Twitter’s shady accounting gets shadier

May 1, 2014, 1:00 PM UTC

FORTUNE — The bad stuff at Twitter is getting worse.

About a decade ago, when tech companies were hot and the bubble was expanding, a number of companies started to invent new ways to report profits. Some commentators dubbed those cherry-picked not-so-bottom-lines “earnings before bad stuff,” or EBBS. Others snickered that the last two letters of that acronym pretty much summed the figures up.

That derision didn’t make the practice go away and, recently, it has staged a comeback. Twitter (TWTR), which reported results on Tuesday afternoon, said it generated $37 million in adjusted Ebitda — its version of EBBS — in the first three months of this year. That was up from $11.7 million in the same period in 2013.

A year ago, though, the spread between what Twitter lost under the official accounting rules — $27 million — and adjusted Ebitda, was just under $40 million. In this year’s first quarter, the gap between its reported results and its adjusted number it has been steering investors to grew to $168 million.

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The justification for reporting adjusted earnings numbers is that they exclude one-time and non-cash expenses. Companies say these are not real, or regular, costs and should be ignored if you want to know how much the company really made.

For the first quarter of 2013, Twitter told investors to ignore about a third of its total costs. But that percentage has been growing recently. Some of the jump was expected. Twitter’s adjusted Ebitda excludes the cost of stock options. Twitter went public last November, which triggered a large one-time expense — $433 million — to pay for stock options that it had issued before it went public. As a result, in the fourth quarter of 2013, Twitter’s bad stuff, the costs it was telling investors they should ignore, had grown to nearly three-quarters of its total expenses.

Twitter’s legacy stock options expense, though, shrunk in the first quarter of 2014. But the percentage of costs that Twitter is excluding from its preferred measure of earnings, which also includes depreciation, interest, and “other costs,” has barely dropped. In the first quarter of this year, the bottom line number that Twitter wanted investors to view as its true profits excluded 68% of its costs.

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Twitter’s revenue rose just 3% in the first quarter from the last three months of the year. That small increase disappointed investors, and Twitter’s stock fell. But if you believe Twitter’s accounting, its real expenses dropped by nearly 60% from the quarter before. And as a result the company’s preferred measure of profits soared, up 216%. Investors should have rejoiced. Admirably, they didn’t.

“If Twitter was reporting all that stuff as a cash expense, people would scream about it,” says Jack Ciesielski, the publisher of The Analyst’s Accounting Observer. “It’s a fixed cost of doing business, and they are trying to tell you to ignore it. And they are going to do it as long as they can, but it’s not good economics.”

Investors may be starting to reach the same conclusion.