforts include significant investments in AI initiatives, including to recommend relevant content across our products, enhance our advertising tools, develop new products, and develop new features for existing products using generative AI.

In particular, we expect our AI initiatives will require increased investment in infrastructure and headcount.

We are also making significant investments in our metaverse and wearables efforts, including developing virtual, augmented, and mixed reality devices, software for social platforms, neural interfaces, and other foundational technologies.

These efforts include significant investments in AI initiatives, including generative AI and superintelligence, to, among other things, recommend relevant content across our products, enhance our advertising tools, develop new products, and develop new features for existing products.

In particular, we expect our AI initiatives will require significantly increased investment in infrastructure.

We are also making significant investments in our RL efforts, including developing virtual and augmented reality devices, software for social platforms, neural interfaces, and other foundational technologies.

Our RL investments include expenses relating to technology development across these efforts.

Many of our RL investments are directed toward long-term, cutting-edge research and development for products that may only be fully realized in the next decade.

In 2024, our RL segment reduced our overall operating profit by approximately $17.73 billion, and we continue to expect our RL operating losses to increase in 2025.

In 2025, our RL segment reduced our overall operating profit by approximately $19.19 billion, and we expect our 2026 RL operating losses to remain similar to 2025.

We expect this will be a complex, evolving, and long-term initiative, and our ability to support our RL efforts is dependent on generating sufficient profits from other areas of our business.

We are investing now because we believe this is the next chapter of the internet and will unlock monetization opportunities for businesses, developers, and creators, including around advertising, hardware, and digital goods.

We are investing now because we believe this will become the next computing platform and will unlock monetization opportunities for businesses, developers, and creators, including around advertising, hardware, and digital goods.

Trends in Our Revenue by User Geography

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The geography of our users affects our revenue and financial results.

Our revenue in regions such as United States & Canada and Europe is relatively higher primarily due to the size and maturity of those online and mobile advertising markets, and ad impression growth is primarily in geographies that monetize at lower rates, such as Asia-Pacific and Rest of World.

In 2025, revenue increased by 21% in United States & Canada, 24% in Europe, 20% in Asia-Pacific, and 27% in Rest of World, in each case relative to 2024.

Non-Ad Revenue

Non-advertising revenue includes RL revenue generated from the delivery of consumer hardware products and FoA Other revenue, which consists of revenue from WhatsApp Business Platform, Meta Verified subscriptions, net fees we receive from developers using our Payments infrastructure, and revenue from various other sources.

Non-advertising revenue includes RL revenue generated from the delivery of consumer hardware products and FoA Other revenue, which consists of revenue from paid messaging from WhatsApp, Meta Verified subscriptions, net fees we receive from developers using our Payments infrastructure, and revenue from various other sources.

Our revenue by user geography in the charts above is geographically apportioned based on our estimation of the geographic location of our users when they perform a revenue-generating activity.

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For additional information, see the section entitled "Limitations of Key Metrics and Other Data" in this Annual Report on Form 10-K.

Beginning in the fourth quarter of 2023, our Family metrics no longer include Messenger Kids users.

Worldwide DAP increased 7% to 3.58 billion on average during December 2025 from 3.35 billion during December 2024.

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$12.33 $11.20 $11.89 $12.29 $14.25 $12.36 $13.65 $14.46 $16.56

Non-Ad Revenue

We updated our definition of ARPP beginning in the first quarter of 2024 and have recast ARPP in prior periods for comparative purposes.

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An accounting estimate is considered critical if both (i) the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment involved, and (ii) the impact within a reasonable range of outcomes of the estimates and assumptions is material to our consolidated financial statements.

We believe that the estimates and assumptions associated with loss contingencies, income taxes, and valuation of assets, when applicable, have the greatest potential impact on our consolidated financial statements.

We believe that the estimates and assumptions associated with loss contingencies, income taxes, and valuation of non-marketable equity investments, when applicable, have the greatest potential impact on our consolidated financial statements.

Therefore, we consider these to be our critical accounting estimates.

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Additionally, we are required to comply with various legal and regulatory obligations around the world, and we regularly become subject to new laws and regulations in the jurisdictions in which we operate.

The requirements for complying with these obligations may be uncertain and subject to interpretation and enforcement by regulatory and other authorities, and any failure to comply with such obligations could eventually lead to asserted legal or regulatory action.

The requirements for complying with these obligations may be uncertain and subject to interpretation and enforcement by regulatory and other authorities, and any failure or perceived failure to comply with such obligations could eventually lead to asserted legal or regulatory action.

With respect to these matters, asserted and unasserted, we evaluate the associated developments on a regular basis and accrue a liability when we believe that it is both probable that a loss has been incurred and the amount can be reasonably estimated.

We review the developments in our contingencies that could affect the amount of the provisions that have been previously recorded, and the matters and related reasonably possible losses disclosed.

We make adjustments to our provisions and changes to our disclosures accordingly to reflect the merits of our defenses and the impact of negotiations, settlements, regulatory proceedings, rulings, advice of legal counsel, and updated information.

Significant judgment is required to determine the probability of loss and the estimated amount of loss, including when and if the probability and estimate has changed for asserted and unasserted matters.

We review the developments in our contingencies that could affect the amount of the estimated liability that has been previously recorded, and the matters and related reasonably possible losses disclosed.

We make adjustments to our estimated liability and changes to our disclosures accordingly to reflect the merits of our defenses and the impact of negotiations, settlements, regulatory proceedings, rulings, advice of legal counsel, and updated information.

Significant judgment is required to determine the likelihood of loss and the estimated amount of loss, including when and if the probability and estimate has changed for asserted and unasserted matters.

Certain factors, in particular, have resulted in significant changes to these estimates and judgments in prior quarters based on updated information available.

For example, in certain jurisdictions where we operate, fines and penalties may be the result of new laws and preliminary interpretations regarding the basis of assessing damages, which may make it difficult to estimate what such fines and penalties would amount to if successfully asserted against us.

In addition, certain government inquiries and investigations, such as matters before our lead European Union privacy regulator, the Irish Data Protection Commission, are subject to review by other regulatory bodies before decisions are finalized, which can lead to significant changes in the outcome of an inquiry.

As a result of these and other factors, we reasonably expect that our estimates and judgments with respect to our contingencies may continue to be revised in the future.

The ultimate outcome of these matters, such as whether the likelihood of loss is remote, reasonably possible, or probable or if and when the reasonably possible range of loss is estimable, is inherently uncertain.

Therefore, if one or more of these matters were resolved against us for amounts that materially differ from management's estimates of losses, it could have a favorable or unfavorable impact on our results of operations and financial condition, including in a particular reporting period in which any such outcome becomes probable and estimable.

The ultimate outcome of these matters, such as whether the likelihood of loss is remote, reasonably possible, or probable or if and when the possible range of loss is reasonably estimable, is inherently uncertain.

See Note 11 — Commitments and Contingencies and Note 14 — Income Taxes of the accompanying notes to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" and Part I, Item 3, "Legal Proceedings" of this Annual Report on Form 10-K for additional information regarding these contingencies.

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Significant judgment is required in determining our provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.

Our actual and forecasted income (loss) before

provision is subject to change due to economic, political and other conditions and significant judgment is required in determining our ability to recognize our net deferred tax assets.

Our actual and forecasted income (loss) before provision is subject to change due to economic, political and other conditions and significant judgment is required in determining our ability to recognize our net deferred tax assets.

As a result of certain U.S.

income tax provisions of the One Big Beautiful Bill Act enacted in July 2025, we expect to incur Corporate Alternative Minimum Tax (CAMT) beginning in 2025.

In assessing the realizability of our deferred tax assets and determining the need for a valuation allowance, our accounting policy incorporates the expected impact of future years' CAMT.

We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position.

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To the extent that the final tax outcome of these matters is different from the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made, and could have a material impact on our financial condition and operating results.

Valuation of Assets

The valuation and impairment assessment of certain assets, including recoverability, requires significant judgment and assumptions such as estimation of future cash flows, discount rates, market data of comparable assets and companies, holding period and residual value of asset groups, among others.

Impairment testing for long-lived-assets, including property and equipment and operating lease right-of-use assets, occurs whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable compared to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition.

The impairment test is performed at the asset group level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

When the test results indicate that the carrying amount of long-lived assets is not recoverable, the carrying amount of such assets is reduced to fair value.

Impairment testing for non-marketable equity securities without readily determinable fair values accounted for using the measurement alternative is performed at each reporting date to determine whether there are triggering events for impairment.

For additional information, see Note 14 — Income Taxes of the accompanying notes to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Valuation of Non-marketable Equity Investments

Impairment testing for non-marketable equity investments, including equity investments without readily determinable fair values accounted for using either the measurement alternative or the equity method, is performed at each reporting date to determine whether there are triggering events for impairment.

Such qualitative assessment considers factors such as, but not limited to, the investee's financial condition and business outlook;

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and other relevant events and factors affecting the investee.

When indicators of impairment exist, we estimate the fair value of our non-marketable equity securities using the market approach and/or the income approach and recognize impairment loss in our consolidated statements of income if the estimated fair value is less than the carrying value.

In addition, for these non-marketable equity securities, determining whether a non-marketable equity security issued by the same issuer is similar to the non-marketable equity security we hold may require judgment in (a) assessment of differences in rights and obligations associated with the instruments such as voting rights, distribution rights and preferences, and conversion features, and (b) adjustments to the observable price for differences such as, but not limited to, rights and obligations, control premium, liquidity, or principal or most advantageous markets.

When indicators of impairment exist, we estimate the fair value of our non-marketable equity investments using the market approach and/or the income approach and recognize impairment loss in our consolidated statements of income if the estimated fair value is less than the carrying value.

For equity method investments, an impairment loss is recognized when the impairment is considered other-than-temporary.

In addition, under the measurement alternative, determining whether another non-marketable equity investment of the same issuer is similar to the non-marketable equity investment we hold may require judgment in (a) assessment of differences in rights and obligations associated with the instruments such as voting rights, distribution rights and preferences, and conversion features, and (b) adjustments to the observable price for differences such as, but not limited to, rights and obligations, control premium, liquidity, or principal or most advantageous markets.

The identification of observable transactions will depend on the timely reporting of these transactions from our investee companies, which may occur in a period subsequent to when the transactions take place.

Therefore, our fair value adjustment for these observable transactions may occur in a period subsequent to when the transaction actually occurred.

For additional information, see Note 5 — Non-Marketable Equity Investments of the accompanying notes to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Change in Accounting Estimate

In January 2025, we completed an assessment of the useful lives of certain servers and network assets, which resulted in an increase in their estimated useful life to 5.5 years, effective beginning fiscal year 2025.

Based on the servers and network assets placed in service as of December 31, 2024, we expect this change in accounting estimate will reduce our full-year 2025 depreciation expense by approximately $2.9 billion.

For information regarding the change in useful lives of our servers and network assets, see Note 1 of the Notes to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

In January 2025, we completed an assessment of the useful lives of property and equipment, which resulted in an increase in the estimated useful lives of most servers and network assets to 5.5 years, effective January 1, 2025.

For additional information regarding the change in useful lives of our servers and network assets, see Note 1 — Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Components of Results of Operations

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Other revenue.

Other revenue consists of revenue from WhatsApp Business Platform, Meta Verified subscriptions, net fees we receive from developers using our Payments infrastructure, and revenue from various other sources.

Other revenue consists of revenue from paid messaging from WhatsApp, Meta Verified subscriptions, net fees we receive from developers using our Payments infrastructure, and revenue from various other sources.

Reality Labs (RL)

RL revenue is generated from the delivery of consumer hardware products, such as Meta Quest and Ray-Ban Meta AI glasses, and related software and content.

RL revenue is generated from the delivery of consumer hardware products, such as Meta Quest and AI glasses, and related software and content.

Cost of Revenue and Operating Expenses

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Research and development expenses consist mostly of employee compensation which includes payroll, share-based compensation and benefits for our employees on our engineering and technical teams who are responsible for developing new technologies and products;

RL technology development costs;

infrastructure costs;

RL technology development costs;

and facilities-related costs.

Marketing and sales.

Marketing and sales expenses consist primarily of employee compensation which includes payroll, share-based compensation and benefits for our employees engaged in sales, sales support, marketing, business development, and customer service functions;

marketing and promotional expenses;

and professional services to support our community and product operations.

Marketing and sales expenses consist mostly of employee compensation which includes payroll, share-based compensation and benefits for our employees engaged in sales, sales support, marketing, business development, and customer service functions;

professional services to support our community and product operations;

and marketing and promotional expenses.

General and administrative.

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Income from operations 83,276 69,380 46,751

Interest and other income (expense), net 1,283 677 (125)

Interest and other income, net 2,656 1,283 677

Income before provision for income taxes 85,932 70,663 47,428

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Income from operations 41 42 35

Interest and other income (expense), net 1 1 —

Interest and other income, net 1 1 1

Income before provision for income taxes 43 43 35

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Advertising revenue in 2025 increased $35.54 billion, or 22%, compared to 2024 due to increases in ad impressions delivered and average price per ad.

In 2024, ad impressions delivered increased by 11%, as compared with a 28% increase in 2023, year-over-year.

Ad impressions delivered during 2024 grew in all regions, especially in Asia-Pacific and Rest of World, which was mostly driven by increases in users and their engagement on our products.

In 2024, the average price per ad increased by 10%, as compared with a decrease of 9% in 2023, year-over-year.

The increase in average price per ad in 2024 was driven by an increase in advertising demand, which we believe is mainly due to ongoing improvements to our ad performance from our ad targeting and measurement tools.

In 2025, ad impressions delivered increased by 12%, as compared with an increase of 11% in 2024, year-over-year.

Ad impressions delivered during 2025 grew in all regions, especially in Asia-Pacific, which was driven by increases in users and their engagement on our products.

In 2025, the average price per ad increased by 9%, as compared with an increase of 10% in 2024, year-over-year.

The increase in average price per ad in 2025 was driven by an increase in advertising demand, which we believe is mostly due to ongoing improvements to our ad performance from our ad targeting and measurement tools.

This increase was partially offset by a higher number of ad impressions delivered, especially in geographies and in products, such as Reels, that monetize at lower rates.

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FoA other revenue in 2025 increased $862 million, or 50%, compared to 2024.

The increase was primarily driven by WhatsApp Business Platform revenue.

The increase was mostly driven by paid messaging from WhatsApp and Meta Verified subscriptions.

RL revenue in 2025 increased $61 million, or 3%, compared to 2024.

The increase was mostly due to an increase in RL consumer hardware products sold.

The increase was driven by an increase in sales of AI glasses, partially offset by a decrease in Meta Quest sales.

Revenue Seasonality

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Cost of revenue in 2025 increased $6.01 billion, or 20%, compared to 2024.

The increase was primarily due to higher operational expenses related to our data centers and technical infrastructure, mostly from higher depreciation expense.

See Note 7 — Property and Equipment in the notes to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for additional information regarding depreciation expense.

The increase was mainly due to higher operational expenses related to our data centers and technical infrastructure, which included decreases in the depreciation growth rate due to an extension in the useful lives of servers and network assets, effective January 1, 2025.

To a lesser extent, higher costs associated with partner arrangements also contributed to the increase.

See Note 1 — Summary of Significant Accounting Policies in the notes to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for additional information regarding changes in the estimated useful life of our servers and network assets.

Research and development

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Research and development expenses in 2025 increased $13.50 billion, or 31%, compared to 2024.

The increase was mostly due to higher employee compensation as well as infrastructure costs for research and development, partially offset by lower restructuring charges.

The higher employee compensation was mainly from a 13% growth in employee headcount from 2023 to 2024 in engineering and other technical functions supporting our continued investment in our family of products and Reality Labs.

See Note 3 — Restructuring in the notes to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for additional information regarding restructuring charges.

The increase was mostly due to higher employee compensation and infrastructure costs related to research and development, including our AI initiatives.

The higher employee compensation was primarily from an 8% growth in employee headcount from 2024 to 2025 in engineering and other technical functions and an increase in share-based compensation expense.

Marketing and sales

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Percentage of revenue 6 % 7 % 9 %

Marketing and sales expenses in 2024 decreased $954 million, or 8%, compared to 2023.

The decrease was primarily due to lower restructuring charges and, to a lesser extent, a decrease in employee compensation.

Marketing and sales expenses in 2025 increased $644 million, or 6%, compared to 2024.

The increase was mainly due to higher professional services related to our ongoing platform integrity efforts.

General and administrative

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Percentage of revenue 6 % 6 % 8 %

General and administrative expenses in 2024 decreased $1.67 billion, or 15%, compared to 2023.

The decrease was mostly driven by a favorable impact of $1.55 billion in legal-related costs.

To a lesser extent, the decrease was also attributed to lower restructuring charges, partially offset by an increase in other taxes.

See Note 3 — Restructuring and Note 12 — Commitments and Contingencies in the notes to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for additional information regarding restructuring charges and legal-related costs, respectively.

General and administrative expenses in 2025 increased $2.41 billion, or 25%, compared to 2024.

The increase was mainly due to higher legal-related costs, which included lapping of a $1.55 billion decrease in accrued losses for certain legal proceedings that benefited the prior year.

See Note 11 — Commitments and Contingencies in the notes to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for additional information regarding legal-related costs.

Segment profitability

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The increase in FoA income from operations was driven by higher advertising revenue which was partially offset by an increase in costs and expenses.

The increase in costs and expenses was mainly due to increases in operational expenses related to our data centers and technical infrastructure, mostly from higher depreciation expense and employee compensation, partially offset by lower restructuring and legal-related costs.

RL loss from operations in 2024 increased $1.61 billion, or 10%, compared to 2023, driven by an increase in RL costs and expenses.

RL costs and expenses increased primarily due to increases in employee compensation and infrastructure costs.

See Note 3 — Restructuring, Note 7 — Property and Equipment, Note 12 — Commitments and Contingencies, and Note 16 — Segment and Geographical Information in the notes to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for additional information regarding restructuring charges, depreciation expense, legal-related costs, and segment employee compensation, respectively.

Interest and other income (expense), net

The increase in costs and expenses was primarily due to increases in employee compensation, infrastructure costs, costs associated with partner arrangements, and legal-related costs.

RL loss from operations in 2025 increased $1.46 billion, or 8%, compared to 2024, driven by higher RL costs and expenses.

RL costs and expenses increased primarily due to increases in employee compensation and other personnel related expenses, estimated losses on non-cancelable purchase commitments for RL inventory, and technology development costs.

See Note 15 — Segment and Geographical Information in the notes to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for additional information.

Interest and other income, net

Year Ended December 31,

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Interest expense (1,165) (715) (446) (63) % (60) %

Foreign currency exchange losses, net (690) (366) (81) (89) % (352) %

Other income (expense), net 171 (150) (320) 214 % 53 %

Total interest and other income (expense), net $ 1,283 $ 677 $ (125) 90 % NM

Foreign currency exchange gains (losses), net 352 (690) (366) 151 % (89) %

Other income (expense), net 1,346 171 (150) NM 214 %

Total interest and other income, net $ 2,656 $ 1,283 $ 677 107 % 90 %

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NM - not meaningful

Interest and other income (expense), net in 2024 increased $606 million compared to 2023, mostly due to an increase in interest income from a combination of higher balances and interest rates, partially offset by an increase in interest expense on our long-term debt.

Interest and other income, net in 2025 increased $1.37 billion, or 107% compared to 2024, due to an increase in other income (expense), net, related to the unrealized gains on our marketable and non-marketable equity investments.

Foreign currency exchange gains, net from foreign currency transactions and remeasurement also contributed to the increase.

Provision for income taxes

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Effective tax rate 30 % 12 % 18 %

Our provision for income taxes in 2024 decreased $27 million compared to 2023, due to a decrease in the effective tax rate, offset by an increase in income before provision for income taxes.

Our effective tax rate in 2024 decreased compared to 2023, primarily due to excess tax benefits recognized from share-based compensation and an increase in research tax credits.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted, introducing several significant U.S.

income tax provisions that reduced our U.S.

federal cash tax payments for the remainder of 2025 and future years.

The provisions include the immediate expensing of domestic research and development costs and certain capital expenditures beginning in 2025, as well as an enhanced deduction for foreign-derived intangible income effective in 2026.

The benefits from these provisions are limited by the 15% Corporate Alternative Minimum Tax (CAMT).

As a result, we recorded a $15.93 billion charge in the third quarter of 2025, of which $14.03 billion was a valuation allowance against our U.S.

federal deferred tax assets as of the enactment date of OBBBA, and the remaining was mostly related to the reduction of the benefit of the foreign-derived intangible income deduction.

In determining the valuation allowance, our accounting policy incorporates the expected impact of future years’ CAMT in assessing the realizability of our deferred tax assets .

Our provision for income taxes in 2025 increased $17.17 billion or 207% compared to 2024, primarily due to an increase in the effective tax rate.

Our effective tax rate in 2025 increased compared to 2024, mostly due to the effects of OBBBA.

Effective Tax Rate Items.

Our effective tax rate in the future will depend upon the proportion between the following items and income before provision for income taxes:

tax benefits from foreign-derived intangible income, tax effects from share-based compensation, research tax credit, tax effects from capital losses not expected to be utilized, settlement of tax contingency items, tax effects of changes in our business, and the effects of changes in tax law.

The accounting for share-based compensation may increase or decrease our effective tax rate based upon the difference between our share-based compensation expense and the deductions taken on our tax return, which depend upon the stock price at the time of employee award vesting.

If our stock price remains constant to the January 24, 2025 price, and absent any changes to our tax landscape, we expect our effective tax rate for the full year 2025 to be in the range of 12-15%.

This includes the effects of the mandatory capitalization and amortization of research and development expenses incurred in 2024, as required by the 2017 Tax Cuts and Jobs Act (Tax Act).

The mandatory capitalization requirement increased our 2024 cash tax liabilities materially but also decreased our effective tax rate due to increasing the foreign-derived intangible income deduction.

If the mandatory capitalization is deferred, our effective tax rate in 2025 could be higher when compared to current law and our cash tax liabilities could be lower.

A number of countries have enacted legislation to implement the Organization for Economic Cooperation and Development’s 15% global minimum tax regime with effect from January 1, 2024.

the effects of changes in tax law, changes in valuation allowance due to the effects of CAMT, U.S.

A number of countries have enacted legislation to implement the Organization for Economic Cooperation and Development’s 15% global minimum tax regime.

These changes did not have a material impact on our consolidated financial statements for 2025.

We continue to evaluate the impacts of proposed and enacted legislation with respect to the global minimum tax regime in the jurisdictions we operate in.

As additional jurisdictions enact legislation, transitional relief expires, and other provisions of the minimum tax legislation become effective, our effective tax rate and cash tax payments could increase in future years.

We continue to evaluate the impacts of proposed and enacted legislation with respect to the global minimum tax regime in the jurisdictions in which we operate.

As additional jurisdictions enact legislation, transitional relief expires, and other provisions of the global minimum tax legislation become effective, our effective tax rate and cash tax payments could increase in future years.

Absent any changes to our tax landscape, we expect our effective tax rate for the full year 2026 to be in the range of 13-16%.

Unrecognized Tax Benefits.

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The ultimate settlement of the liabilities will depend upon resolution of tax audits, litigation, or events that would otherwise change the assessment of such items.

Based upon the status of litigation described below and the current status of tax audits in various jurisdictions, we do not anticipate a material change to such amounts within the next 12 months.

See Note 14 — Income Taxes in the notes to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for additional information regarding income tax contingencies.

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Cash, cash equivalents, and marketable securities were $81.59 billion as of December 31, 2025, an increase of $3.78 billion from December 31, 2024.

The increase was due to $91.33 billion of cash generated from operations and $10.43 billion of net proceeds from the issuance of fixed-rate senior unsecured notes (the Notes) in August 2024.

These increases were offset by $39.23 billion of capital expenditures, including principal payments on finance leases, our capital returns of $35.20 billion for repurchases of our Class A common stock and payments of dividends and dividend equivalents, and $13.77 billion of taxes paid related to net share settlement of employee restricted stock unit (RSU) awards.

The increase was due to $115.80 billion of cash generated from operations and $29.91 billion of net proceeds from the issuance of fixed-rate senior unsecured notes (the Notes) in November 2025.

These increases were partially offset by $72.22 billion of capital expenditures, which includes purchases of property and equipment and principal payments on finance leases;

$31.57 billion of capital returns for repurchases of our Class A common stock and payments of dividends and dividend equivalents;

$18.40 billion of taxes paid related to net share settlement of employee restricted stock unit (RSU) awards;

and $18.33 billion of purchases of non-marketable equity investments.

The following table presents our cash flows (in millions):

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Cash Provided by Operating Activities

Cash provided by operating activities during 2024 mostly consisted of $62.36 billion net income adjusted for certain non-cash items, such as $16.69 billion of share-based compensation expense and $15.50 billion of depreciation and amortization expense.

The increase in cash flows from operating activities during 2024 compared to 2023, was due to an increase in cash collection from our customers driven by the increase in revenue, partially offset by higher cash paid for income taxes and other operational spending.

Cash provided by operating activities during 2025 mostly consisted of $60.46 billion net income adjusted for certain non-cash items, such as $20.43 billion of share-based compensation expense, $18.74 billion of deferred income taxes, and $18.62 billion of depreciation and amortization expense.

The increase in cash flows from operating activities during 2025 compared to 2024, was primarily due to an increase in cash collections from our customers driven by the increase in revenue and lower cash paid for income taxes, partially offset by higher operational spending.

Cash Used in Investing Activities

Cash used in investing activities during 2024 mostly consisted of $37.26 billion of purchases of property and equipment as we continued to invest in servers, data centers, and network infrastructure, and $9.75 billion of net purchases of marketable securities.

The increase in cash used in investing activities during 2024 compared to 2023 was mostly due to increases in net purchases of marketable debt securities and property and equipment.

We anticipate making capital expenditures of approximately $60 billion to $65 billion in 2025 to support our core business and generative AI efforts.

Cash used in investing activities during 2025 mostly consisted of $69.69 billion of purchases of property and equipment as we continued to invest in servers, data centers, and network infrastructure, and $18.33 billion of purchases of non-marketable equity investments, and $10.05 billion of net purchases of marketable securities.

The increase in cash used in investing activities during 2025 compared to 2024 was mostly due to increases in purchases of property and equipment and non-marketable equity investments.

We anticipate making capital expenditures of approximately $115 billion to $135 billion in 2026 to support our AI efforts and core business.

Cash Used in Financing Activities

Cash used in financing activities during 2024 mostly consisted of $30.13 billion for repurchases of our Class A common stock, $5.07 billion of payments of dividends and dividend equivalents, and $13.77 billion of taxes paid related to net share settlement of RSUs, partially offset by $10.43 billion of net proceeds from the issuance of additional Notes in August 2024.

The increase in cash used in financing activities during 2024 compared to 2023, was mostly due to increases in our capital returns of $10.35 billion for repurchases of our Class A common stock and $5.07 billion for quarterly dividend payments that began in March 2024, as well as a $6.76 billion increase in taxes paid related to net share settlement of RSUs.

Cash used in financing activities during 2025 mostly consisted of $26.25 billion for repurchases of our Class A common stock, $18.40 billion of taxes paid related to net share settlement of RSUs, and $5.32 billion of payments of dividends and dividend equivalents, partially offset by $29.91 billion net proceeds from the issuance of the Notes in November 2025.

The decrease in cash used in financing activities during 2025 compared to 2024, was mostly due to an increase in net proceeds from the Notes.

Free Cash Flow

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Material Cash Requirements

We currently anticipate that our available funds and cash flow from operations and financing activities will be sufficient to meet our operational cash needs and fund our investments in infrastructure and AI initiatives, share repurchases and dividend payments for at least the next 12 months and thereafter for the foreseeable future.

We currently anticipate that our available funds and cash flow from operations and financing activities will be sufficient to meet our operational cash needs and fund our cash commitments for investing and financing activities, including investments in infrastructure and AI initiatives, as well as any return of capital to stockholders over the next 12 months and thereafter for the foreseeable future.

We have increased investments in infrastructure and AI initiatives and expect to continue to do so.

From time to time we may also seek to raise additional capital through debt, equity, or other financing arrangements.

We continuously evaluate our liquidity and capital resources, including our access to external capital, to ensure we can finance our future capital requirements.

Leases and Contractual Commitments

Our operating lease obligations mostly include data centers, offices and colocations.

Our finance lease obligations include certain network infrastructure.

Our facilities consolidation restructuring efforts did not materially change our operating lease obligations.

Our contractual commitments are primarily related to our investments in servers and network infrastructure, and content costs from content providers whom we license video and music to increase engagement on the platform.

Our operating and finance leases include data centers, offices, and certain network infrastructure.

In addition to lease liabilities included in our consolidated balance sheets, we have leases that have not yet commenced, with total lease obligations of approximately $103.77 billion, mostly for data centers, colocations, and network infrastructure, as of December 31, 2025.

These operating and finance leases will commence between 2026 and 2030 with lease terms of greater than one year to 30 years.

We also have $131.05 billion of contractual commitments as of December 31, 2025, mostly related to third-party cloud capacity arrangements and our continued investments in servers and network infrastructure, data centers, and consumer hardware products in Reality Labs with $30.63 billion due in 2026.

Long-term Debt

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As of December 31, 2025, $25.03 billion remained available and authorized for repurchases.

We paid four quarterly cash dividends, including dividend equivalents, totaling $2.00 for each share of Class A and Class B common stock during the year ended December 31, 2024.

The timing and actual number of shares repurchased under the repurchase program depend on a variety of factors, including price, general business and market conditions, and other investment opportunities.

Shares may be repurchased through open market purchases or privately negotiated transactions, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

Our share repurchase program may be suspended, delayed, discontinued, or accelerated at any time.

Beginning in the first quarter of 2025, we increased our quarterly cash dividends from $0.50 to $0.525 per share of Class A and Class B common stock.

Total dividends and dividend equivalents paid were $5.32 billion for the year ended December 31, 2025.

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Cash paid for income taxes was $7.58 billion for the year ended December 31, 2025.

As of December 31, 2024, we had taxes payable of $718 million related to a one-time transition tax payable incurred as a result of the Tax Act, which is due within one year.

Our long-term income taxes include $9.99 billion related to the uncertain tax positions as of December 31, 2024.

Due to uncertainties in the timing of the completion of tax audits, the timing of the resolution of these positions is uncertain and we are unable to make a reasonably reliable estimate of the timing of payments.

Our long-term income tax liabilities include $11.23 billion related to the uncertain tax positions and $9.78 billion related to deferred tax liabilities as of December 31, 2025.

Due to the uncertainty in the timing of the resolution of our uncertain tax positions, we are unable to make a reasonably reliable estimate of the timing of payments.

Loss Contingencies

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Should any of these estimates and assumptions change or prove to be incorrect, it could have a material impact on our results of operations, financial position, and cash flows.

See Note 8 — Leases, Note 10 — Long-term Debt, Note 12 — Commitments and Contingencies, Note 13 — Stockholders' Equity, and Note 15 — Income Taxes in the notes to the consolidated financial statements included in Part II, Item 8, and "Legal Proceedings" contained in Part I, Item 3 of this Annual Report on Form 10-K for additional information regarding leases, debt, contractual commitments and contingencies, capital return program, and taxes, respectively.

See Note 5 — Non-Marketable Equity Investments, Note 7 — Leases, Note 10 — Long-term Debt, Note 11 — Commitments and Contingencies, Note 12 — Stockholders' Equity, and Note 14 — Income Taxes in the notes to the consolidated financial statements included in Part II, Item 8, and "Legal Proceedings" contained in Part I, Item 3 of this Annual Report on Form 10-K for additional information.

Recently Issued Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis