Twilio’s Stock Soars on Upbeat Profit Forecast
Cloud communications software vendor Twilio saw its stock surge over 20% on Friday, marking its largest gain since the early days of the Covid pandemic. The company’s shares jumped to $140.12, the highest close since 2022, after Twilio issued a promising profit forecast for the coming years.
New Guidance and Leadership
At an investor event on Thursday, Twilio revealed its new guidance, which includes an adjusted operating margin of 21% to 22% in 2027. This exceeds the Visible Alpha consensus of 19.68%. The company’s adjusted operating margin in the most recent quarter was 16.1%. Khozema Shipchandler, who took over as CEO over a year ago, committed to generating $3 billion in free cash flow over the next three years, significantly higher than the Visible Alpha consensus of $2.76 billion.
Free Cash Flow and Revenue Growth
For 2025, Twilio expects $825 million to $850 million in free cash flow and the same amount in adjusted operating income, with 7% to 8% revenue growth year over year. This is in line with the LSEG consensus. The company did not issue a revenue growth target for 2027 at its Thursday event.
A Shift in Focus
Twilio went public in 2016 as a high-growth software company, taking advantage of the transition to the cloud. The company benefited greatly from the Covid remote work boom, with its stock surging over 240% in 2020. However, in 2022, the stock lost over 80% of its value as investor focus shifted to profit over growth.
Expansion into New Areas
Twilio is expanding into new areas, such as conversational artificial intelligence, which could increase its total addressable market to $158 billion by 2028. The company’s preliminary results for the fourth quarter show 11% revenue growth, exceeding analyst expectations.
Analyst Upgrades
Baird analysts William Power and Yanni Samoilis upgraded their stock rating to the equivalent of buy from the equivalent of hold, citing the company’s strengthening profitability, cash flow, and capital returns. They expect a potential beat-and-raise cadence to continue to push shares higher.
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