Elon Musk’s X Holdings Corp is evolving from a social media platform powered by mainstream advertisers to one betting on dollars generated from artificial intelligence and subscriptions – a change that appears to have buoyed its revenue lately.
The platform, formerly known as Twitter Inc, posted $91 million (€80 million) in revenue tied to data licensing and subscriptions in February, a 30 per cent increase from a year earlier, according to materials shared with investors related to a new debt sale. Advertising revenue also grew, though at a more modest 4 per cent clip, the materials show.
A representative for X declined to comment.
It is a contrast from when Mr Musk bought X nearly three years ago. The platform was heavily reliant on ads from conventional blue-chip companies, but saw that kind of revenue erode under his leadership as the billionaire implemented severe changes to its business model.
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Ad revenue has since stabilised, albeit at a lower level, while revenue from data licensing and subscriptions has grown, according to the materials shared with investors. Meanwhile, Mr Musk’s decision to combine X with his artificial intelligence company xAI last month only further reshaped its focus.
Twitter posted advertising revenue of $4.5 billion in 2021, its final full year as a publicly traded entity before Mr Musk’s acquisition. It is projected to generate $2.26 billion in global ad sales this year, up 16.5 per cent, according to Emarketer, Bloomberg previously reported.
Still, with X’s revenue on the mend, its costs sharply lower and its leader tied closely to US president Donald Trump, investors have been feeling more optimistic. Morgan Stanley launched a sale on Thursday of the final bits of debt related to Mr Musk’s 2022 buyout of the company after a sharp turnaround in sentiment about its prospects.
In its financial disclosures, X boasted nearly $1.5 billion in annual earnings before interest, taxes, depreciation and amortisation, a common earnings metric known as “Ebitda” on Wall Street.
Its improving metrics allowed the company to raise almost $900 million in a new equity round from Mr Musk and other investors that valued the company at $44 billion – around the same valuation he bought it at – Bloomberg previously reported.
X’s balance sheet is improving as well, according to the financials recently shared with investors. The company now has almost $1.1 billion of cash on hand, up from the roughly $120 million to about $320 million it maintained during the year through January. It expects to use some of those funds to either repay the $12.5 billion in expensive debt it still owes or else fund tech investments and use it for other purposes.
Debt is still weighing on Mr Musk’s firm.
In March alone, X paid about $200 million in debt-servicing costs related to its buyout, said people familiar with the matter who were not authorised to speak publicly. The firm’s annual interest expense by the end of 2024 was more than $1.3 billion, they added.
The Morgan Stanley-led debt offering kicked off on Thursday is intended to refinance a final, expensive part of X’s buyout financing that carries a 14 per cent interest rate. Banks are marketing the debt with a 9.5 per cent fixed coupon, which would help cut costs for the company. X expects to reduce its annual interest expense by $43 million, the people said.
X’s heavy debt load has been an issue not just for the company, but for the banks that helped Mr Musk buy out the company. The lenders had held on to about $12.5 billion of that debt, unable to sell it to investors until January and February of this year, when they offloaded about $11.2 billion’s worth across three sales.
A month ago, Mr Musk said xAI, his artificial intelligence start-up, had acquired X.
Information shared with investors shows that he created a holding company, dubbed XAI Holdings, that owns both X and xAI. In earlier debt sales, banks and company management had touted X’s relationship with Mr Musk’s start-up as a sweetener to spur investor interest.
