We came across a bullish thesis on Twilio Inc. (TWLO) on Substack by Stefan Waldhauser. In this article, we will summarize the bulls’ thesis on TWLO. Twilio Inc. (TWLO)’s share was trading at $98.97 as of March 14th. TWLO’s forward P/E was 22.68 according to Yahoo Finance.
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Twilio, a leader in the Communications Platform-as-a-Service (CPaaS) industry, has undergone a remarkable transformation under its new management, making it one of the standout AI-driven SaaS companies in recent years. The company’s financial performance in 2024 demonstrated significant improvements, with revenue reaching $4.46 billion, marking a 7% year-over-year increase. More importantly, Twilio achieved GAAP operating profitability for the first time, with operating income climbing to $14 million in Q4 2024, a milestone that reflects its successful cost-cutting initiatives and operational efficiency. On a non-GAAP basis, operating income surged to $714 million for the year, up from $533 million in 2023. Free cash flow followed a similar trajectory, increasing by 81% year-over-year to $657 million, a testament to the company’s improved financial discipline and a reduction in share-based compensation expenses.
Twilio’s strategic restructuring played a pivotal role in its profitability turnaround. Following a series of layoffs in 2022 that saw more than 40% of its workforce exit the company, Twilio streamlined operations and shifted toward a more sustainable growth model. As a result, its guidance for 2025 remains strong, with expected organic revenue growth of 7-8%, non-GAAP operating income in the range of $825-850 million, and free cash flow projected to increase by up to 30%, potentially reaching $850 million. The company’s long-term financial roadmap, revealed during its January 2025 Investor Day, further reinforced investor confidence. Management outlined ambitious but achievable goals, including a return to double-digit revenue growth, an expansion of operating margins to 21-22% by 2027, and cumulative free cash flow of at least $3 billion over the 2025-2027 period.
Beyond its financial turnaround, Twilio has positioned itself as a key beneficiary of AI-driven enterprise solutions. According to company data, 90% of the top 50 AI startups leverage Twilio’s platform, underscoring its role as a critical infrastructure provider for emerging AI applications. Notably, OpenAI has integrated Twilio’s tools to enable access to ChatGPT via phone and WhatsApp, while Paradox.ai’s virtual recruiting assistant, Olivia, schedules over 25 million interviews annually using Twilio’s communication stack. In 2024 alone, more than 800 million AI-driven text messages were sent through Twilio’s platform, showcasing the company’s deep integration into the AI ecosystem.
Despite recent market volatility, including a sharp decline in Twilio’s stock price following macroeconomic concerns and political uncertainty, the company’s valuation remains attractive. At a share price of $95, Twilio’s enterprise value stands at approximately $13 billion, with an EV/sales ratio of 3—levels that appear reasonable given its strong cash flow generation and improving profitability metrics. If the company meets or exceeds its financial targets, Twilio’s enterprise value could rise to $20-30 billion by 2027, making its current valuation an appealing entry point for long-term investors.
With a clear roadmap toward sustainable growth, improving financial performance, and a strong position within the AI and cloud communication sectors, Twilio represents a compelling investment opportunity. If the company continues to execute on its strategic initiatives and delivers on its profitability goals, it is well-positioned for significant appreciation over the next three years.
Twilio Inc. (TWLO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 74 hedge fund portfolios held TWLO at the end of the fourth quarter which was 52 in the previous quarter. While we acknowledge the risk and potential of TWLO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TWLO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.