Facebook's earnings and revenues fell in the first quarter of 2012, the company said in a regulatory filing ahead of what is expected to be a $100bn stock market sale.
The company has been spending heavily in the initial public offering (IPO). It said seasonal factors were also to blame for the slip, as advertisers spent less in the first quarter compared with the last three months of last year.
Facebook's revenue in the first three months of the year rose 45% year-on-year to $1.06bn, compared with the first quarter of 2011. But profit during the quarter dropped 12% to $205m from $233m a year earlier as costs soared.
Facebook is still growing fast. Advertising revenue was up 37% and payments and other fees rose 98%. The company now has 901 million monthly active users and looks set to hit a billion by the end of the year on current trends.
Analyst Sam Hamadeh said the latest profit figures were a "disaster". "This company has done everything it can to have a blowout the first quarter. This is absolutely not what they wanted," said Hamadeh, chief executive of PrivCo, which specialises in private companies.
He said Facebook had increased the number of ads its customers see, introduced its new timeline look and made several other attempts to increase profits as the IPO approached.
"You have to ask: has this company peaked?" he said. "We often say that companies go public too early. Could this one be too late?"
Costs and sales and marketing expenses rose – in part related to expanding data centre operations and more people in sales and marketing. For the three months ending 31 March, costs were $677m, compared with $343m for the same period last year.
Revenues in the first quarter were 6.5% lower than in the fourth quarter of 2011 and profit down 32% from the end of last year. Facebook said the fall in advertising spending was driven by "seasonal trends".
Facebook also gave new details about its purchase of Instagram, which it bought earlier this month. Facebook bought the photo sharing site for $300m in cash and 23 million shares.
About 11% of Facebook's revenue for the quarter came from Zynga, the social gaming company. Zynga is set to report its own results on Thursday afternoon, and its numbers will be closely watched for more news on Facebook's fortunes.
