Facebook, the social network planning an initial public offering, said first-quarter profit fell 12 per cent as operating costs almost doubled.
Net income fell to US$205 million ($252 million) in the three months through March, Facebook said.
Sales climbed 45 per cent to US$1.06 billion, a slowdown from 55 per cent in the December period.
Expenses surged to US$677 million, reflecting higher costs of helping marketers reach Facebook's growing user base, which swelled by one-third to 901 million last quarter.
The company may struggle to reach EMarketer's projection for 2012 sales of US$6.1 billion as it awaits the full impact of new tools aimed at wringing more money from advertisers, said Debra Aho Williamson.
"Facebook has a pretty steep hill to climb to meet the expectations that we set out," Williamson said.
Facebook may seek an IPO valuation of US$75 billion to US$100 billion.
The upper end of that range would value the company at about 25 times trailing 12-month sales, more than double Google's valuation when the search-engine operator went public in 2004.
Before last quarter, Facebook's sales were projected to gain at a slower rate this year than Google's at the time of its IPO, according to data compiled by Bloomberg.
At US$6.1 billion, 2012 revenue would be 64 per cent higher than the US$3.71 billion reported in 2011. Google's revenue more than doubled to US$3.19 billion the year it went public.
Facebook unveiled a new metric that showed monthly revenue per user climbed 6 per cent to US$1.21. The company valued its shares at US$30.89 apiece at the end of January, up from US$29.73 at the end of last year.
Facebook, which plans to raise US$5 billion in the largest-ever internet initial public offering, said to finance the US$1 billion purchase of Instagram, it used 23 million shares and US$300 million in cash.
Chief executive Mark Zuckerberg is rolling out advertising services to step up competition with Google and Yahoo and generate higher sales from Facebook's user base.
Facebook said it would add mobile advertising along with new ads to reach users when they log off the website. Facebook said 82 per cent of its revenue came from advertising last quarter, down from 83 per cent in the preceding period.
The company also derived less revenue from gaming company Zynga, which contributed 11 per cent of the total in the quarter, down from 13 per cent a year earlier.
The number of daily active users rose to 526 million, up 41 per cent from a year earlier. Facebook's employee base rose 46 per cent to 3539 from a year earlier.
"Our costs are growing quickly, which could harm our business and profitability," the company said.
Sales had risen 55 per cent to US$1.13 billion in the fourth quarter, and net income had climbed 20 per cent.