It's not looking good for Twitter as it gears up for a legal battle against Elon Musk.

Twitter issued its latest quarterly report on Friday, noting a loss of eight cents a share. Revenue reached $1.18 billion in the second quarter or a decline of 1 percent year-over-year. The posted numbers vastly missed Refinitiv analyst estimates, who were expecting earnings of 14 cents a share as well as revenue of $1.32 billion.

The company attributed its miss to "advertising industry headwinds associated with the macroenvironment as well as uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk."

"Twitter's earnings come just after Musk announced that he would be backing out of the $44 billion dollar deal that made headlines earlier this year," Zarnaz Arlia, CMO of brand insights company Emplifi, said via email. "Twitter's fluctuating stock price undoubtedly correlates with Musk's Twitter takeover."

Shares dropped about 1 percent when the report was released before the market opened. Overall, the company's share value has dropped about 8 percent since the beginning of the year.

"Twitter has reached the end of a turbulent quarter, and the turmoil isn't over yet," Jasmin Enberg, a principal analyst at eMarketer, stated in an email. "Twitter has been working hard to convince advertisers that it is business-as-normal, rolling out new ad- and commerce-related products in Q2. But nothing is normal right now at Twitter, and if it hadn't been so distracted by the Musk saga, it could have focused better on fixing the problems at hand."

Twitter's ongoing struggles over who will own the company will play out in Delaware's Chancery Court during a five-day trial in October. But in the meantime, investors still want to see that the company can prove its advertising-reliant revenue model can keep the company afloat.

However, with inflation creating rising costs and a predicted recession looming ahead, many companies are pulling back on their advertising budgets. If they are choosing to spend, they want to make sure each dollar leads to a direct sale. Unfortunately, Twitter's platform is better meant for brands looking to create awareness about their products or events.

Musk's involvement in potentially owning the company may have stirred the pot further. Advertising agency R/GA previously told Cheddar it noticed a 15 percent decrease in spending on Twitter ever since Musk tried to buy the company. And there are plenty of other digital platforms to spend advertising dollars without having to deal with the controversy, added Mike Shields, founder of Shields Strategic Consulting.

"If you're a Twitter salesperson over the past few months, you're probably trying to get the hell out of there," Shields said. "Meanwhile, how do you look advertisers or an agency in the eye and say 'Don't worry, this program I'm trying to sell you is great and won't get completely blown up if Elon buys the company and makes huge changes, or if he doesn't buy it and causes tons of collateral damage.'"

However, Emplifi's Arlia believes Twitter may be able to bounce back after the courtroom controversy and economic issues settle. The company's investment in algorithm updates to create personalization and to allow users to control their social feeds, as well as the fact that it is still an engaging place for online conversation keeps her confident.

"They have so many brilliant features in the pipeline that will be the breath of fresh air the platform needs to appeal to current and new audiences," she said.