Twilio stock surged over 20% on Friday, marking its biggest gain since the early days of the Covid-19 pandemic, after issuing a promising profit forecast for the coming years. The cloud communications software vendor projected its adjusted operating margin to reach 21% to 22% by 2027.
Twilio shares experienced their most significant surge since 2020 following the company's optimistic outlook for the coming years. At an investor conference, Twilio projected its adjusted operating margin to expand to a range of 21% to 22% by 2027, outlined within a three-year guidance framework. CEO Khozema Shipchandler stated to CNBC prior to the event, 'If we execute well in 2025, I think we write our own story from 2026 on.
' Shares jumped over 20% on Friday, positioning them for their largest gain since the early stages of the Covid-19 pandemic. This upward trajectory follows the cloud communications software vendor's release of an encouraging profit forecast for the next few years. This investor event took place on Thursday, a little over a year after the company appointed Khozema Shipchandler as CEO. Shipchandler, Twilio's former president and a 22-year veteran of GE, succeeded co-founder Jeff Lawson.Twilio now anticipates its adjusted operating margin to reach 21% to 22% by 2027, exceeding Visible Alpha's consensus estimate of 19.68%. Twilio's adjusted operating margin in the current year is steadily improving. During Thursday's event, company executives pledged to generate $3 billion in free cash flow over the subsequent three years, compared to approximately $692 million in free cash flow for 2022, 2023, and 2024. This surpasses the Visible Alpha consensus of $2.76 billion for Twilio's free cash flow projection from 2025 through 2027. 'If we execute well in 2025, I think we write our own story from 2026 on,' Shipchandler shared with analysts at the investor gathering.While Twilio did not unveil a revenue growth target for 2027 at its Thursday event, Shipchandler assured analysts that the company is 'orienting itself to deliver against double-digit growth over time.' For the year 2025, Twilio anticipates $825 million to $850 million in free cash flow and the same amount in adjusted operating income, with 7% to 8% year-over-year revenue growth. The Visible Alpha consensus predicted $814 million in adjusted operating income and approximately $808 million in free cash flow. The 2025 revenue forecast aligns with the LSEG consensus. Twilio emerged in 2016 as a high-growth software company capitalizing on the shift to the cloud. It was among the early beneficiaries of the Covid-19 remote work boom as more companies relied on mobile communications for employee and client interactions. The stock soared over 240% in 2020. However, in 2022, the stock plummeted by over 80% of its value as investor focus shifted from growth to profitability in response to rising interest rates and soaring inflation. Twilio implemented cost-cutting measures in early 2023, and activist investors Anson Funds and Legion Partners Asset Management pressed for a sale of Twilio or one of its business units. Since activist firm Sachem Head Capital Management secured a Twilio board seat in April, the company's stock has rallied approximately 81%, driven by accelerated revenue growth and narrowing losses. By expanding into new sectors, such as conversational artificial intelligence, Twilio asserts it can target a total addressable market of $158 billion by 2028, compared to $119 billion when solely focusing on the communications and customer data platform categories. Twilio's preliminary results for the fourth quarter indicate 11% revenue growth, with adjusted operating income exceeding the upper end of the $185 million to $195 million range the company projected in October. Analysts surveyed by LSEG had anticipated 7.9% revenue growth, and according to Visible Alpha, the adjusted operating income consensus was approximately $190 million. Baird analysts William Power and Yanni Samoilis upgraded their stock rating to the equivalent of 'buy' from the equivalent of 'hold' in a Friday note to clients, raising their price target to $160 from $115. The analysts stated, 'We expect a potential beat-and-raise cadence to continue to push shares higher, particularly with the strengthening profitability, cash flow, and capital returns.'
TWLO Twilio Cloud Communications Profit Forecast Stock Surge Investor Event Khozema Shipchandler CEO AI Technology Stock
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