X, the social media platform formerly known as Twitter, is facing a major crisis in its core business. In the second quarter of 2025, the company’s ad revenue took a significant hit, shrinking by a substantial margin. This decline isn’t just a minor blip; it’s the result of a perfect storm of factors that have shaken the confidence of advertisers and redefined the platform’s future.
The Advertiser Exodus
The most immediate cause of the revenue drop is a large-scale advertiser exodus. Following the company’s acquisition and subsequent rebranding, a number of major brands began pulling their advertising. This was driven by a combination of concerns. Many were wary of the new direction of the platform, including changes to content moderation and a more relaxed approach to what was once a strictly policed environment. For big corporations, brand safety is paramount, and the fear of their ads appearing next to controversial or extremist content was a risk they were unwilling to take.
This “brand safety” concern was amplified by a series of high-profile incidents and policy shifts. As a result, brands like Apple, Disney, and a host of others significantly reduced or completely paused their spending. For a platform that relies on advertising for the vast majority of its income, the departure of these key players has created a massive hole in its revenue stream.
Shifting Priorities and a New Business Model
Under its new leadership, X has openly stated its ambition to move away from a traditional ad-supported model. The company’s focus has shifted to a subscription-based revenue stream, encouraging users to pay for a premium, verified experience. While this strategy aims to diversify income, it has inadvertently signaled to advertisers that they are no longer the platform’s primary focus.
The push for subscriptions, while potentially lucrative in the long run, has not yet been able to compensate for the massive losses in ad revenue. The number of paying subscribers, while growing, is still a small fraction of the platform’s total user base. This has created a significant gap between the old business model’s decline and the new one’s slow growth, leaving the company in a precarious financial position.
A Decline in User Engagement
Another contributing factor to the ad revenue slump is a noticeable decline in user engagement. While the platform still commands a significant audience, there are signs that daily active users and the time spent on the app are stagnating or even falling. A less engaged user base is less attractive to advertisers, as it means their potential reach is diminished.
This drop in engagement can be attributed to several factors, including the departure of prominent users, technical glitches, and a general sense of instability on the platform. As the user experience becomes less consistent, it becomes harder for X to justify its value proposition to advertisers who have other, more stable options available to them.
The Road Ahead
The road ahead for X is challenging. The company is at a critical juncture, needing to prove that its new business model can be successful while simultaneously trying to win back advertisers. The long-term viability of the platform may hinge on whether it can strike a balance between its new, user-centric vision and the fundamental need to generate revenue from advertising.
While X’s leadership has expressed confidence in their new direction, the Q2 2025 earnings report serves as a stark reminder of the risks involved. The decline in ad revenue isn’t just a financial setback—it’s a symptom of a deeper, more fundamental shift in the platform’s identity and its relationship with the brands that have long funded its existence. The question now is whether X can navigate this transition without completely alienating the very advertisers it may still need to survive.
