Thanks, Mark, and good afternoon, everyone. Let's begin with our segment results.
All comparisons are on a year-over-year basis, unless otherwise noted. Our community across the family of apps continues to grow, and we estimate more than 3.5 billion people used at least 1 of our family of apps on a daily basis in September. Q3 total family of apps revenue was $50.8 billion, up 26% year-over-year. Q3 family of apps ad revenue was $50.1 billion, up 26% or 25% on a constant currency basis.
In Q3, the total number of ad impressions served across our services increased 14%. Impression growth was healthy across all regions driven by engagement and user growth, particularly on video services. The average price per ad increased 10% year-over-year, benefiting from increased advertiser demand, largely driven by improved ad performance. This was partially offset by impression growth, particularly from lower monetizing regions and services. Family of Apps other revenue was $690 million, up 59%, driven by WhatsApp paid messaging revenue growth as well as meta verified subscriptions.
Within our Reality Labs segment, Q3 revenue was $470 million, up 74% year-over-year. The significant year-over-year growth in Q3 was partly due to retail partners stocking up on Quest headsets ahead of the holiday season. We did not have a similar benefit in the third quarter of last year since our Quest 3S headset launched in the fourth quarter of 2024. Aside from this, strong AI glasses revenue also contributed to revenue growth in Q3. Moving now to our consolidated results. Q3 total revenue was $51.2 billion, up 26% or 25% on a constant currency basis. Q3 total expenses were $30.7 billion, up 32% compared to last year.
Year-over-year expense growth accelerated 20 percentage points from Q2 due primarily to 3 factors: First, legal-related expense growth was higher than in Q2 due to charges we recorded in the third quarter as well as us lapping a period of accrual reversals in the third quarter a year ago. Second, employee compensation growth accelerated, driven by technical hires, particularly AI talent. Finally, growth in infrastructure costs accelerated due to increased infrastructure operating costs associated with our expanded data center fleet, depreciation on our incremental CapEx spend and third-party cloud spend. We ended Q3 with over 78,400 employees, up 8% year-over-year, driven by hiring in priority areas of monetization, infrastructure, Reality Labs, Meta Superintelligence Labs as well as regulation and compliance. Third quarter operating income was $20.5 billion, representing a 40% operating margin. Q3 interest and other income was $1.1 billion driven primarily by unrealized gains on our marketable equity securities.
Our tax rate for the quarter was 87%, which was unfavorably impacted by a onetime noncash reduction in deferred tax assets that we no longer anticipate using under new U.S. tax law. Our tax rate would have been 14%, excluding this charge. Although the transition to the new U.S. tax law resulted in an accounting charge in the third quarter, we continue to expect we will recognize significant cash tax savings for the remainder of the current year and future years under the new law, and this quarter's charge reflects the total expected impact from the transition to the new U.S. tax law.
Net income was $2.7 billion or $1.05 per share. Excluding the onetime tax charge, our net income and EPS would have been $18.6 billion and $7.25 per share, respectively.
Capital expenditures, including principal payments on finance leases were $19.4 billion, driven by investments in servers, data centers and network infrastructure. Free cash flow was $10.6 billion. We repurchased $3.2 billion of our Class A common stock and paid $1.3 billion in dividends to shareholders. We ended the quarter with $44.4 billion in cash and marketable securities and $28.8 billion in debt. Turning now to the business outlook. There are 2 primary factors that drive our revenue performance.
Our ability to deliver engaging experiences for our community and our effectiveness at monetizing that engagement over time. On the first, daily actives continue to grow year-over-year across Facebook, Instagram and WhatsApp. We're continuing to see improvements to our products and recommendations drive incremental engagement with year-over-year growth in global time spent accelerating on both Facebook and Instagram in Q3. In the U.S., overall time spent on Facebook and Instagram grew double digits year-over-year, driven by continued video strength as well as healthy growth in non-video time on Facebook. The engagement gains continue to be driven by product work and ongoing improvements to our recommendation systems as we optimize our model architectures, implement advanced modeling techniques and integrate more signals about people's interests.
We also continue to focus on increasing the freshness of recommended content. On Facebook, our systems are now surfacing twice as many Reels published that day than at the start of the year. Looking to 2026, we expect to advance our recommendation systems across several dimensions. On Instagram, one focus is evolving our systems to surface content across a broader set of topics that cater to the diverse interest of each person.
This follows a similar approach we've implemented on Facebook that has driven good results. We also expect to make significant progress on our longer-term ranking innovations in 2026. We're seeing promising new results from our research efforts to create foundational ranking models and expect the new model innovations we're developing as part of this will enable us to significantly scale up the amount of data and compute we use to train our recommendation models in 2026, yielding more relevant recommendations. Another large focus next year is leveraging LLMs to improve content understanding. We expect this is going to enable our systems to more precisely label the keywords and topics within videos and posts, which will allow our systems to both develop deeper intuition about a person's interest and retrieve the content that matches them. Finally, we're making good progress with Meta AI and Threads. The number of people using Meta AI across our family of apps continues to grow, and we're increasingly leveraging first-party content into Meta AI results with the majority of Meta AI's responses to Facebook Deep Dive queries in the U.S. now showing related Reels. We're also seeing a lot of traction with media generation. People have created over 20 billion images using our products. And since launching Vibes within Meta AI in September, we have seen media generation in the app increased more than tenfold.
On Threads, we see strong growth in both daily actives and the depth of engagement as we continue to improve recommendations. The ranking optimizations we made in Q3 alone drove a 10% increase in time spent on Threads. We also continue to ship new features, including launching direct messaging in Q3, so anyone on Threads can now message one another within the app. Now to the second driver of our revenue performance. increasing monetization efficiency. The first part of this work is optimizing the level of ads within organic engagement. We continue to refine ad supply across each of our major surfaces within Facebook and Instagram to better deliver ads at the time and place they are most relevant to people. Longer term, we have exciting ad supply opportunities on both Threads and WhatsApp status. Ads are now running globally and feed on Threads and we're following our typical monetization playbook of optimizing the ads formats and performance before we ramp supply. Within WhatsApp status, we're continuing to gradually introduce ads and expect to complete the rollout next year. The second part of increasing monetization efficiency is improving marketing performance. Advancing our ad systems remains a critical aspect of this work and we are driving performance gains through ongoing improvements in our larger scale ads ranking models. For example, we continue to broaden the adoption of Lattice, our unified model architecture. In Q3, we rolled out Lattice to app ads, which drove a nearly 3% gain in conversions for that objective. Since introducing Lattice back in 2023, along with other back-end improvements, we have now cut the number of ads ranking and recommendation models by approximately 100 as we consolidated smaller and more specialized models into larger ones that use the Lattice architecture to generalize learnings across surfaces and objectives. We continue to observe performance improvements as we combine models and expect to drive additional gains as we consolidate another 200 models over the coming years into a smaller number of highly capable models. In addition to advancing our foundational ads models, we're innovating on our run time models we use downstream of them for ads inference. For example, we began piloting a new run time ads ranking model in Q3 that leverages more compute and data than our prior models to select more relevant ads. In testing, we've seen this new model drive a more than 2% lift in conversions on Instagram. We also significantly improved performance of Andromeda in Q3 by combining models across retrieval and early-stage ranking into a single model, driving a 14% increase in ads quality on Facebook surfaces. Within our ads products, we're seeing continued momentum with Advantage+. In Q3, we completed the rollout of our streamlined campaign creation flow for Advantage+ lead campaigns. So now advertisers running sales app or lead campaigns have end-to-end automation turned on from the beginning, allowing our systems to look across our platform to optimize performance by automatically choosing criteria like who to show the ads to and where to show them. The annual run rate of revenue running through our end-to-end automated solutions has now reached $60 billion following the implementation of the new streamlined creation flow, as we continue to see more advertisers leverage the performance benefits of our solutions. Within our Advantage+ creative suite, the number of advertisers using at least 1 of our video generation features was up 20% versus the prior quarter as adoption of image animation and video expansion continues to scale. We've also added more generative AI features to make it easier for advertisers to optimize their ad creatives and drive increased performance. In Q3, we introduced AI generated music. So advertisers can have music generated for their ad that aligns with the tone and message of the creative. Finally, business messaging remains a significant opportunity for us. We're seeing strong growth across our portfolio of solutions, including with click-to-WhatsApp ads, which grew revenue 60% year-over-year in Q3. We're also making good progress on our business AI efforts, where we've been focused on building a turnkey AI that helps businesses generate leads and drive sales. We've been opening access in recent months to more businesses within our initial test markets, the Philippines and Mexico. And I've seen strong usage with millions of conversations between people and business AIs taking place since July. This month, we expanded availability within WhatsApp and Messenger to all eligible businesses in Mexico and the Philippines, respectively.
In the U.S., we're also starting to roll out the ability for merchants to add their business AIs to their website so we can support the full sale funnel from ad to purchase. Next, I would like to discuss our approach to capital allocation. Our primary focus is deploying capital to support the company's highest order priorities including developing leading AI products models and business solutions. As we make significant investments in infrastructure to support this work, we are focused on preserving maximum long-term flexibility to ensure we can meet our future capacity needs while also being able to respond to how the market develops in the years ahead. We're doing so in several ways, including staging data center sites so we can spring up capacity quickly in future years as we need it as well as establishing strategic partnerships that give us option value for future compute needs. The strong financial position and cash generation of our business enable us to make these investments while also accessing additional pools of cost-efficient capital.
Moving to our financial outlook. We expect fourth quarter 2025 total revenue to be in the range of $56 billion to $59 billion. Our guidance assumes foreign currency is an approximately 1% tailwind to year-over-year total revenue growth based on current exchange rates. Our outlook reflects an expectation for continued strong ad revenue growth partially offset by lower year-over-year Reality Labs revenue in Q4. The anticipated reduction in Reality Labs revenue is due to us lapping the introduction of Quest 3S in Q4 of last year. As well as retail partners procuring Quest headsets during Q3 of this year to prepare for the holiday season, which were recorded as revenue in the third quarter.
Turning to the expense and CapEx outlooks. I'll first start with 2025 before providing some commentary on our planning for 2026.
We expect full year 2025 total expenses to be in the range of $116 billion to $118 billion, updated from our prior outlook of $114 billion to $118 billion and reflecting a growth rate of 22% to 24% year-over-year. We currently expect 2025 capital expenditures, including principal payments on finance leases to be in the range of $70 billion to $72 billion, increased from our prior outlook of $66 billion to $72 billion.
On to tax. Absent any changes to our tax landscape we expect our fourth quarter 2025 tax rate to be 12% to 15%. Turning now to 2026. We are at an exciting point for our company. where we have continued runway to improve our core services today as well as the opportunity to build new AI-powered experiences and services that will transform how people engage with our products in the future. We expect the set of investments we're making within our ads and organic engagement initiatives next year will enable us to continue to deliver strong revenue growth in 2026. While our progress on AI models and products will position us to capitalize on new revenue opportunities in the years to come. A central requirement to realizing these opportunities is infrastructure capacity. As we have begun to plan for next year, it's become clear that our compute needs have continued to expand meaningfully, including versus our own expectations last quarter. We are still working through our capacity plans for next year, but we expect to invest aggressively to meet these needs, both by building our own infrastructure and contracting with third-party cloud providers. We anticipate this will provide further upward pressure on our CapEx and expense plans next year. As a result, our current expectation is that CapEx dollar growth will be notably larger in 2026 than 2025. We also anticipate total expenses will grow at a significantly faster percentage rate a than 2025, with growth primarily driven by infrastructure costs, including incremental cloud expenses and depreciation. Employee compensation costs will be the second largest contributor to growth. As we recognize a full year of compensation for employees hired throughout 2025, particularly AI talent and add technical talent in priority areas. Finally, we continue to monitor active legal and regulatory matters, including the increasing headwinds in the EU and the U.S. that could significantly impact our business and financial results. For example, in the EU, we continue to engage constructively with the European Commission on our less personalized ads offering. However, we cannot rule out the commission imposing further changes to that offering that could have a significant negative impact on our European revenue as early as this quarter. In the U.S., a number of youth-related trials are scheduled for 2026 and may ultimately result in a material loss.
In closing, this was another good quarter for our business. We have an exciting set of opportunities to continue improving our core business while delivering innovative new experiences and services for the people and businesses using our products in the years to come. With that, Christa, let's open up the call for questions.