Twitter’s earnings falter as it fights with Elon Musk.

Twitter is embroiled in a grueling authorized struggle with Elon Musk as he tries to again out of a $44 billion acquisition of the corporate. It has slowed its hiring because it grapples with a flagging financial system. Its inventory value has slumped.

On Friday, Twitter revealed the toll from these challenges. In an earnings report, the corporate stated the uncertainty brought on by Mr. Musk had harm its enterprise, alongside macroeconomic troubles. Twitter’s quarterly income declined for the primary time since 2020 because it struggled to be a vacation spot for advertisers and swung to a internet loss.

The lackluster earnings report ramps up the blame recreation that has erupted between Twitter and Mr. Musk, who swooped in and uncovered the corporate’s lack of enterprise and monetary prospects as he has gone backwards and forwards over shopping for the social media service. Mr. Musk, who additionally leads the electrical carmaker Tesla, had agreed to purchase Twitter in April and stated he would take it personal. He privately informed buyers that he might quintuple the corporate’s income by 2028 and increase it to 931 million customers that very same yr.

However because the inventory market has teetered, knocking down shares of Tesla — which is his major supply of wealth and has misplaced a 3rd of its worth this yr — Mr. Musk made more and more barbed feedback about Twitter. This month, he moved to terminate the deal. Twitter has since sued him to finish the acquisition, and a five-day trial to adjudicate the matter is scheduled for October in Delaware Chancery Courtroom.

“Twitter now has an acquirer who now not needs it, it has a C.E.O. and a board who need to do away with it, and an worker base who’s caught within the center,” stated Mike Proulx, a analysis director at Forrester. “None of that is good for Twitter.”

In its earnings assertion, Twitter attributed the disappointing outcomes to “promoting trade headwinds related to the macroenvironment in addition to uncertainty associated to the pending acquisition of Twitter by an affiliate of Elon Musk.”

In complete, income was $1.18 billion for the second quarter, down 1 % from a yr earlier, a far cry from the 20 % development that it had as soon as predicted for the yr. Twitter’s income fell 2 % from the primary to second quarter, which roughly coincides with the durations instantly earlier than and after Mr. Musk made his transfer on the corporate.

The corporate’s internet loss was $270 million, a significant swing down from a revenue of $66 million a yr earlier, as prices and bills grew.

There was one vivid spot. Twitter stated it had 237.8 million day by day energetic customers who noticed advertisements, up practically 17 % from a yr earlier.

Mr. Musk didn’t reply to a request for remark.

In latest months, Twitter and different social media firms have confronted a dark promoting market. Fears about an financial downturn and the struggle in Ukraine have tamped down advert spending, which social media corporations depend on for many of their income.

On Thursday, Snap, the maker of Snapchat, reported its slowest-ever charge of quarterly development and a wider loss. Snap’s shares plunged 39 % on Friday, pushing its market capitalization under $17 billion.

Twitter’s and Snap’s earnings might bode unwell for different web corporations that depend on promoting for the majority of their earnings. Meta, the father or mother firm of Fb, and Google report earnings subsequent week.

Twitter faces further worries from advertisers in regards to the potential takeover by Mr. Musk, who has stated he hates promoting and needs to loosen up Twitter’s content material moderation insurance policies, which have prevented advertisements from showing alongside objectionable content material.

Parag Agrawal, Twitter’s chief govt, has informed workers the corporate has not lived as much as its potential and has minimize prices, fired high executives and exhorted workers to disregard Mr. Musk’s fireworks in latest months.

Nonetheless, the financial headwinds detailed by Twitter on Friday might not be an enormous fear to present shareholders if a court docket forces Mr. Musk to take possession of the corporate at his proposed value of $54.20 per share, stated Wealthy Greenfield, a co-founder of LightShed Companions, a analysis agency.

“The humorous factor is, earnings form of don’t matter,” he stated. “On the finish of the day, in the event that they promote the corporate at $54.20, it’s Elon’s downside, not the market’s downside.”

Twitter’s share value was $51.70 on April 25, the day the corporate’s board accepted Mr. Musk’s supply. However the inventory has largely headed downhill since, spending the previous month under $40. Its shares declined lower than 1 % in early buying and selling on Friday however had been up practically 1 % on the shut.

Buyers shall be involved about Twitter’s income provided that the deal collapses and the corporate’s enterprise fundamentals regain their significance, Mr. Greenfield added. “If the deal totally falls aside, we all know the inventory would go down,” he stated. “However the query is, ‘How a lot?’”

Mr. Musk has additionally accused Twitter of deceptive buyers and undercounting the inauthentic accounts on its platform. The corporate has stated that these accounts make up fewer than 5 % of the energetic customers on its platform and that it makes use of consultants to audit its depend. Twitter reiterated this determine in Friday’s submitting.

As its battle with Mr. Musk unfolds, Twitter has tried to keep away from the highlight. For the second quarter in a row, the corporate declined to carry an earnings name with Wall Road analysts, dodging the uncomfortable questions on Mr. Musk’s influence on the enterprise which may have been raised.

“The corporate is exceedingly quiet,” Mr. Greenfield stated. “It’s been months since any buyers had any conversations with the corporate.”

Mr. Musk additionally faces enterprise considerations at Tesla. The carmaker reported on Wednesday that its quarterly revenue had fallen due to provide chain delays and the value of Bitcoin, which the corporate had invested in.