Fitbit CEO James Park is doing what smart CEOs do, focusing resources on the best opportunities for future growth, but he can’t seem to get Wall Street to play along.
Despite reporting that first quarter sales rose 50% and again beat analysts’ expectations, Fitbit’s (fit) stock price lost as much as 12% in Wednesday’s after-hours trading. The culprit was Park’s profit forecast for the second quarter, with adjusted earnings per share of 8-to-11 cents less than half the 26 cents analysts expected on average.
In an interview, the CEO says the company will be spending more in the short term on research and development for several upcoming new products and increasing the company’s marketing push outside of the United States, where fewer people already wear a fitness tracker. “A lot of our media spend is going to be in markets outside of the US versus inside, which are at different levels of maturity,” Park explained.
Get Data Sheet, Fortune’s technology newsletter.
It’s a standard playbook for fast-growing companies to take some of the profits from the most mature markets and pour them into new opportunities. That’s exactly how Jeff Bezos and Reed Hastings built modern titans, to name two of the most successful practitioners. It’s especially appropriate after a quarter in which revenue grew 50% instead of “only” the 32% analysts had forecast.
And surely Park should have earned some deference from investors, as both of his spending priorities—new products and developing markets—have done well. Almost half of the Fitbit’s $505 million of first quarter revenue was generated by its two newest trackers, the Blaze and Alta, which also helped push the average selling price up 18% from a year ago.
The new products also helped kick off the company’s first serious upgrade cycle, with some 40% of sales coming from repeat customers, Park said. Spending to build more enticing new products seems like an obvious way to go.
And Fitbit’s spending more on overseas markets is also paying off so far. While U.S. sales increased 33% to $351 million in the first quarter, sales in Asia-Pacific more than doubled off a much smaller base to $56 million. Sales in Europe, the Middle East, and Africa also more than doubled to $75 million.
Park’s seeming sacrifice of profits for next quarter should pay off quickly. The company on Wednesday raised the high end of its revenue expectations for the full year to $2.6 billion, up from $2.5 billion in its prior forecast, and adjusted earnings per share to as much as $1.24 from $1.20.
To learn more about Park’s strategy, watch:
Speaking of adjusted earnings per share, Fitbit includes several financial measures in its results that don’t coincide with Generally Accepted Accounting Principles. Such non-GAAP measures as adjusted net income, which excludes the cost of stock based compensation, have recently come under fire from regulators as potentially confusing to some investors. And some big tech companies like Amazon have moved towards offering more GAAP data.
But at least for now, Park says he remains in favor of Fitbit reporting a combo of both GAAP and non-GAAP numbers.
“Giving investors both GAAP results and non-GAAP results gives them the best overall view of the business,” he said. “Investors can them use their own judgement as to how to use those two numbers.”