Facebook (FB  ) topped analysts' expectations for the top and bottom-line in the third quarter. However, shares opened 3% lower and traded down by as much as 6% intraday.

Interestingly, many social media stocks posted strong earnings results this quarter with higher than expected demand for ads and spending. Facebook's results didn't' catch the same momentum. Another issue weighing on shares is there was a small decline in U.S. and Canadian users during the quarter.

Overall, mega-cap tech giants that have outperformed for so much of the bull market have been underperforming for a few months. It will be interesting to see if this is a short-term, pause or whether this is reflecting the increased risk of regulatory scrutiny due to concerns about Democrats taking power in DC.

Inside the Numbers

In Q3, Facebook reported that its number of users decreased to 196 million per day from 198 million in the U.S. and Canada. It also expects a decrease in the next quarter as COVID led to a temporary spike in usage. Ad revenue was up 22% from 2019's Q3 and showed little effect from the #StopHateForProfit ad boycott.

Earnings came in at $2.71 cents per share vs $1.91 per share forecasts. Revenue was $21.47 billion vs $19.8 billion expected by analysts.

Daily active users for the quarter were 1.82 billion which was higher than 1.79 billion expected by analysts. Monthly active users also beat expectations at 2.74 billion vs. 2.7 billion. The average revenue per user increased to $7.89 from $$7.01 and topped expectations of $7.32. The total number of users across all its apps reached 3.21 billion monthly which means it added 70 million new users during the quarter.

The total number of advertisers reached 10 million on the platform which is a 10% increase from the last quarter. It's also consistent with expectations that the holiday, eCommerce shopping season is going to be very busy.

Stock Price Impact

Facebook is off a little more than 10% off its all-time highs set in early-September. Notably, it didn't meaningfully participate in the rally from late-September which has rolled over in the last couple of weeks. During this rally, many social media stocks like Snap (SNAP  ) and Pinterest (PINS  ) had big breakouts.

Facebook's near-term path is likely to follow its peers. The company is dominant within a market that continues to expand faster than the broader economy which means its power and profits are only likely to grow. However, its biggest threat is regulatory action. And, the chances of this happening are highest if Democrats win the Presidency and Senate.