Facebook CEO Mark Zuckerberg
Photo by Josh Edelson/AFP/Getty Images

Another quarter, another blockbuster earnings report for Facebook

By Erin Griffith
July 27, 2016

Facebook has been on an impressive winning streak. And for each one of its last few earnings calls, I’ve written the same thing: Investors love this company. It delivers huge growth and profit every quarter.

This quarter was no exception—Facebook fb blew the doors off of analyst expectations, increasing revenue by 59%. The company’s monthly active user number grew by 15% to 1.71 billion, its strongest growth in more than three years. At a time when growth at tech and media companies would normally plateau, Facebook’s growth has accelerated. CEO Mark Zuckerberg and crew took yet another victory lap on their earnings call Wednesday. Shares jumped by 6% in after hours trading.

It sounds a little crazy to question how long Facebook’s winning streak can last, amid such a blockbuster quarter. But there are signs Facebook’s status as an investor darling status may fade as it struggles to live up to high expectations.

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Some investors believe that Facebook may see a drop in ad spending as the funding for tech startups pulls back. Startups are big customers of Facebook’s popular app-install ads. Those ads are especially big on Instagram, since they’re so effective. (It’s easier to “convert” a mobile user into downloading an app than it is to “convert” them to sign up for a newsletter or buy something on their phone.) Instagram is expected to bring in as much as $3 billion in revenue this year.

Meanwhile, some investors fear Facebook’s ability to keep its monopoly on social media. Andrew Left, a short seller at Citron Research, recently told Bloomberg he’s betting against Facebook because he believes investor expectations have outpaced the reality of Facebook’s growth in the next one to two years. What’s more, the popularity of Snapchat and, more recently, Pokemon Go show how “volatile and fragile” Facebook is to new trends.

Rich Greenfield, an analyst with BTIG, downgraded the stock from a “Buy” rating to “Neutral” earlier this week. “With Facebook stock now over $120, exceeding the $117 price target we set one year ago this week, we believe the risk/reward is no longer compelling,” he wrote. “Investor expectations over the past year have risen dramatically and we now feel the bar is simply too high.”

Facebook Will Be All Video in 5 Years

I hinted at these risks back in March in my column, “How Long Can Facebook’s Winning Streak Last?

With 1.6 billion people using Facebook each month, the company is running out of potential new users. Its lead in the mobile advertising market could shrink as Google goog and others quickly catch up. And Facebook’s next generation of growth engines—Instagram, Oculus VR, Facebook Messenger, and WhatsApp—are only beginning to figure out how they’ll make money. (The phrase “early days” is a favorite among execs.)

That will be new territory for Zuckerberg and crew. WhatsApp, the messenger service it bought for $19 billion in 2014, and Messenger, its homegrown app, are expanding into the unsexy business of customer support, which is new territory for Facebook. Making and selling hardware, as it plans to do with virtual-reality headset maker Oculus VR, is even further afield.

So far the nay-sayers, myself included, have been dead wrong. Anyone who shorted the stock at the time of my story would be hurting right now. Facebook shares are up about 15% since March. And that’s not including today’s post-earnings bump.

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