Twilio CEO Khozema Shipchandler speaks at Twilio’s Signal event in Sao Paulo on August 14, 2024.
Courtesy: Twilio
Cloud communication software manufacturer Twilio on Thursday it issued a promising profit forecast for the next few years.
The company expects its adjusted operating margin to increase to between 21% and 22% in 2027 as part of a three-year guidance framework. That’s higher than the Visible Alpha consensus of 19.68%. Twilio’s adjusted operating margin in the last quarter it was 16.1 percent.
Twilio revealed its new guidelines at an investor event on Thursday. There, company executives also committed to generating $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. Visible Alpha Consensus for Twilio from 2025 to 2027. was 2.76 billion dollars.
The company’s share 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 is all about execution, CEO Khozema Shipchandler told CNBC ahead of the company’s investor day.
“If we’re successful in 2025, I think we’ll be writing our own story from 2026 onward,” said Shipchandler, who joined Twili as CFO after 22 years at GE in 2018 and he replaced co-founder Jeff Lawson as CEO in January 2024.
Twilio, which sends text messages and emails for customers, did not disclose a revenue growth target for 2027 at its event on Thursday.
Management also provided guidance on Thursday for 2025. It called for $825 million to $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 $814 million in adjusted operating income and about $808 million in free cash flow. The revenue forecast for 2025 was in line with the LSEG consensus.
More than 9,000 AI companies are already building on Twilio services. These include OpenAI, which in December announced a 1-800-CHATGPT service that relies on Twilio voice tools.
“We want to be able to take on a bunch more of those, as well as large enterprises,” Shipchandler said. “We’re kind of open to both.”
Pressure from shareholders is increasing
After Twilio stock debuted on the New York Stock Exchange in 2016, investors piled in as the company posted consistently high rates of revenue growth. Stocks fell in 2022 as investors became more interested in profitable companies and interest rates jumped higher. At the same time, Twilio’s revenue growth was slowing.
Shareholder input influenced the reorganization that included workforce reduction of 17 percent in early 2023, and activist investors Anson Funds and Legion Partners Asset Management campaigned 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 jumped about 81% as revenue growth accelerated and losses narrowed.
Twilio has an opportunity to show double-digit growth in 2025 and beyond, Mizuho analysts 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 artificial intelligence, Twilio says it can sell into a total addressable market worth $158 billion by 2028, compared to $119 billion when it focuses only on the communications and customer data platform categories. .
The company does not believe acquisitions will be necessary to reach its new total addressable market, the spokesman said.
Twilio’s preliminary results for the fourth quarter show revenue growth of 11%, with adjusted operating income exceeding the upper end of the company’s $185 million to $195 million range. issued in October. Analysts polled by LSEG had expected revenue growth of 7.9%, and according to Visible Alpha, the adjusted operating income consensus was around $190 million.
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