With the widespread integration of cloud-based services and an innate advantage over traditional software, the software-as-a-service (SaaS) industry is thriving. Amid this growth, Twilio Inc. (TWLO) seems to be well-positioned to capitalize on the sector’s growing momentum.
SaaS products have been becoming more prevalent in the tech industry owing to the rise in the adoption of public & hybrid cloud-based solutions, integration with other tools, and centralized data-driven analytics, among others. With 17,000 companies and 59 million customers worldwide, the United States ranks first in the sector.
In this booming landscape, TWLO distinguishes itself with a diverse suite of customer engagement solutions. Additionally, its latest guidance projects a 7% to 8% year-over-year revenue growth for the first quarter of fiscal 2025, highlighting strong long-term growth potential.
That being said, TWLO’s stock has climbed 89.1% over the past six months and an impressive 103% over the past year, closing the last trading session at $117.24.
Now, let us discuss the factors that could affect the stock’s growth trajectory.
Recent Developments
On February 5, 2025, TWLO announced a multi-year partnership with Chelsea Football Club to serve as an official supplier for the club. The partnership aims to enhance Chelsea’s fan engagement in the stadium and through digital experiences using the TWLO Segment customer data platform (CDP).
The partnership could serve as a blueprint for future efforts with other sports organizations looking to enhance their fan engagement strategies.
On December 2, 2024, TWLO announced the public beta availability of Linked Audiences in the TWLO Segment for Amazon Redshift. This move makes it easier for TWLO Segment and AWS customers to build audiences, enrich their customer profiles, and grow personalization at scale.
Equipping both B2B and B2C marketers and coming with the ability to explore trusted customer data within Redshift and build a context-rich payload, the integration would strengthen TWLO’s offerings.
Stable Historical Growth
Over the past five years, TWLO has demonstrated consistent growth across key financial metrics. Its revenue and total assets grew at a CAGR of 31.5% and 13.9%, respectively. Moreover, tangible book value and levered free cash flow expanded at a CAGR of 10.2% and 50.9%, respectively.
Sound Financials
For the fiscal 2024 fourth quarter that ended December 31, 2024, TWLO’s revenue increased 11% year-over-year to $1.19 billion. Its non-GAAP income from operations rose 14.1% from the year-ago value to $197.05 million.
Additionally, non-GAAP net income and non-GAAP net income per share attributable to common stockholders grew 1.7% and 16.3% from the prior year’s quarter to $161.16 million and $1.00, respectively.
Optimistic Analyst Estimates
Analysts expect TWLO’s revenue and EPS for the fiscal 2025 first quarter (ending in March) to increase 8.8% and 20% year-over-year to $1.14 billion and $0.96, respectively. Furthermore, the company has surpassed the consensus revenue estimates in each of the four trailing quarters, which is impressive.
Looking forward, TWLO’s revenue and EPS for the fiscal 2025 second quarter (ending in June) are expected to rise 8.3% and 20.1% year-over-year to $1.17 billion and $1.04, respectively.
Strong Profitability
TWLO’s trailing 12-month gross profit margin of 51.13% is 2% higher than the industry average of 50.15%. Its trailing 12-month levered FCF margin of 16.84% is 42.2% higher than the sector average of 11.84%. Also, the stock’s trailing 12-month cash from operations of $716.24 million outperforms the industry average of $101.50 million by 605.6%.
POWR Ratings Reflects Optimism
TWLO’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
TWLO has an A grade for Growth, in line with its impressive historical growth. Within the A-rated Software – SAAS industry, TWLO is ranked #8 out of 18 stocks. Beyond what is stated above, we have also given TWLO grades for Valuation, Momentum, Sentiment, Stability, and Quality. Get all TWLO ratings here.
Bottom Line
Fueled by strategic partnerships with major sports organizations and recent product expansions, TWLO maintains a strong foothold in the thriving SaaS market. With solid financials, strong profitability, and impressive growth metrics, investing in TWLO presents a wise opportunity for long-term gains.
How Does Twilio Inc. (TWLO) Stack Up Against Its Peers?
Although TWLO’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who also exhibit even stronger POWR Ratings. So, consider these A (Strong Buy) rated stocks from the Software – SAAS industry:
The Sage Group plc (SGPYY)
Kaltura, Inc. (KLTR)
WM Technology, Inc. (MAPS)
To explore more A or B-rated Software – SAAS stocks, click here.
What To Do Next?
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TWLO shares fell $0.54 (-0.46%) in premarket trading Friday. Year-to-date, TWLO has gained 8.48%, versus a -0.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Aritra_Gangopadhyay
Aritra is a financial journalist dedicated to breaking down complex financial topics into simple, actionable insights. Holding a Master’s degree in Economics, he uses his analytical expertise to help investors uncover unique opportunities for long-term success.
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