Meta ordered to pay $25 billion in New Mexico case over Cambridge Analytica scandal

The Wednesday ruling marks one of the largest-ever legal penalties for a tech giant — and just the latest court loss for Meta this year.

The company, then known as Facebook, disclosed in 2018 that the private information of as many as 87 million Facebook users was improperly obtained by political analytics firm Cambridge Analytica. The firm used that information to build profiles of American voters.

New Mexico sued Facebook in 2021, accusing it of mishandling state residents’ personal information and deceiving those users about its policies in connection with the incident.

A jury found in September that Meta had violated the state’s Unfair Practices Act more than 43 million times. State District Court Judge Francis Mathew criticized the company for what he described as a “coherent strategy designed to mislead the public” in his Wednesday penalty decision.

“Facebook’s misrepresentations about users’ control of their data were not isolated incidents, but rather a systematic pattern of deception at the core of Facebook’s business model,” Mathew wrote.

After Wednesday’s penalty decision, Meta said it will appeal the decision and has accused New Mexico’s attorney general of conflating privacy and speech issues.

“This ruling, and the Attorney General’s approach to this enforcement, makes it all but impossible to do business in the state of New Mexico,” Meta Chief Legal Officer C.J. Mahoney said in a statement. “At its core, this lawsuit seeks to impose a tax on speech to enforce new rules for what people can say online. We are confident we will prevail on appeal.”

Meta’s legal battles threaten to strain its business, though court penalties and settlements remain relatively small compared to the company’s earnings so far.

The company reported earnings for the quarter ended in September on Wednesday, including lower quarterly profits than Wall Street had expected. It attributed the miss to a charge from the $18 billion multistate settlement it agreed to in August to resolve claims that its platforms have addicted and harmed young people.

New Mexico was not a party to that settlement, which also resolved the participating states’ outstanding claims related to Cambridge Analytica.

Meta posted income from operations of nearly $13 billion during the quarter, compared to nearly $23 billion that it said it would have earned without the settlement.

Meta CFO Susan Li said on a call with analysts following the earnings report that the company is monitoring “active legal and regulatory matters that could significantly impact our business and financial results,” including additional youth-related trials set for later this year and next.

Meta was also ordered to pay nearly $1 billion in a separate New Mexico case earlier this year over claims that its platforms addicted and harmed young people. Meta, along with YouTube, also lost a case in March in Los Angeles brought by a young woman with similar addiction and harm claims. The companies plan to appeal.

Meta earnings

Still, Meta’s business continues to grow at a strong clip thanks in large part to its investments in artificial intelligence. The company posted sales growth of 26 percent year-on-year to more than $64 billion in the quarter.

Meta’s stock (META) jumped more than three percent in after-hours trading following the report on Wednesday.

Meta launched its Muse AI personal assistant app in September. The app quickly rocketed to the top of app stores and has gained more than 10 million users, according to the company. It also launched its latest foundation model, Muse Wonder, last month.

The company said Wednesday that its AI investments are boosting its core advertising business “through stronger engagement, better recommendations, and more efficient monetization.” Its average price per ad, a key metric for the company, jumped 14 percent year-over-year in the September quarter.

Across the industry, tech companies face questions about their heavy spending on AI infrastructure. Meta’s capital expenditures during the quarter reached nearly $35 billion, up 80 percent from the year-ago quarter. And the company narrowed its full-year capital expenditure guidance to between $135 billion to $145 billion, the upper end of the range it had previously provided. Meta declined to provide spending guidance for next year.

But investors are signaling they’re willing to give Meta some leeway, given the success of Muse, said Jesse Cohen, senior analyst at Investing.com.

“The market has shifted from punishing Meta for spending to rewarding it for having a compelling product story,” Cohen wrote in emailed commentary.