So much for management's expectation for revenue growth to come down meaningfully in the second half of the year. Both Facebook's (NASDAQ:FB) top and bottom lines soared past expectations. Indeed, year-over-year growth in both revenue and earnings per share actually accelerated compared to Q2.

Here's a look at Facebook's breakneck growth, what's behind it, and what to expect next.

Facebook CEO Mark Zuckerberg reveals the social network's new mission statement

Facebook CEO Mark Zuckerberg. Image source: Facebook.

Q3 Results: The Raw Numbers

Metric

Q3 2017

Q3 2016

Year-Over-Year Change

Revenue

$10.3 billion

$7.0 billion

47%

Operating margin

50%

44%

600 basis points

Net income

$4.7 billion

$2.6 billion

79%

EPS

$1.59

$0.90

77%

Data source: Facebook's third-quarter earnings release. Table by author.

Since last year, Facebook management has been warning that revenue growth would slow meaningfully in the second half of 2017 as one of its main drivers for advertising growth, increases in ad load, moderated. But instead revenue growth accelerated in Q3. Year-over-year revenue growth increased from 45% in Q2 to 47% in Q3, driven primarily by a 49% year-over-year increase in advertising revenue.

Thanks to an expansion in the company's operating margin, from 44% in the year-ago quarter to 50% in Q3, Facebook's net income and earnings per share increased faster than revenue. The two metrics were up 79% and 77%, respectively.

Third-quarter highlights

  • Despite its surging revenue growth, Facebook did follow through with its expectation to decrease ad load. "We saw that ad load as predicted -- had a much less significant impact on impression growth," said Facebook CFO David Wehner in the company's earnings call.
  • Facebook's daily active users hit 1.37 billion, up 16% year over year. This compares to year-over-year growth of 17% in Q2.
  • Monthly active users were 2.07 billion, up 16% year over year. This compares to 17% growth in Q2.
  • Year-over-year growth in advertising revenue accelerated from 47% in Q2 to 49% in Q3.
  • Advertising revenue benefited from "growth across all regions, marketer segments, and verticals," said Facebook COO Sheryl Sandberg in the company's earnings call.

Outlook

The biggest news regarding Facebook's updated outlook on Wednesday was its new forecasts for operating expenses.

Facebook lowered its guidance for full-year growth in operating expenses. Management now expects expenses during 2017 to increase 35% to 40%, down from a previous forecast for a 40% to 45% year-over-year increase.

The address sign with a thumbs-up icon outside the main entrance to Facebook HQ.

Image source: Facebook.

But Facebook is making up for this more conservative outlook for operating expenses in 2017 with a forecast for a huge jump in expenses in 2018. The company expects 2018 to be "a significant investment year," said Wehner during Facebook's earnings call. After clarifying that management hasn't finalized its 2018 budget yet, Wehner said he expects total 2018 operating expenses to increase 45% to 60% compared to 2017. This expense growth will be driven primarily by investments in security "to strengthen our systems and prevent abuse," aggressive investments in video content, and "long-term initiatives around augmented and virtual reality, AI, and connectivity," Wehner explained.

Facebook similarly expects a sharp jump in capital expenditures in 2018, forecasting they will "roughly double from 2017 levels."

Beyond Facebook's outlook for rising spending, management said it still expects revenue growth to decelerate in the coming quarters and in 2018.

Daniel Sparks owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.