Facebook (META -0.07%) reported third-quarter 2019 results after the closing bell on Wednesday that pleased the market.

Shares of the social-networking and tech behemoth closed up 4.5% in Wednesday's after-hours session, which bodes well for the stock's performance on Thursday.

We can attribute the market's reaction to the company beating Wall Street's consensus estimates on both the top and bottom lines. Moreover, the market likely breathed a sigh of relief that year-over-year revenue growth in constant currency decelerated just 1% from the second quarter, as management had warned again last quarter that it expected this metric to decelerate sequentially throughout the year. 

Here's how the quarter worked out for Facebook and its investors.

Young woman lounging on a tan sofa while using a smart phone.

Image source: Getty Images.

Key numbers

Metric

Q3 2019

Change (YOY)

Revenue

$17.65 billion

29% (31% in constant currency)

Operating income

$7.19 billion

24%

Net income

$6.09 billion

19%

Earnings per share (EPS)

$2.12

20%

Data source: Facebook. YOY = year over year.

Wall Street was looking for EPS of $1.91 on revenue of $17.37 billion, so Facebook sailed by both expectations.

For context, last quarter, revenue grew 28% year over year -- 32% in constant currency -- and EPS, adjusted for one-time items, rose 14%.

Revenue breakdown

Advertising revenue grew 28% year over year -- 31% in constant currency -- to $17.38 billion, and payments and other revenue jumped 43% to $269 million. Other revenue growth is being driven by sales of the company's new virtual-reality (VR) headsets.

The average price per ad decreased 6% year over year, CFO Dave Wehner said on the earnings call. Last quarter, this metric declined 4%. The dynamic at play here is that there's an "ongoing mix shift toward geographies and Stories ads which monetize at lower rates," according to Wehner. However, robust growth in the number of ad impressions -- up 37% year over year -- continues to more than make up for the declining average ad price.

Key user and operational stats 

Metric

Q3 2019

Change (YOY)

Daily active users (DAUs) 1.62 billion 9%
Monthly active users (MAUs) 2.45 billion 8%
Average revenue per user (ARPU) worldwide $7.26  19%
Mobile advertising revenue/total advertising revenue 94% 2 pp

Data source: Facebook. pp = percentage points.

Last quarter, both DAU and MAU rose 8% year over year, so the sequential growth rate remains steady. User growth continues to be driven by growth in India, Indonesia, and the Philippines, Wehner said on the call. ARPU growth accelerated slightly from last quarter's 18% result.

Moreover, the company estimates that more than 2.2 billion people now use at least one of its family of services -- Facebook, Instagram, WhatsApp, or Messenger -- on a daily basis, and more than 2.8 billion people were active on a monthly basis. These metrics are up from last quarter's 2.1 billion and 2.7 billion.

CEO's comments regarding political ad controversy

Facebook has been garnering a lot of press recently for its decision to allow political ads that contain "false information." CEO Mark Zuckerberg made a long statement on the earnings call about this topic, which is probably best summarized by this statement: "In a democracy, I don't think it's right for private companies to censor politicians or the news."

While I don't agree with management's views on this issue, the relevant questions for investors are will the company's stance hurt its long-term growth prospects? And will a deluge of political ads that promise to be nasty and contain lies turn off some users enough to access Facebook's platforms less frequently? These things remain to be seen, just as does the regulatory risk related to data privacy and antitrust issues. 

On a related note, Twitter announced on Wednesday that it will ban political ads beginning in November.  

Q4 2019 and 2020 revenue outlook

Here's what Wehner had to say about the company's revenue expectations:

[W]e continue to expect a more pronounced deceleration of our revenue growth rate in Q4. We expect our Q4 reported revenue growth rate will decelerate by a mid-to-high single-digit percentage compared to our Q3 rate. This deceleration [will] largely [be] driven by the lapping of several successful product optimizations in Q4 of last year, as well as ad-targeting-related headwinds. Since these factors are largely unique to Q4, we would expect our revenue growth deceleration in 2020 versus the Q4 rate to be much less pronounced. [emphasis mine]

In Q3, reported revenue grew 28% year over year, so it seems Facebook is expecting Q4 reported revenue to grow in the range of 19% to 24% year over year.