Here’s Why Facebook Inc (NASDAQ:FB) Stock Is Falling After Blockbuster Earnings Report

In the pre-market hours Facebook Inc (NASDAQ:FB) shares are trading in the red after the company warned on Wednesday that ads revenue growth is expected to slow down later this year. However, Facebook Inc (NASDAQ:FB) first quarter 2017 results easily surpassed expectations on revenue and profits. The social media giant which is now a direct competitor of Google in ads space reported a net income of $3 billion, or $1.04 per share, versus the consensus estimate of $0.87 per share. Revenue in the period jumped by a 49% to reach $8 billion. Facebook Inc (NASDAQ:FB) monthly active users reached to 1.94 billion in the period, up from 1.86 billion a quarter earlier.

Facebook Inc (NASDAQ:FB) warned that its ads revenue growth will come down “meaningfully” as it begins dwindling the ad load in the user news feed. Facebook Inc (NASDAQ:FB) said that it has reached a limit of the amount of ads it could show in user feeds without seeing a backlash. Facebook’s total number of ad impressions increased by 32% in the first quarter on year-over year basis. This was significantly down from 50% growth rate recorded in the third quarter of 2016. However, Facebook Inc (NASDAQ:FB) saw blockbuster growth in its ads revenue in the first quarter, about 41%.

Facebook Inc (NASDAQ:FB) also warned that its capital expenditures will rise more than 50% in 2017, as the company will have to spend more to keep the wheels of its massive growth machine moving.

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Revenue growth of Facebook Inc (NASDAQ:FB) is also expected to fall soon. According to Wall Street’s analysts, Facebook’s full-year revenue growth will come in 26% next year, as compared to 38% in 2017.

But massive user growth of Facebook Inc (NASDAQ:FB) social platforms remains its strength. According to RBC Capital Markets analyst Mark Mahaney, Facebook Messenger and WhatsApp will become multi-billion dollar revenue streams over the next 3-5 years. Facebook Inc (NASDAQ:FB) Instagram, the biggest competitor of Snapchat, is expected to generate $3.92 billion in revenue in 2017, according to research firm eMarketer. Facebook Inc (NASDAQ:FB) big bet on VR will also pay off in the near future. Last month, Facebook’s CEO Mark Zuckerberg announced new platforms and products for Augmented Reality and VR. Zuckerberg also announced his plans to replace TV with smartphone-based content projection on walls.