Twilio Earnings: Robust Q3 Results and Upbeat Guidance, Raise Fair Value Estimate

No-moat Twilio delivered strong third-quarter results exceeding both our top- and bottom-line expectations and issued solid guidance for the fourth quarter, which drove shares higher after hours. The communications business was the highlight of the quarter, leading the company’s performance with strong revenue growth and expansion rates. We are also pleased to see gradual improvements with Segment and in overall profitability. Twilio is upbeat on these improvements but was cautious given the dynamics of a usage-based business model. The company also expects to achieve GAAP profitability in fiscal 2025 while accelerating revenue growth modestly. Based on positive high-level guidance for 2025, we raised our margin assumptions, and accordingly, raise our fair value estimate to $76 from $68 per share. We view the stock as fairly valued.