Advertising loses its effectiveness, subscription transformation, and Musk's social platform X saw a decline in revenue in the second quarter compared to the previous quarter

Compared to before its privatization, the business scale of the social platform X, owned by Elon Musk, has significantly shrunk.

According to a report by Bloomberg on Saturday, the latest data disclosed to private investors shows that X's revenue for the second quarter of 2025 (ending June 30) is approximately $707 million, a year-on-year increase of over 20%, a slight quarter-on-quarter decrease of 2.2%, but a staggering 40% drop compared to the same period in 2022 (the last financial report released when it was a publicly traded company).

The structural decline in advertising business is forcing this social giant to completely shift towards subscription services and data licensing, providing "fuel" for its sister company xAI's AI large models, becoming the core narrative for its future.

Shrinking Advertising Base and Strategic Shift

For the X platform, advertising was once its lifeblood, but now, this traditional growth engine has given way to subscriptions and data licensing in X's strategic landscape.

In July of this year, seasoned executive and CEO Linda Yaccarino, who was well-versed in the advertising business, left, which was seen as a clear signal of X's accelerated transformation towards becoming a source of training data for artificial intelligence (AI). Its strategic focus has shifted to supporting Grok, the chatbot of Musk's other company xAI.

The fluctuations in revenue data also confirm the growing pains of this transformation period. Although the second quarter's revenue benefited from election and post-election activities, growing over 20% year-on-year compared to the same period in 2024, analysts believe that the foundation of this surge is not stable.

After Trump's victory, Musk had a close relationship with him, attracting some advertisers to increase their spending to curry favor with the new government, but as their public discord emerged and Musk announced his withdrawal from politics, this "political dividend" quickly dissipated.

Amidst the severe transformation pains, X's profitability has also shown fluctuations.

Data shows that in the second quarter of this year, its gross profit decreased by 24% quarter-on-quarter, but still grew by over 30% year-on-year. Meanwhile, the adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) was approximately $360 million, slightly lower than the beginning of the year but achieving a 33% increase compared to the same period last year.

Additionally, sources indicate that due to last year's financial metrics containing complex adjustments, the information disclosed to investors is limited, casting a shadow over the accurate assessment of its financial health.

Balance Sheet: Increased Cash Reserves, Debt Remains a Burden

Despite revenue pressures, X's overall business has begun to show signs of stabilization after the turmoil following the acquisition.

A positive signal is the significant increase in its cash reserves, with cash on the balance sheet rising from approximately $244 million at the end of 2024 to nearly $1 billion.

This is mainly due to a recent round of equity financing, where Musk and other investors injected $900 million, stabilizing X's valuation at around $44 billion, roughly in line with the acquisition price in 2022.

However, on the other side of the scale is the heavy debt burden. The approximately $12 billion debt incurred from Musk's acquisition of Twitter remains a significant burden for the company Despite X refinancing a $1.23 billion loan earlier this year to reduce costs, high debt repayment expenses still persist.

AI Injects New Narrative, Imagination and Risk Coexist

As traditional businesses face pressure, Musk is seeking a new, more imaginative capital story for X, with xAI becoming a key component.

Earlier this year, X completed a merger with xAI, with X holding an 11% stake in xAI. With xAI recently completing a new round of financing at a valuation of up to $200 billion, the value of this stake held by X may have doubled, becoming a highly imaginative asset off its balance sheet.

It is worth mentioning that this is also a crucial part of Musk's strategy to build his "Empire Synergy." His rocket company SpaceX has invested in xAI, and shareholders of electric vehicle manufacturer Tesla will vote in November on whether to follow suit with an investment.

However, behind the high return expectations lies equally enormous risks. According to media reports, xAI is aggressively investing in infrastructure such as data centers and chips at a rate of $1 billion in losses per month.

For X, this means its future fate is no longer solely determined by its social media business but is closely tied to a high-risk, high-investment AI gamble