Revenue fell 6.5% quarter-on-quarter to $1.06bn (£657m) in the three months to 31 March – although it is still up 45% year-on-year. Profit dropped 12% year-on-year to $205m (£127m) and was down 32% from the end of 2011.
Facebook says advertising spending is traditionally strong in the fourth quarter of each year, but the rapid growth in its business may have “partially masked” the seasonal impact on the first quarter to date.
Advertising revenue now accounts for 82% of Facebook’s total income and was up 37% year-on-year. Income from payments and other fees were up 98% year-on-year.
The profit slowdown was also blamed on increased spending ahead of Facebook’s IPO, which has doubled over the past 12 months – outpacing the 45% revenue increase in the period. Such spending included its purchase of photo app Instagram, which it bought for $300m (£186m) in cash and 23 million shares.
Marketing and sales expenses rose by $123m (£76m) year-on-year as the social network looked to make itself attractive to investors ahead of its planned stock market flotation.
Facebook is preparing to raise up to $5bn (£3.1bn) in an initial public offering, which could value the social network at $100bn (£62bn).
The world’s largest social network now has 901 million monthly active users globally, posting 3.2 billion likes and comments per day.