Facebook recorded a decline in the number of daily active users for the first time in its eighteen-year history.
Meta, the social network's parent company, said the number of daily active users fell to 1,929 billion in the last quarter of 2021, compared to 1,93 billion in the three-month period before that.
The company also warned of slowing revenue growth due to competition from the likes of TikTok and YouTube, while advertisers are also cutting back on spending.
Meta shares fell more than 20 percent in after-hours trading in New York.
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The drop in Meta's share price reduced the company's market value by about 200 billion dollars.
Shares of other platforms and social networks, including Twitter, Snap and Pinterest, also fell sharply in extended trading.
Mark Zuckerberg, Facebook's CEO, said the company's sales growth has slowed as audiences, especially younger users, have gone to competitors.
Meta, which owns the world's second-largest digital advertising platform after Google, also said it was affected by changes to privacy rules on Apple's operating system.
The changes have made it harder for brands to target and measure advertising on Facebook and Instagram and could have a "$10 billion" impact this year, said Dave Wenner, Meta's chief financial officer.
Meta's total revenue, most of which comes from advertising, rose to $33,67 billion in the period, narrowly beating market forecasts.
It also forecast revenue of $27 billion to $29 billion for the next quarter, which was lower than analysts expected.
Although the company has invested in video itself to compete with TikTok, the revenue from it is less than that brought in by traditional offerings on Facebook and Instagram.
Zuckerberg said he is confident that investments in video and virtual reality will pay off, as they have done in the past with mobile advertising and Instagram Stories.
But, he noted, the company didn't have to contend with a major rival during previous strategy changes.
"The teams are working pretty well and the product is growing very quickly," he said.
"But TikTok has already become a major competitor and continues to grow quite quickly as well."
Analysis by James Clayton, technology reporter
Meta on the run?
Facebook has always been a growing platform.
For every quarter of its existence, the overall numbers have grown.
However, in the last few years, growth has stalled in Europe and the US.
This was masked by the increase in the number of users from the rest of the world.
Facebook just isn't as popular with younger people as it used to be.
By its own admission, TikTok is hurting Facebook's business.
But there are other reasons investors are worried about Meta.
Meta changed its name because it wanted to focus on metaverse.
But Meta isn't even close to building a metaverse yet, it's a dream right now.
Instead, it's pouring billions of dollars into trying to create it, all because Mark Zuckerberg thinks there's an appetite for it, which is a huge risk.
Maybe the answer to Meta's current problems would be to buy TikTok?
Well, US regulators would never allow that because of anti-trust laws.
And Facebook is now seen by many in Silicon Valley as a toxic brand.
It's certainly not a cool place to work in the same way it was ten years ago.
This makes it difficult to attract talent.
Meta has serious problems going forward. This milestone could be just the beginning.
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