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.

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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.

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"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.

Currently, King Digital is in the process of trying roll out new games to replace its addictive Candy Crush Saga game, which drove over 1,000% user, profit and revenue growth and lead to the company initial public offering on the New York Stock Exchange at an over $7 billion valuation.

In the first quarter, bookings at the company related to Candy Crush Saga fell to 67% of overall bookings, while Farm Heroes Saga rose. King Digital's 1% sequential rise in bookings meant that growth at Farm Heroes surpassed declines from Candy Crush.

Sterne Agee analyst Arvind Bhatia said Candy Crush bookings dropped more than expected. In contrast to a 2% sequential drop in Candy Crush bookings, King Digital reported that bookings fell 13% quarter-over-quarter to $429.5 million. Bhatia had also forecast Candy Crush to represent 75% of overall bookings, indicating that paying user activity slowed faster than expected.

Although a rise in Farm Heroes Saga bookings helped to cushion King Digital top-line, expense, or the cost to achieve bookings, rose as the company marketed the game. Meanwhile, equity-based compensation hit King Digital's bottom line.

Still, there is a way to forget about those worrying trends for King Digital, which currently carries a market capitalization on par with companies as First Republic Bank (FRC) - Get Report, Goodyear Tire (GT) - Get Report, Frontier Communications (FTR) - Get Report or NasdaqI:IXIC.

Daily active users (DAUs) increased to 143 million in the first quarter and monthly active users (MAUs) increased to 481 million, rising over 200% year-over-year and at least 18% sequentially. Monthly unique users (MUUs) also rose at similar rates to 352 million total users.

Given that King Digital's paying users fell to less than 12 million as monthly active users surged, MUPs now account for less than 3.5% of the company's total MUUs.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), an accounting metric that excludes some expenses like stock-based compensation (SBC), rose over 200% to $249 million in the first quarter from year-ago-levels. Even excluding SBC, adjusted EBITDA fell 8% sequentially "primarily due to planned increases in marketing spend in conjunction with the launch of Farm Heroes Saga on mobile during the period, as well as increased investments in headcount."

Analysts, of course, are almost universally bullish on King Digital and see the company as undervalued based on full-year and 2015 earnings multiples.

Still, the basic fact is that profits, paying users, and adjusted EBITDA fell sequentially. This is a worrying sign for a company that only began generating meaningful profits in 2013 and that went public just a few months ago.

Apparently, the markets noticed. After rising as much as 5% in pre-market trading and initially opening higher, King Digital shares were falling over 14% to $16 a share in late Wednesday afternoon trading.

Bottom Line: There are fewer people paying for King Digital games, meaning that the company's earnings have become more concentrated. In coming quarters, this could augur poorly for King Digital's growth.

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-- Written by Antoine Gara in New York.

Follow @AntoineGara