Meta Platforms Settles Major Lawsuit, Pays $18 Billion

In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Tyler Crowe, Rachel Warren, and Lou Whiteman discuss:

• Meta's $18 billion settlement.
• Was this a "best-case scenario" for Meta?
• Intuit's earnings: SaaSpocalyse or corporate complacency?
• Mailbag: Will Uber's European fines impact its future?

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A full transcript is below.

This podcast was recorded on Aug. 26, 2026.

Tyler Crowe: Meta Platforms dodges a $1.4 trillion bullet. Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe, and today I'm joined by longtime Fool contributors, Rachel Warren and Lou Whiteman. Guys, a little bit of using a term from a prior host here. I think the news fairy really came in and gave us an extra little doubt for the show today because Meta Platforms has had its fair share of lawsuits out there. There was one back in New Mexico where courts ordered it to pay almost $1 billion in fines outstanding. But looks like a lot of that is changing because it just agreed to a massive settlement with several states on a class action lawsuit, and it looks like the total cost of this is going to be a lot less expensive than expected. Rachel, what were the details of this?

Rachel Warren: To really understand how Meta ended up here, we have to look at what this was about. You had a coalition of state attorneys general that sued Meta, and they accused the company of deliberately designing Facebook and Instagram to be addictive to children. The lawsuits pointed to a wide range of features, infinite scrolling, algorithmic recommendations, constant push notifications. We saw recently that New Mexico had won a separate trial against Meta, and a federal judge in California was actually about to drag Zuckerberg himself to the witness stand. In fact, we saw believe it was just yesterday, the head of Instagram, Adam Mosseri, had testified. Now Meta has agreed to a $17 billion settlement to resolve the claims of 47 states. Now, Meta is not going to be just cutting one check. They're actually paying a $12 billion baseline amount, and that's going to be distributed to the states to fund youth mental health, addiction recovery programs.

But the remaining billions, about 5 billion, actually only kicks in if Meta's top competitors TikTok, YouTube, of course, owned by Alphabet, SNAP also settle with the states and agree to face similar financial penalties. That's a very interesting element of the settlement. Now, aside from the financial element of it, the settlement binds Meta to an independent auditor with data access to ensure that they are adhering to the terms of this agreement. The settlement enforces sweeping permanent product changes across the U.S. that specifically protect different age brackets. For example, new age verification tools for children under 13, daily two-hour time limits for teenagers under 18, silencing of push notifications, so a lot of changes there for young users. The way a lot of the state's attorneys general are framing it is the largest state consumer protection settlement in history outside of the big tobacco deals of the 1990s. It does very much change the Internet for minors moving forward.

Tyler Crowe: I was trying to do the math before the show on where this landed in terms of the biggest settlements in corporate history. We had big tobacco, obviously. I was the Deepwater Horizon one it was $60 billion. It's definitely in the top five, though. I think the biggest DOJ settlement was Enron, and that was only $7 billion. Definitely a massive settlement here, at least on a raw number here. At the same time, I say that, though, we had 1 billion in losses to New Mexico, with 47 states in line to do similar class action lawsuits, as well as state stuff here. It seems like that loss, Lou, influenced this decision to settle here because I think the losses they were looking at were expected way higher than 16, 17 billion or whatever the final number is going to be here.

Lou Whiteman: Right. I guess the spin here, as the attorneys general would say, the change in conduct is so significant that it's worth it, the night mode, the notification steering school, all of that. But on the surface, the monetary side of this is just kind of what's got to be a letdown. By my account, looking at, say, it was 52 parties, 48 states plus 4 territories. Break it down. That's about 340 million per state, assuming, as Rachel said, the full 17 comes in. New Mexico got almost 1 billion by comparison. Definitely, this is a better monetary outcome for Meta than having to go through all of these one by one and, again, the time, too.

Tyler Crowe: Yeah, one of the Bloomberg stories that came out before this settlement was announced this morning was some of Meta's lawyers had said that the losses here could be almost 1.4, $1.5 trillion, basically the entire market cap of the company based on their kind of projections of, well, if this New Mexico case did almost 1 billion, this is what the rest could look like. Obviously, 16, 17, 18, whatever the number is, it's definitely a lot less. Now there are still several cases outstanding. This is just the federal ones. There's some state ones, there's some local ones. There's still could be some more coming out of this. I want to turn this to the investor side because big capital outlays for a company like Meta, I would have said five years ago, probably not a big deal because this is a business that has cash coming out of its ears. But now that they've got all of these capital spending requirements for AI infrastructure, doing a lot of off-balance-sheet deals and stuff like that, does this in any way alter Meta's plans for capital spending and AI infrastructure ambitions at all?

Lou Whiteman: Not for now, at least. The total outlay here is about 12% of what Meta intends to spend on AI in 2026 alone. I doubt they'll write that check for all of the sediment this year, too, so they have a lot of wiggle room here. Look, this is less than they're going to spend on stock-based compensation in 2026, put in perspective. The only way that this impacts spending is long term if the sentiment really does change human behavior and somehow make the magic money printing machine print significantly less money. I'll probably take the under on that, and I'm definitely not going to assume that. But for now, this is a way for Meta to just get back to business as usual, which I think was the motivation for writing that big check.

Rachel Warren: Now, I think that's absolutely correct. I mean, from a product perspective, I think there are some wins for users, from a financial perspective, this is without equivocation a win for Meta. I mean, even with the other cases still looming, this is not going to derail their capex plans. I don't think it's going to in any way touch their AI infrastructure ambitions. I mean, we actually saw Meta stock. I don't know where it is at the time we're recording it, but it ticked up right after the news broke because essentially this settlement has put a cap on the significant liability that it was potentially facing and it's going to be paying orders of magnitude less than what we had thought could be a possibility. When you consider that Meta pulled in hundreds of billions in revenue last year alone, a payout like this, it's structured over time. It's quite literally a drop in the bucket for their balance sheet, and that's the reality for Meta.

Tyler Crowe: I'm starting to come around to this idea, and it's hard to penalize a company as big as Meta when they have these massive coffers, these massive market caps where $16 billion sounds like a massive settlement. But we're talking about less than 1% of their entire market cap here. It is a question we're actually going to get to lister question coming up, but before we do that, coming up after the break, we're going to dive into it, spurning.

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Tyler Crowe: Shares of tax and accounting software company Intuit are down about 3.5% as we taped after the company reported earnings. I think before the market opened, shares were down almost 10%. I think some combination of earnings and slower growth forecasts being revised down. It wasn't exactly what the market was looking for. Lou, what did the numbers actually look like? Were they really that bad? I mean, I guess, based on the market reaction, we've seen a lot worse this quarter.

Lou Whiteman: You said it, though. It's been kind of the story of this earnings season. The numbers weren't bad relative to expectations, but the forecast was disappointing. They actually beat on revenue and earnings per share, but on guidance, they're lowering their growth targets for the year. Customers, according to them, are fleeing TurboTax due to the costs, and areas that are growing like Credit Karma are not growing fast enough to offset the losses there. It's a looking-forward reaction, not a reaction to what they actually posted.

Tyler Crowe: Intuit is one of those companies that has gotten a little bit wrapped up in the SaaSapocalypse. I know Intuit isn't necessarily a SaaS company, but basically anything that is software-related these days is doomed by AI because everyone's just going to apparently build all their own software and barely have AI do all your taxes or whatever. Is that actually the case here, or is this maybe just an easy excuse that management investors can use when looking at Intuit these days?

Lou Whiteman: I'm picking B here. This isn't about AI. AI is not doing anyone's taxes yet, maybe eventually, although I'm not sure I'm ready to give all that information to Grok. I don't know about you guys. And there aren't hundreds of thousands of small businesses that are just switching over all of their accounting systems to Claude. Intuit has always been run, or in recent years has been run, like it's a monopoly, like it's a utility. And utilities have terrible customer service. Why? Because, deal with it, you can't help it. They have not listened to the market. They were caught offsides here, I think. In the commentary, the top reason customers leave TurboTax was price. They weren't listening to their customers. They've made a few questionable deals that haven't worked out, accord business under pressure. This isn't AI. This is a case where management should look in the mirror and ask itself hard questions.

Rachel Warren: I tend to agree. I do think that this is a scenario where you have a series of bad business decisions catching up with the business. For many years until it leveraged its power to really consistently and relentlessly raise prices on TurboTax. A lot of filers paying more and more each spring. We've even seen the CEO saying price is now the number one reason customers are abandoning TurboTax for cheaper DIY alternatives. That's not a failure of technology. That's a business error. I think they got greedy, overplayed their hand, and I think they damaged their consumer goodwill, and that's why they're being forced to slash a lot of their prices and accept a slowdown in the hope of winning back lost market share. I agree. People aren't feeding all their tax information into Claude, but it is the case that a lot of generative AI tools have made it very simple for these small startups to build cheaper, free, useful conversational tax prep tools that can handle a lot of these elements in minutes. I think what we're seeing is a lot of investors and Wall Street looking into its core business, that software moat that maybe we thought they had seems to be rapidly evaporating and somewhat becoming obsolete in a time where AI agents can be handling a lot of these small business accounting or helping build tools to do that for pennies on the dollar. I think there are a lot of ways in which Intuit has made a series of bad decisions that have led it to this.

Tyler Crowe: Last thing is we come out here because they own a couple of properties. Obviously, Credit Karma and Intuit, QuickBooks. They seem to be the big ones for them. I actually wanted to focus on Credit Karma for a second, because it does seem like that is one of those things where people check their credit scores when they need to finance something large, a car, a new project, or a house or anything like that. Is there any possibility here where Intuit may also be suffering from this housing spending slowdown that we're seeing here and that bringing back to probably a topic that I talked about way too much here is, like, housing, could, like, an uplift in the housing market start to reinvigorate at least one segment of this business here?

Lou Whiteman: Maybe, but Credit Karma looked pretty strong relative to other parts of the business. Mailchimp has been a disaster among acquisitions. They never really figured out what to do with it, and now the answer is we ever paid, so we got to just start cutting. I'm sure the rising tide would lift the boat over at Credit Karma, but I don't think the answer is a better mortgage market because I don't think that's the part of the business that's really ailing.

Tyler Crowe: It'll be something worth following, at least in the sense of, like, you know, management excuses as to why things aren't going quite right versus, you know, making tangible changes to some of the points you guys made here. Coming up after the break, we're going to dip into the mailbag.

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Tyler Crowe: Hey, everyone, just a quick reminder if you want to have your question answered on air, go ahead and email us at podcast at fool.com. That's podcast with an S. Also, I've put the email in the show description if you need it there. Three reminders. As always, number one, keep it short, two, keep it Foolish; and can't give any personalized advice, so try to make it some sort of impersonal question related to, like, stocks or something like that. Today's question come from Carlos Shimkus. I hope I pronounce that name. If I didn't apologize. This is actually a question kind of related to what we were talking about with the legal settlements and stuff like that.

The question is, Hey, guys, you've just talked about Uber's potential in autonomous food delivery, but they are faced with a possible $825 million fine in Europe for GDPR rules violations. Could this stop some of that progress? And how should investors look at these types of fines for hyperscalers that might be faced with something similar in the future? You know, we just had this long discussion about Meta at the top and their social media-related sort of infractions with the law and settlements and stuff like that. It does kind of bring all of this together because we have these massive companies seeing massive fines. Is it really going to slow down progress? We said not really at Meta. What about Uber?

Lou Whiteman: Fines are speed bumps, not road-closure signs. Now, this is a huge speed bump. I agree. It's $1 billion or so. But I don't think this will impact their long-term ambitions. If you read the fine print on this one, maybe they used automation to discipline employees or to filter or, I'm sorry, not employees, drivers, so contractors. This might be a reminder of why Uber would like to see autonomous happen. The bigger issue in delivery for Uber is the amount of competition that's out there and the issues trying to make autonomous a reality. I think this is a very, very big annoyance for them. I don't mean to whistle past $1 billion, but this is not going to change their outlook.

Rachel Warren: Yeah, I think Lou is right on that. This is an 825 million euro fine. That's about $966 million based on today's exchange rate. I mean, Uber just reported profits of over $1 billion in recent quarters. This is not a capital-destroying event, and I think we've seen for many years now, tech giants will view these types of regulatory battles as an expensive but unavoidable cost of doing business. I mean, you can go back to the, you know, 562 million antitrust fine against Microsoft back in 2013, met his historic FTC settlement in 2019, didn't break their ad business. I think it's more about the fact that obviously there will be maybe some tightening of compliance protocols.

But this GDPR penalty actually highlights, as Lou alluded to, the exact reason why Uber is pushing so hard into autonomous vehicle infrastructure, because the cause of this fine was that Uber was letting automated algorithms essentially suspend or permanently deactivate human drivers without any human oversight. Obviously, that cuts off the workers' income instantly. When your business model relies on managing millions of gig workers across the globe, as Uber's does. You're often exposed to labor disputes, these types of lawsuits, privacy liabilities. I think the thing for investors to watch, it's not what European regulators do. It's really whether Uber's able to scale their self-driving partnerships fast enough to move towards their hybrid autonomy goals on target. That's what I'm watching in the mid- to long-term for Uber.

Tyler Crowe: Isn't just specific to Uber. It's thinking again about these very large companies. The idea of behavior change, because obviously these fines are supposed to be to change behavior at a lot of these companies. Again, when you have companies that are hundreds of billions of dollars or trillions of dollars, are these the type of things that are going to actually incentivize behavior change? Obviously, like we were saying, the monetary fine for Meta up at the top here on their settlement may not necessarily do it, but it seems like some of the enforced behavior changes of how they operate their business might actually be a little bit more of a solution here. It would be interesting to see if companies like Uber and others start to face similar things, how are penalties going to be put in place to actually incentivize change? Something we can definitely follow as investors as we come up here. But that's all the time we have for today.

As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against. Don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provide for informational purposes only. To see our full advertising disclosure, please check out our show notes. Thanks to producer Dan Boyd and the rest of The Motley Fool team for Lou, Rachel, and myself. Thanks for listening, and we'll chat again soon.

Lou Whiteman has no position in any of the stocks mentioned. Rachel Warren has positions in Alphabet. Tyler Crowe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Intuit, Meta Platforms, and Microsoft. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.