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Twilio CEO Khozema Shipchandler speaks at Twilio’s Signal event in Sao Paulo on August 14, 2024.
Courtesy: Twilio
Cloud Communications Software Manufacturer Twilio On Thursday it released an encouraging earnings forecast for the coming years.
The company expects its adjusted operating margin to expand to between 21% and 22% in 2027 as part of a three-year guidance framework. That’s higher than Visible Alpha’s 19.68% consensus. Twilio’s adjusted operating margin in the most recent quarter was 16.1%.
Twilio revealed your new guide at an investor event on Thursday. There, company executives also pledged to generate $3 billion in free cash flow over the next three years, compared to approximately $692 million in free cash flow for 2022, 2023 and 2024. The consensus Visible Alpha for Twilio from 2025 to 2027 was $2.76 billion.
The company’s stock price rose more than 10% in extended trading after the company released its presentation for the event.
If 2024 was about rebuilding Twilio’s foundation, 2025 was about execution, CEO Khozema Shipchandler told CNBC ahead of the company’s investor day.
“If we perform well in 2025, I think we will write our own history starting in 2026,” said Shipchandler, who joined Twilio as chief financial officer after 22 years at GE in 2018 and replaced co-founder Jeff Lawson as CEO in January 2024.
Twilio, which sends text messages and emails to customers, did not issue a 2027 revenue growth target at its Thursday event.
On Thursday, management also provided guidance for 2025. It called for between $825 million and $850 million in free cash flow and the same amount in adjusted operating income, with revenue growth of 7% to 8% year over year. The Visible Alpha consensus was for $814 million in adjusted operating income and around $808 million in free cash flow. The 2025 revenue forecast was in line with the LSEG consensus.
More than 9,000 AI companies are already taking advantage of Twilio services. That includes OpenAI, which in December announced the 1-800-CHATGPT service that relies on Twilio’s voice tools.
“We want to be able to bring in a lot more of them, as well as large companies,” Shipchandler said. “We’re kind of in open season on both.”
Pressure from shareholders increases
After Twilio stock debuted on the New York Stock Exchange in 2016, investors flocked as the company generated consistently high revenue growth rates. Stocks fell in 2022 as investors became more interested in profitable companies and interest rates rose. At the same time, Twilio’s revenue growth was slowing.
Shareholder contributions influenced a reorganization that included a 17% workforce reduction in early 2023, and activist investors Anson Funds and Legion Partners Asset Management agitated for the sale of Twilio or one of its business units, CNBC reported.
Since activist investor Sachem Head Capital Management won a seat on Twilio’s board last April, Twilio shares have risen about 81%, as revenue growth has accelerated and losses have narrowed. .
Twilio has a chance to show double-digit growth in 2025 and beyond, analysts at Mizuho said in a note earlier this month. Analysts have the equivalent of a buy rating on the stock.
By expanding into new areas such as conversational AI, Twilio says it can sell into a total addressable market of $158 billion by 2028, compared to $119 billion when it only focuses on communications platform categories. and customer data.
The company does not believe acquisitions will be necessary to reach its total new addressable market, a spokesperson said.
Twilio’s preliminary results for the fourth quarter show 11% revenue growth, with adjusted operating income exceeding the high end of the $185 million to $195 million range the company issued in October. Analysts surveyed by LSEG expected revenue growth of 7.9%, and according to Visible Alpha, the adjusted operating income consensus was about $190 million.
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