Company Reports

We are discontinuing analyst coverage of Twilio.

With its cloud-native communication platform as a service, we think Twilio is well on its way to unlocking the power of software builders. The firm's portfolio of application programming interfaces and ready-made solutions allows software developers to build a communication infrastructure to meet the unique needs of virtually any organization. As organizations have fully embraced the notion that existing clients are the most critical channel from which to generate new revenue, we think Twilio enjoys critical infrastructure, which could be moatworthy. Through extensive innovation efforts and strategic acquisitions, the firm has expanded its portfolio, paving the way for what we think will be robust growth over an extended period. These acquisitions, however, have eroded returns. We believe Twilio is a CPaaS leader and will remain as such for years to come, and that returns will improve as the company scales and applications grow within the mix.

Twilio delivered strong second-quarter results that exceeded the high end of guidance. Revenue grew 22% year over year to $1.5 billion, and non-GAAP operating margins came in at 19%. Management materially raised the full-year revenue and profitability guidance.

Twilio's first-quarter results blew past the high end of guidance, with revenue growing 20% year over year, the strongest growth rate since 2022. Organic revenue and non-GAAP gross profit both grew 16% year on year, driven by robust demand in voice and messaging.

With its cloud-native communication platform as a service, we think Twilio is well on its way to unlocking the power of software builders. The firm's portfolio of application programming interfaces and ready-made solutions allows software developers to build a communication infrastructure to meet the unique needs of virtually any organization. As organizations have fully embraced the notion that existing clients are the most critical channel from which to generate new revenue, we think Twilio enjoys critical infrastructure, which could be moatworthy. Through extensive innovation efforts and strategic acquisitions, the firm has expanded its portfolio, paving the way for what we think will be robust growth over an extended period. These acquisitions, however, have eroded returns. We believe Twilio is a CPaaS leader and will remain as such for years to come, and that returns will improve as the company scales and applications grow within the mix.

Twilio reported fourth-quarter results that easily exceeded top-end guidance, with revenue growing 14% year over year to $1.37 billion and a non-GAAP operating margin of 18.7%. Increased carrier fees continue to boost revenue but crimp margins.

With its cloud native communication platform as a service, we think Twilio is well on its way to unlocking the power of software builders. The firm's portfolio of application programming interfaces and ready-made solutions allows software developers to build a communication infrastructure to meet the unique needs of virtually any organization. As organizations have fully embraced the notion that existing clients are the most critical channel from which to generate new revenue, we think Twilio enjoys critical infrastructure, which could be moatworthy. Through extensive innovation efforts and strategic acquisitions, the firm has expanded its portfolio, paving the way for what we think will be robust growth over an extended period. These acquisitions, however, have eroded returns. We believe Twilio is a CPaaS leader and will remain as such for years to come, and that returns will improve as the company scales and applications grow within the mix.

Twilio reported third-quarter results that easily beat guidance. Revenue grew 15% year over year to $1.3 billion alongside non-GAAP operating margin of 18.0%, versus the guidance midpoints of $1.25 billion and 16.8%, respectively.

With its cloud native communication platform as a service, we think Twilio is well on its way to unlocking the power of software builders. The company's portfolio of application programming interfaces and ready-made solutions allows software developers to build a communication infrastructure to meet the unique needs of virtually any organization. As organizations have fully embraced the notion that existing clients are the most critical channel from which to generate new revenue, we think Twilio enjoys critical infrastructure, which could be moatworthy. Through extensive innovation efforts and strategic acquisitions, the firm has expanded its portfolio, paving the way for what we think will be robust growth over an extended period. These acquisitions, however, have eroded returns. We believe Twilio is a CPaaS leader and will remain as such for years to come, and that returns will improve as the company scales and applications grow within the mix.

Twilio reported second-quarter results that easily topped guidance, with revenue up 13% year over year to $1.228 billion and non-GAAP operating margin of 18.0%, versus the midpoint of guidance at $1.185 billion and 16.9%, respectively. However, guidance was mixed.

No-moat Twilio kicked off 2025 with results that topped our expectations on both the top and bottom lines and prompted a modest bump to the company’s full-year guidance, which sent shares higher after hours. We like the execution in the quarter but are cautious on the uncertain macro environment. Management said it has not seen any material impact on customer engagement metrics on the heels of rising global uncertainty, but updated guidance baked in some conservatism. Overall, we incorporate the good performance offset by near-term headwinds into our model and maintain our $120 fair value estimate. While we see the stock as slightly undervalued, we prefer moatier companies during this volatile macro environment.

No-moat Twilio continued its impressive run, ending 2024 with solid results featuring upside to our revenue estimate and profitability slightly ahead. We view the outlook as in line with the investor day framework prescribed in January. As such, we have more confidence in moving our DCF to more closely align with this framework, which drives our fair value estimate meaningfully higher to $120 per share, from $76. We haven't moved our revenue forecast to the 10%-plus area, as we think margins are more manageable than the demand environment. We assume shares selling off in the after-market hours is due to a lack of even a slight guidance boost after a very aggressive move in the stock recently. Given the meaningful improvements baked into investor expectations within the stock price, our Morningstar Uncertainty Rating is High, and we would wait for a better entry point.

With its cloud native communication platform as a service, or CPaaS, we think Twilio is well on its way to unlocking the power of software builders. The company's portfolio of application programming interfaces, or APIs, and ready-made solutions allow software developers to build a communication infrastructure to meet the unique needs of virtually any organization. As organizations have fully embraced the notion that existing clients are the most critical channel from which to generate new revenue, we think Twilio enjoys critical infrastructure, which could be moatworthy. Through extensive innovation efforts and strategic acquisitions, the firm has expanded its portfolio, paving the way for what we think will be robust growth over an extended period. These acquisitions, however, have eroded returns. We believe Twilio is a CPaaS leader, and will remain as such for years to come, and that returns will improve as the company scales and applications grow within the mix.

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.

With its cloud native communication platform as a service, or CPaaS, we think Twilio is well on its way to unlocking the power of software builders. Twilio’s portfolio of application programming interfaces, or APIs, and ready-made solutions allow software developers to build a communication infrastructure to meet the unique needs of virtually any organization. As organizations have fully embraced the notion that existing clients are the most critical channel from which to generate new revenue, we think Twilio enjoys critical infrastructure, which could be moatworthy. Through extensive innovation efforts and strategic acquisitions, the firm has expanded its portfolio, paving the way for what we think will be robust growth over an extended period. These acquisitions, however, have eroded returns. We believe Twilio is a CPaaS leader, and will remain as such for years to come, and that returns will improve as the company scales and applications grow within the mix.

With its cloud native communication platform as a service, or CPaaS, we think Twilio is well on its way to unlocking the power of software builders. Twilio’s portfolio of application programming interfaces, or APIs, and ready-made solutions allow software developers to build a communication infrastructure to meet the unique needs of virtually any organization. As organizations have fully embraced the notion that existing clients are the most critical channel from which to generate new revenue, we think Twilio enjoys critical infrastructure, which could be moatworthy. Through extensive innovation efforts and strategic acquisitions, the firm has expanded its portfolio, paving the way for what we think will be robust growth over an extended period. These acquisitions, however, have eroded returns. We believe Twilio is a CPaaS leader, and will remain as such for years to come, and that returns will improve as the company scales and applications grow within the mix.

Twilio reported strong second-quarter results, featuring meaningful upside against both our revenue and profitability expectations. However, despite a multitude of positive indicators and signs of momentum, management tightened its revenue guidance downward. Given the size of quarterly beats over the last several quarters, we think this level of conservatism borders on excessive. Still, profitability guidance was raised higher. We see continued progress on a variety of fronts, including margins, Segment performance, and product innovation. We are maintaining our $68 fair value estimate and see some upside for the stock, but we prefer our moatier companies during this cautious macro environment.

We are downgrading our moat rating for Twilio to none, from narrow. We still believe the company benefits from high switching costs among its existing customer base on its Application Programming Interfaces, or APIs, and applications, while its super network business benefits from both switching costs and a network effect. However, the company has not historically generated returns that have exceeded its cost of capital, nor do we expect it to throughout the next five years, which precludes us from assigning the company with a narrow moat rating. We maintain our $68 fair value estimate, as the moat downgrade does not materially affect our long-term profitability assumptions. Shares appear modestly undervalued today.

With its cloud native communication platform as a service, or CPaaS, we think Twilio is well on its way to unlocking the power of software builders. Twilio’s portfolio of application programming interfaces, or APIs, and ready-made solutions allow software developers to build a communication infrastructure to meet the unique needs of virtually any organization. As organizations have fully embraced the notion that existing clients are the most critical channel from which to generate new revenue, we think Twilio enjoys critical infrastructure, which could be moatworthy. Through extensive innovation efforts and strategic acquisitions, the firm has expanded its portfolio, paving the way for what we think will be robust growth over an extended period. These acquisitions, however, have eroded returns. We believe Twilio is a CPaaS leader, and will remain as such for years to come, and that returns will improve as the company scales and applications grow within the mix.

We are lowering our fair value estimate for narrow-moat Twilio after the company reported better-than-expected first-quarter results and mixed guidance. We have lowered our growth estimates slightly over the next several years, as we would like to see the company deliver top-line results more consistently in both business units while slightly raising our margin profile. We cut our fair value estimate to $68 per share from $73. We continue to adjust our long-term financial model given the information from Twilio’s strategic review from March 2024 and its progress milestones. We expect the next year or so to be a series of fits and starts as the company balances margin improvements with strategic growth investments and plows capital into buybacks. We see shares as fairly valued.