Why is Elon Musk so keen to get more people to try out xAI’s latest Grok offerings, including text-to-video generation and companions?
Because xAI needs the money, in order to offset its mounting costs, and eventually, hopefully, generate meaningful revenue.
Elon Musk’s grand X project is still struggling to bring in cash, though his AI projects have offered some light, and X is now going all-in to build on that, in the hopes of rejuvenating his whole X Corp organization.
But it still has a significant hill to climb on this front.
First off, on costs. Despite slashing the company’s expenses by reducing staff, and shutting down offices around the world, X is still likely close to break-even this year, based on the insights available.
Back in January, Musk reportedly told an all-hands meeting at X that:
“…we’ve witnessed the power of X in shaping national conversations and outcomes, [but] our user growth is stagnant, revenue is unimpressive, and we’re barely breaking even.”
According to estimates, X’s is set to generate around $2.26 billion in 2025, primarily based on ad sales, with X Premium subscriptions contributing a minor amount.
That would suggest that X’s operating cost is still over $1 billion per annum, with X also required to pay another $1 billion per year in debt servicing related to the loans that Elon took out to purchase the app (which are linked to X the business, not Elon himself).
X’s ad sales are still struggling, after the advertiser exodus following Musk’s changes at the app, though more recently, things have been improving, according to some reports.
But even so, X’s cost ratio is still not great, and without significant take-up of subscriptions, or a big turnaround in X ads, there’s not a lot on the horizon to right the ship.
Which leads to xAI, and Elon’s new quest to win the AI wars.
xAI has rapidly become the company’s main focus, though the development of X’s AI project is also expensive, with billions now sunk into the xAI project.
xAI has already raised over $17 billion in funding, with a lot of that going towards the construction of its massive data centers, including its record-breaking Colossus project in Memphis. It’s also building more data facilities, and the Wall Street Journal reported last month that X is seeking an additional $12 billion in funding for the next stage.
So xAI has seemingly invested over or around $17 billion thus far, which means that it needs to start making big money in order to recoup those costs, while xAI also acquired X the platform back in March, which essentially combines their funding and revenue.
So how is xAI looking on the revenue side?
A new report from Wired’s Kylie Robison has shed some light where xAI is placed in this respect, with the business reportedly generating just over $500 million in July, based on subscriptions and API access.
xAI’s intake has increased from $150 million in January, so Elon’s AI projects are gaining traction, and it seems plausible that xAI could be bringing in around $2 billion per quarter by the end of the year.
Which is a significant run-rate, though whether that’ll be enough to satisfy Elon’s investors, and show a clear path toward recouping its costs, remains to be seen.
Because even if xAI ends up generating $8 billion in 2026, it could still be in the hole by over $20 billion, based on the combined costs of its own development and X’s expenses (note: this is if it does seek an additional $12 billion in funding).
And many of these are ongoing, so xAI wouldn’t be looking to generate a profit for some time, unless it can significantly boost its subscription intake, or get more out of X ads.
So while X is seemingly doing better, and xAI’s prospects are looking promising, it is worth noting the scope of the challenge ahead of it. And with Meta investing hundreds of billions into its AI projects, and OpenAI continuing to launch new models, it’s hard to see xAI becoming the main player in the broader AI race. Combine that with ongoing controversies around how xAI is training its tools, particularly its approach to information that Elon doesn’t like, and a lot remains to be seen, despite early promise.
But then again, maybe xAI doesn’t have to be leading the way, and maybe, it’s also still on track to win government supply contracts, which would give it a more viable, sustainable path to ongoing income.
But if you were wondering how X is going to make money, and whether the platform can even stay in business, and whether its AI push is actually viable, these are the elements you need to keep an eye on.
It’s also why Elon’s making a big effort to get more media attention for his latest AI additions.
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