Musk says Twitter may reach positive cash flow by second quarter

Elon Musk said that Twitter’s finances are improving to the point that the social media company could return to posting positive cash flow next quarter, as the chief executive attempts to cut costs, lure back advertisers and navigate the platform’s tech woes.

Speaking at a Morgan Stanley investor conference on Tuesday, Musk said that cash flow at the company he bought for $44bn last year would break even in the second quarter, adding that it might even become positive in that period.

He said Twitter’s costs were projected to run at about $3bn a year — including $1.5bn of interest payments on the $13bn of debt he used for the purchase — down from the $4.5bn he said the company would have otherwise incurred in 2023.

However, Musk acknowledged a “massive decline in advertising”, as marketers left the site over his plans to relax content moderation. In 2021, the last full year that Twitter published its revenues, it made $5.1bn.

Twitter generated net cash of $126mn in the first quarter of 2022, which fell to $30mn in the second quarter, its last filing of financial results as a listed company.

Musk has led dramatic cost-cutting efforts in order to wrestle Twitter’s finances under control, including several waves of job cuts. Nevertheless, the shift to a leaner operation has caused internal chaos and repeated technical issues for users.

The company has also faced mounting scrutiny from regulators over its ability to comply with social media rules. On Tuesday, a report by the Republican-led House judiciary committee said regulators at the Federal Trade Commission has previously asked Twitter to hand over internal communications relating to Musk since the acquisition, as well as details around its new premium subscription service, Twitter Blue.

In a wide-ranging interview with Morgan Stanley banker Michael Grimes, Musk said he had reduced cloud spending by 40 per cent and taken Twitter from using three to two data centres as he tries to improve its finances. Meanwhile, a company presentation showed Twitter’s monetisable daily active users numbers had risen to 253mn, its highest ever.

Musk added that some brands were returning to the platform and he now planned to improve the relevance of advertising, allowing marketers to target users by keywords and by interest. Twitter was “poorly monetised”, with it making 5 to 6 cents per hour per user, he said, adding that he hoped to raise this to at least 15 cents an hour.

“The natural potential here for Twitter revenue is gigantic,” Musk said.

In the future, he said he still planned to introduce payments to the platform, adding that he believed it was “possible to become the biggest financial institution in the world just by providing people with convenient payment options”.

Grimes, Morgan Stanley’s head of technology investment banking who has led the initial public offerings of Uber and Facebook, told Musk during the interview that the media had painted an “inaccurate narrative” about his ownership of the platform, and that the “value is clear” regarding the changes he had implemented.

Morgan Stanley led the syndicate of banks that loaned Twitter $13bn in November, which partly funded Musk’s takeover. Morgan Stanley provided the biggest chunk, about $3.5bn. The banks, which also include Barclays and Bank of America, face potentially large losses on the loans as they have been unable to sell the debt to investors due to uncertainty around Musk’s strategy to make Twitter profitable and pressure from rising interest rates.