This cloud communications inventory dropped after its newest quarterly report, however buyers should not miss the larger image.
Twilio (TWLO 5.25%) is a cloud communications firm that is identified for its software programming interfaces (APIs) that assist its purchasers construct software program instruments to stay in contact with their prospects by way of numerous channels akin to voice, textual content, e-mail, video, and instantaneous messaging. Its development has accelerated in latest quarters because of the combination of synthetic intelligence (AI)-focused instruments into its communications platforms.
Nonetheless, Twilio inventory has witnessed a whole lot of volatility in the marketplace this yr. It has misplaced simply over 4% of its worth in 2025 as of this writing, pushed by the corporate’s combined quarterly performances. It fell like a rock in February this yr, and the same story unfolded following the discharge of its second-quarter outcomes on Aug. 7.
Shares of Twilio sank over 19% after its newest report, because of disappointing steering. Nonetheless, Twilio’s 12-month median value goal of $131, as per 30 analysts overlaying the inventory, factors towards a 27% bounce from present ranges. Let’s have a look at why analysts are upbeat about Twilio’s course within the coming yr.
Picture supply: Getty Pictures.
Twilio’s development is accelerating because of AI
Twilio reported a 13% year-over-year improve in income in Q2. Its earnings grew at a sooner tempo of 37% to $1.19 per share. It’s price noting that Twilio’s income development has accelerated up to now yr.
TWLO Income (Quarterly) knowledge by YCharts.
The corporate’s enhancing development profile will be attributed to the stronger development in its buyer base in latest quarters, in addition to a bounce in spending by present prospects on its options. That is evident within the following desk.
Interval
Lively buyer accounts
12 months-over-year development (in %)
Greenback-based web enlargement charge (in %)
Q1 2024
313,000
4%
102%
Q2 2024
316,000
4%
102%
Q3 2024
320,000
5%
105%
This autumn 2024
325,000
7%
106%
Q1 2025
335,000
7%
107%
Q2 2025
349,000
10%
108%
Knowledge supply: Twilio quarterly studies.
The lively buyer accounts confer with prospects from whom Twilio generated a minimum of $5 in income within the last month of the quarter. In the meantime, the dollar-based web enlargement charge compares the spending by lively buyer accounts in 1 / 4 to the spending by those self same prospects within the year-ago interval.
The corporate is witnessing a pleasant uptick on each fronts, and this explains why its top- and bottom-line development have began getting higher in latest quarters. The adoption of Twilio’s AI instruments is taking part in a central function in giving its development a shot within the arm. As an example, the corporate is witnessing a “surge in voice AI start-ups who’re constructing on Twilio.”
Administration factors out that it noticed an 86% year-over-year improve within the variety of buyer accounts utilizing its conversational intelligence messaging platform final quarter. Twilio’s conversational intelligence options permit its purchasers to extract and analyze insights from voice calls and chats, convert voice calls into transcripts in actual time, summarize conversations, and measure buyer sentiment.
Firms can combine this software into their communications software program with Twilio’s APIs to allow them to use the information from conversations for enhancing gross sales and lowering buyer churn. So, it’s straightforward to see why Twilio’s AI communications instruments are serving to it entice extra prospects, whereas additionally permitting it to win a much bigger share of present prospects’ wallets.
Buyers must look previous the near-term steering
Twilio’s Q3 income steering requires 10% to 11% development from the year-ago interval. That will be a slight deceleration from the expansion it reported within the earlier quarter. Even the earnings steering vary of $1.01 per share to $1.06 per share does not level towards a major enchancment over the year-ago interval’s studying of $1.02 per share.
Nonetheless, do not be stunned to see Twilio exceeding its expectations and reporting stronger development. That is as a result of the adoption of AI within the cloud-based contact middle market is predicted to generate a income alternative of $10 billion in 2032, in comparison with lower than $2 billion final yr. In consequence, Twilio can maintain attracting new prospects and cross-sell its AI instruments to present ones.
This could result in an enchancment in its backside line sooner or later, and that is what analysts predict.
TWLO EPS Estimates for Present Fiscal 12 months knowledge by YCharts.
An enchancment in Twilio’s earnings development could lead on the market to reward it with the next a number of. The inventory is buying and selling at 24 occasions ahead earnings, which is a reduction to the tech-focused Nasdaq-100 index’s ahead earnings a number of of 30 (utilizing the index as a proxy for tech shares). If Twilio can certainly hit $6.20 per share in earnings in 2027 and trades in step with the index’s ahead earnings a number of at the moment, its inventory value may bounce to $186.
That will be an 80% bounce from present ranges. So, Twilio appears to be ready to not simply hit Wall Road’s value goal within the coming yr, however ship stronger positive factors in the long term. That is why buyers ought to contemplate shopping for this AI inventory on the dip, since its weak spot should not final for lengthy.
