Facebook posts Q2 gains, but expenses worry investors; shares rise, fall

Facebook has met nearly all expectations for the second quarter, yet shares fell soon after the release of its earnings report.

Revenue was at $4.04 billion, up 39% from a year ago, beating analysts' forecast of $3.99 billion.

Earnings were at 50 cents a share, higher than Wall Street forecast of 47 cents.

"The quarter was a great quarter almost any way you look at it," Facebook Chief Financial Officer David Wehner told CNBC.

Despite the rosy numbers, Facebook's stock fell by as much as 5% in after-hours trading.

This left some wondering what went wrong. Looking closer into the earnings report, observers noticed that Facebook's expenses grew faster than its gains. Costs and expenses rose 82% from a year ago to $2.76 billion.

This is hardly surprising, as Facebook told investors earlier this year it would be investing heavily on creating new technologies, like its virtual reality headset Oculus. The social network also said it was hiring top engineers and building data centers.

But this did not calm nerves. "People are worried about runaway, undisciplined, expenses and ultimately, unsuccessful expenses," S&P Capital IQ analyst Scott Kessler told USA Today.

There's more. The California-based company failed to meet daily active user expectations. Over the past three months, some 968 million users checked their accounts every day, lower than analysts' forecast of 970.5 million.

Still, that figure was up 17% from the previous year. "In fact, Facebook added more daily active users in the U.S. alone in the quarter than Twitter added monthly active users globally," Jan Dawson, chief analyst with Jackdaw Research, told USA Today.

Facebook's advertising revenue from mobile also rose 76%, up from 62% last year.

"The important story here is we're executing well on the business, the community is growing, engagement is strong," said Wehner. "We didn't have a mobile business three years ago, and that's now three quarters of our ads revenue."

Following that comment, Facebook's stock recovered its losses. But when the Facebook CFO later said revenue growth would likely slow for the rest of the year, shares again fell.

"The Street must have been expecting something pretty outlandish to react as badly as it has," Jan Dawson, chief analyst with Jackdaw Research, told USA Today.