The Guardian has reported a 15 per cent rise in operating losses to £44.2m for the year to March 2012 and appealed for journalists willing to take voluntary redundancy.
Revenue is understood to have fallen slightly to £196.2m from £198.2m in 2010/2011.
Editor-in-chief Alan Rusbridger yesterday insisted that Guardian and Observer's early focus on digital journalism has paid-off as it was reported that digital revenues were up 16.3 per cent to £45.7m.
In May, unique vistors numbers to Guardian.co.uk increased by 18.4 per cent to 60,847,400 according to ABC while print sales of The Guardian dropped 18.3 per cent year on year to 214,703 and sales of The Observer fell 13.7 per cent to 252,780.
A spokeswoman for the company said it was "on course" to save £25 million by the end of a five-year programme to focus more on online publishing by 2016/17, adding: "As part of that, in editorial we aim to reduce costs by £7 million to fund investment and GNM has this week re-opened the voluntary redundancy programme for editorial."
The spokeswoman said "investment in digital platforms and set-up costs for the five-year transformation programme" was partly responsible for the operating loss.
Rusbridger said: "Having the foresight to start exploring digital platforms as early as 1999 has given us a great foundation on which to build a secure future for the Guardian. This has been an extraordinary year for our journalism, all the more so for having the largest ever audience for our work."
GMG chief executive Andrew Miller said: 'Last year we explained how we would, over five years, transform GNM so that it not only survives the transition to digital but thrives on it. There is much work to be done but we are already seeing a significant surge in revenue from our investment in digital, helping GNM to maintain our revenues in a very tough market. Meanwhile, Guardian Media Group has grown its cash and investment fund and continues to be able to support the development of our journalism.'
GMG said that the combined balance of its cash in the bank and investment fund stands at £225.8m (compared with £197.4m) a year ago.
The increasing loss for GNM provides evidence that the double-dip recession and loss of public sectors jobs advertising are hitting the bottom line while the 'digital first'strategy, announced in June 2011, has yet to translate into a decrease in losses.
Losses for GNM in 2010/2011 stood at £38.3m compared with £37.8m in 2009/2010 and £33.7m in 2008/2009.
In 2010/2011 turnover at GNM dropped to £198.2m compared with £221m in the same period a year earlier.
Yesterday's figures emerged as a result of briefings to staff. Guardian Media Group's full results will be released in August.