Facebook (FB) blew away its earnings report, as it has just about every quarter for the past three years. And yet, investors weren’t happy. Shares traded down 7% in after hours trading.
The stock fell, despite the fact that Facebook increased its revenue by 56% over the same period last year, increased its net income and earnings per share by 166% and 165%, respectively, and increased its monthly active users by 16% to 1.8 billion. The company reported enviable operating margins of 45%. Facebook is growing faster than startups and high-growth tech companies that arguably have much more room to grow than it does, and it’s a profit machine, to boot. CEO Mark Zuckerberg has had an impressive run.
So why did shareholders punish the company by trading its stock down? Blame the adverbs. Facebook has been warning investors all year that it will increase its costs and may not be able to maintain its blockbuster revenue growth and profits for long.
But this quarter, the warnings seemed more serious. Particularly, CFO Dave Wehner’s use of the word “meaningfully” to describe the falling growth rate of Facebook’s ad revenue in the next year. “We expect to see ad revenue growth rates come down meaningfully,” he said.
On Twitter, astute journalists following the call noted that last quarter, he said the growth would decline “accordingly.”
More specifically, Facebook said it has maxed out on its “ad load,” or the number of ads it can show each user. That was a big factor in Facebook’s revenue growth, and it won’t contribute much going forward.
That’s one of several concerns about Facebook’s future growth. For starters, the company is running out of potential new users on its main app, the “big blue” Facebook app. Plus, the company’s lead in the mobile advertising market could shrink as Google (GOOG) and others quickly catch up.
For more on Facebook, watch Fortune’s video:
Lastly, Facebook’s next generation of growth engines—Oculus VR, Facebook Messenger, and WhatsApp—are only beginning to figure out how they’ll make money, and however that happens, it likely won’t be via advertising, the business Facebook knows best. There will be a harsh learning curve. (The phrase “early days” is a favorite among execs.)
Facebook’s stock has been on a four-year tear. If you bought stock not long after the company went public in 2012, you’d be up around 600%. But today, Facebook trades at a rich price-to-earnings ratio of 60, far higher than many of its peers with less profits. Some contrarians (including me) have suggested that Facebook’s winning streak can’t last forever. Investors may be starting to feel the same way.