With a market cap of $17.8 billion, Twilio (TWLO) is a cloud communications platform company. Its APIs enable developers to include voice, video, messaging, email, and authentication features in their apps without having to build complex telecommunications infrastructure themselves. Twilio’s core strength is its programmable communication tools, which are used by companies such as Uber (UBER) and Airbnb (ABNB).
Twilio’s stock has fluctuated dramatically, from soaring prices during the tech boom to sharp declines as Twilio prioritized growth over profitability. Recognizing the need for change, Twilio’s management team, led by ex-CEO Jeff Lawson, launched a comprehensive restructuring in 2023 and 2024. So far this year, Twilio stock is up nearly 9%, compared to the broader market gain of 2.5%.
Let’s find out if now is the time to buy this tech stock, which is poised for a rebound.
Strategic investments in generative AI, intelligent voice, cross-channel data integration, and automation are starting to show results in both product adoption and financial performance. Recently, Twilio reported a solid start to fiscal 2025. Total revenue for the first quarter came in at $1.17 billion, up 12% year over year and marking the third consecutive quarter of double-digit growth. Adjusted earnings per share increased by 42.5%, reaching $1.14.
During the Q1 earnings call, Chief Revenue Officer Thomas Wyatt mentioned that Twilio’s cross-sell engine is gaining traction. Many customers who initially entered through a single channel (typically messaging or voice) are now expanding into related products such as email, Verify (authentication), and SMS Pumping Protection (fraud prevention). These premium features are growing faster than the company average, contributing significantly to high-margin software revenue. Over time, the company expects higher-margin software revenue from products such as Segment and Verify to boost blended margins.
In Q1, Communications revenue increased 13% year on year to $1.09 billion, while Segment revenue remained roughly flat at $76 million. According to management, Segment revenue is expected to resume growth and break even in Q2. Management also highlighted that the collaboration with ElevenLabs added over 1,000 AI voice models in more than 40 languages to Twilio’s voice stack, allowing for highly localized, personalized conversational experiences.
Despite a $122 million bonus payout, free cash flow totaled $178 million. Twilio repurchased $130.2 million in shares in Q1, with an additional $90 million in April. The $2 billion buyback program, which runs through 2027, aims to return 50% of annual free cash flow to shareholders.
Despite macroeconomic uncertainty, Twilio remains cautiously optimistic, raising its full-year fiscal 2025 revenue growth forecast to 7.5% to 8.5%, in line with consensus estimates. Management also stated that Q2 revenue could range from $1.18 billion to $1.19 billion (9%-10% YoY growth). Analysts who cover Twilio expect earnings to rise 24.4% in fiscal 2025, followed by a 14.7% increase in fiscal 2026. Twilio is currently trading at 22 times forward earnings, making it a reasonable buy.
Is TWLO Stock a Buy, Hold, or Sell on Wall Street?
Following the Q1 earnings, KeyBanc initiated coverage of TWLO stock with an "Overweight” rating and a price target of $146. Separately, William Blair and Jefferies held on to their “Hold” ratings for the stock.
Overall, the stock is a “Moderate Buy” on Wall Street. Out of the 26 analysts covering the stock, 16 rate it a “Strong Buy,” two say it’s a “Moderate Buy,” six rate it a “Hold,” one says it’s a “Moderate Sell,” and one recommends a “Strong Sell.” Its mean target price of $128.92 suggests the stock can climb 9.8% from current levels. Its Street-high estimate of $170 implies upside potential of 44.9% over the next 12 months.
The Key Takeaway
Twilio’s first-quarter results showed that the company is executing with both innovation and discipline. Twilio appears well-positioned to navigate economic uncertainty while scaling a high-margin multiproduct platform. However, the company is currently in a transformation phase, and the path ahead is not without challenges.
Risk-averse investors may want to start with a small stake and monitor Twilio’s progress.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
