Here's a classic Wall Street puzzle: a company beats revenue expectations but still sees its stock drop. That's what happened to Weibo Corp. (WB) on Wednesday after it reported its fiscal fourth-quarter results. The Chinese microblogging giant posted revenue that topped what analysts were looking for, but profits took a much steeper dive than anyone anticipated.

The headline numbers tell the story of two very different quarters. Revenue came in at $473.26 million, which was up 4% from a year ago and nicely above the consensus estimate of $435.75 million. So far, so good. But then you get to the bottom line: adjusted earnings per share were just 25 cents, a far cry from the 43 cents analysts had penciled in. When profits fall that much short, investors tend to sell first and ask questions later.

Digging into the revenue, the recovery was led by advertising. Advertising and marketing revenues hit $403.8 million, up 5% year-over-year. The company said that was "primarily driven by robust growth" from the e-commerce and local service sectors. If you strip out advertising revenue from its major partner Alibaba Group Holding Ltd (BABA), the growth was a more modest 2%. The other part of the business, value-added services, actually shrank by 2% to $69.5 million.

So, the ad business is coming back. That's the good news. The less good news is that it's getting more expensive to run the company, and fewer people are showing up to use it. The adjusted operating margin—a key measure of profitability—fell from 30% a year ago to just 21%. Profits decreased by 26.3% over the same period.

Meanwhile, the user metrics are pointing in the wrong direction. Monthly active users (MAUs) in December 2025 were 567 million, down from 590 million a year earlier. Average daily active users (DAUs) were 252 million, compared to 260 million previously. For a social media company, users are the product; when the product starts to shrink, investors get nervous.

On the bright side, the company isn't running out of cash. It finished the quarter with $2.4 billion in cash, cash equivalents, and short-term investments. It generated $181.4 million from operations and spent $10.4 million on capital expenditures.

In the company's commentary, CEO Gaofei Wang tried to steer the narrative toward the future. He pointed to "strong growth in its AI-powered search," which he said increased user engagement and made finding content more efficient. He also noted that the advertising business "stabilized during the year" thanks to strength in key industries, and that the company is continuing to invest in content marketing and AI to make ads perform better. Perhaps as a consolation to shareholders watching the stock dip, Wang announced that the board approved a $150 million annual dividend for fiscal 2025.

None of that was enough to stop the selling in premarket trading, however. According to market data, Weibo shares were down 3.41% at $9.34. It seems that for now, a beat on the top line and promises about AI aren't enough to offset the reality of falling profits and a shrinking user base.