The sudden surge of investor interest in Elon Musk’s X has been reported recently, but the social network’s key financial performance is worth a special mention. X managed to turn a profit last year, while Twitter was generating losses before Musk bought the company. At the same time, X’s revenue for last year is still almost half of its 2021 level.
Image source: Unsplash, BoliviaInteligente
Let us recall that Elon Musk bought the social network Twitter in October 2022 for $44 billion, using a lot of borrowed funds, which now lie as a heavy burden on the company X, which is the legal successor to Twitter. X’s debt obligations are approximately nine times the company’s revenue, while the risk limit is six times the value from the point of view of the banking community.
The most interesting thing is that even with such an unfavorable balance of risk factors, there are those willing to invest in X, judging by rumors about the company’s capitalization growing to the “initial” $44 billion for 2022. The lack of transparency in X’s reporting, high debt burden, and the outflow of advertisers and subscribers immediately ceased to frighten investors as soon as it became clear that Elon Musk had become one of Donald Trump’s most influential associates as US President.
According to unofficial data, X ended the year before last with revenue of $2.96 billion, and by the end of 2024 it had decreased to $2.6 billion. For comparison, in 2021, Twitter could boast revenue of $5.1 billion, but then it suffered losses, and by the end of last year, X’s profit according to the EBITDA method reached $1.4 billion. True, this amount does not take into account the subsequent deduction of taxes, interest on loans and depreciation of assets, but the main thing is that under Musk, the company still made a profit, at least according to this calculation method.
Image Source: Bloomberg
By the way, cooperation with its sister company xAI brings both benefits and inconveniences to X. On the one hand, the former transferred $65 million in license fees to the latter last quarter. In addition, other xAI infrastructure brought X additional revenue of more than $200 million. On the other hand, X had to spend money on purchasing expensive computing accelerators for xAI. For this reason, X ended last year with $400 million in free cash, while at the time of Elon Musk’s purchase of Twitter, this amount reached $1.4 billion.
Musk’s political activities are driving away some advertisers from X, but attracting others. Amazon, Apple, Kraft Heinz, and Stellantis NV, with their entire range of automobile brands, have recently returned to the social network’s pages. This trend should strengthen X’s cash flow, help it pay off its debts faster, and turn the company into a stable source of income for Elon Musk.