King Digital's Tiny Troubles

Updated from 9:31 a.m. ET with Sterne Agee analyst comments and afternoon share prices.

NEW YORK (TheStreet) - By tech company standards, King Digital Entertainment (KING) posted stellar first quarter results that included $606 million in revenue and $127 million in net income on rising user growth for the popular mobile game maker. Yet, there are worrying signs in King Digital's earnings that investors might be wise to focus upon.

>> Read More: Analysts Still Courting King Digital

King Digital's monthly unique paying users (MUPs), the less than 12 million users that pay for digital goods and drive pretty much all of the company's revenue and earnings, fell between the fourth quarter of 2013 and the first quarter of 2014. That drop in King Digital MUPs came as the company reported strong growth on just about every other user metric, and should be worrying for those who want to project future earnings.

WATCH: More market update videos on TheStreet TV | More videos from Keris Alison Lahiff

"First quarter 2014 MUPs declined compared to 12.2 million in the fourth quarter of 2013. We believe this decrease is primarily a result of reduced payment activity among the occasional payers on the network, in addition to the introduction of virtual currency in some of our games," King Digital said in its earnings.

As a result, revenue barely grew quarter-over-quarter, and net profits tumbled 20% amid heavy marketing spending for the company's Farm Heroes Saga game and a 30% sequential rise in equity-related compensation to $78 million.

If you liked this article you might like

Mainstream Media Miss Message; IPOs Could Kill the Bull: Jim Cramer's Best Blog

Cramer: Here's How IPOs Could Kill the Bull

Nintendo's Super Mario Run Exposes Shift in Game Player Expectations

Big Retailers Aren't Capitalizing on Pokémon Go Like They Should

Activision's Disappointing Quarter Only a Temporary Setback for the Game Maker