Elon Musk's X sees revenue decline despite claims of record usage

Despite the claims of rising popularity and 'record high' usage from X's owner and CEO, the transition to X has not been financially successful and may jeopardize Elon Musk's social media venture.

The New York Times reported that X CEO Linda Yaccarino is struggling to attract advertisers back to the platform. Internal documents show that X earned $114 million in U.S. revenue in Q2, a 25% decrease from Q1 and a 53% decline from the previous year. The company aims for $190 million in U.S. revenue in Q3, supported by ads related to the Olympics, football, and political campaigns. However, this would still be 25% less than last year's earnings.

In 2022, Twitter generated $4.4 billion in revenue, primarily through advertising. In 2023, under Musk, revenue dropped to about $3.4 billion, with a significant decline in ad revenue. Although X has cut costs by laying off 80% of its staff, it also bears a substantial debt burden from the $44 billion acquisition, adding approximately $1.2 billion in annual debt servicing costs.

Therefore, X remains in a precarious financial situation. Historically, U.S. users have contributed around 50% of X's revenue. Assuming this holds, X's total revenue in Q2 would be around $230 million. This marks a 25% decline from Q1's estimated $287 million, totaling $517 million for the first half of 2024. Including additional revenue from subscriptions, X is on track for about $600 million in H1, projecting around $1.2 billion for the year.

Even with potential boosts from Olympic campaigns, X might struggle to reach 50% of its 2023 revenue, barely covering debt costs. Musk's commitment to free speech could result in significant financial losses for the company.

Another factor is xAI, which recently secured $6 billion in funding, with potential investments from Tesla. This could provide up to $11 billion for X and xAI, though it's uncertain if this funding could directly support X. However, this would be a short-term fix, not a sustainable solution.

Musk may find ways to keep X afloat, possibly by leveraging xAI, but the platform's path to profitability remains unclear. Without convincing advertisers to return or increasing subscription uptake, X's future is uncertain.