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With a market capitalization of $17 billion, Twilio (TWLO) offers developers tools for integrating voice, messaging, video, and email into their applications. Twilio’s platform enables businesses to communicate with their customers seamlessly. The stock has grown in popularity due to its growth story and management’s compelling vision for the future of communication using artificial intelligence (AI). The market cheered Twilio’s third-quarter results and optimistic year-end outlook.
The stock gained 52% in 2024, outperforming the S&P 500 Index’s ($SPX) gain of 24%. Let’s find out if AI can push the stock higher this year.
AI Could Bring More Growth for Twilio
Twilio’s APIs allow developers to incorporate communication features into their applications without the need to build the infrastructure from the ground up. This plug-and-play model appeals to businesses across industries, including e-commerce, healthcare, and fintech.
Twilio’s revenue comes primarily from a usage-based subscription business model. This hybrid model provides a mix of predictable income and scalability. As businesses prioritize digital transformation, Twilio has experienced phenomenal revenue growth, from $88.8 million in 2014 to reach a 2024 revenue estimate of $4.4 billion.
Twilio’s third-quarter revenue increased 10% year-over-year to $1.13 billion, exceeding consensus estimates by $40.5 million. Another positive sign about Twilio is that the company has been consistently profitable in recent quarters, demonstrating its ability to exercise disciplined cost management.
It reported an impressive increase in adjusted net earnings to $1.02 per share, up from $0.58 a year ago. The bottom line also outperformed the consensus estimate of $0.86 earnings per share. The company expects adjusted earnings growth of 10% to 16% in the fourth quarter.
The company has integrated AI into its core platform, allowing it to automate capabilities and increase productivity for its customers. CEO Khozema Shipchandler stated, “Our concerted focus on embedding AI and machine learning throughout the Twilio platform has resulted in a differentiated offering that strategically positions us to capture a massive opportunity as we leverage the strength of our platforms...”
Twilio’s confidence in finishing the year strong is what drove its stock price. The company now expects organic revenue growth of 7.5% to 8% compared to the previous estimate for 6% to 7% growth.
The company generated $189.1 million in free cash flow in the third quarter and expects to generate between $650 million and $675 million this year. Twilio also has a strong balance sheet, with cash and short-term investments totaling about $2.69 billion as of Q3. This liquidity enables the company to continue investing in AI. Management believes that because it uniquely combines communications and customer data, the company is well-positioned to succeed in the age of AI.
Analysts predict 6.4% revenue growth to $4.4 billion, accompanied by a staggering 49.4% earnings growth in 2024. Analysts predict 7.7% revenue and 17.3% earnings growth over the next year. Twilio, trading at 25 times forward 2025 earnings, appears to be an attractive AI stock to buy right now.
Is TWLO Stock a Buy on Wall Street?
Recently, Wells Fargo increased its target price for TWLO stock to $140 from $120, adding it to its Q1 “Tactical Ideas List.” The firm believes Twilio has the potential for more growth in 2025.
With the surge last year, Twilio stock has surpassed its mean target price of $94.08. But with AI driving its earnings growth, the stock could climb higher, reaching its Street-high estimate of $140. This would imply upside potential of 26% from current levels.
Overall, the stock is a “Moderate Buy” on Wall Street. Out of the 26 analysts covering the stock, 12 rate it a “Strong Buy,” two say it’s a “Moderate Buy,” 10 rate it a “Hold,” one say it’s a “Moderate Sell,” and one recommends a “Strong Sell.”
Twilio’s growth story remains compelling. Its AI-powered platform, strong balance sheet, and emphasis on innovation position it well for long-term growth. Those with a long time horizon and a tolerance for volatility may find Twilio’s current valuation appealing.
