Twilio's Q2 Earnings Beat Expectations, but Stock Tumbles on Tepid Q3 Forecast Amid AI-Driven Growth

Twilio's stock tanks on tepid earnings forecast - SiliconANGLE

Shares of Twilio Inc. fell more than 10% in post-market trading after the communications and customer engagement software provider offered a third-quarter profit forecast that fell short of expectations. The drop came despite a solid showing in the previous three months. Twilio reported second-quarter earnings before certain costs such as stock compensation of $1.19 per share, easily beating the Street's consensus estimate of $1.06 per share. Revenue for the quarter rose 13% to $1.23 billion, surpassing the $1.19 billion analyst target. That helped Twilio to cement an overall profit of $22.4 million in the quarter, rising from a $31.8 million loss in the year-ago period. Twilio is best known for selling developer tools that make it possible to embed capabilities such as voice, text messages and video into software applications. The company's software also streamlines communications for cloud-based apps. In addition, it has a growing business selling tools for customer engagement, such as its Twilio Engage growth automation platform that's used by marketers to improve their customer relationships by creating more personalized experiences. Twilio Chief Executive Khozema Shipchandler (pictured), who replaced the company's co-founder Jeff Lawson just over a year ago, said the accelerating revenue and growing profitability is evidence that his team's focus and execution is beginning to pay off. "During the quarter, Twilio showcased our latest innovations at our user conference, further cementing our place in the ecosystem as the infrastructure layer for customer experience," the CEO pointed out. Shipchandler was talking about the SIGNAL 2025 event in May, where the company unveiled a new customer engagement platform built for an artificial intelligence and data-driven future, along with a new strategic partnership with Microsoft Corp. to advance conversational AI. Those updates appear to have been well received, if Twilio's growing customer base is any indication. The company said it increased its total number of active customer accounts to 349,000 at the end of the quarter, up from just 316,000 one year earlier. Twilio's stock had already dropped more than 6% at the closing bell in today's trading session, indicating a lack of confidence among investors. And their worst fears were confirmed when the company offered its guidance for the current quarter. Executives said the company is aiming for earnings of between $1.01 and $1.06 per share, a forecast that came in well below Wall Street's consensus estimate of $1.14 per share, pushing the stock down even more in extended trading. On the other hand, Twilio did offer a more positive revenue forecast, saying it's looking for sales of between $1.25 billion and $1.26 billion in the current quarter, above the $1.22 billion estimate. Twilio also raised its free cash flow target from a range of $850 million to $875 million, to a new range of $875 million to $900 million. Despite the dismal after-hours performance of Twilio's stock, it's still up just over 13% in the year to date, outpacing the broader S&P 500 index, which has gained just over 7% in the same period.

Is Twilio a Buy, Sell, or Hold After Its Most Recent Earnings Report? | The Motley Fool

There's little doubt as to how investors initially felt. Let's see if they feel the same once the dust settles. With the stock down more than 20% just since Thursday's release of its second-quarter results, it would be easy to presume the worst of customer-communications technology company Twilio (TWLO 6.83%). That's a pretty big setback in a short period of time, after all, in an environment that's otherwise been mostly bullish. Perhaps investors are right to steer clear. Or, maybe the market's choosing to come to the wrong conclusion about Twilio's profit guidance. Maybe this steep sell-off is a buying opportunity -- at least, for a particular kind of investor. Let's have a closer look. It's possible that you've heard of Twilio but don't know exactly what it is. In simplest terms, it helps companies automate their digital communications with consumers and customers. From text messaging to call center management to customer-identity verification, Twilio's solutions have become very relevant in the modern mobile era. Nearly 350,000 active customers, including Uber Technologies, Shopify, and IBM, collectively contributed $1.23 billion in revenue last quarter, up 13% year over year. That top-line growth helped improve the year-ago Q2 non-GAAP operating income from $175.3 million to $220.5 million this time around. Things seem to be slowing down, though. The company's revenue guidance for the quarter currently underway only calls for organic sales growth of between 8% and 9%, while its per-share earnings of between $1.01 and $1.06 fell short of the consensus estimate of $1.10. Investors panicked, and understandably so. Now, they need to take a step back and look at the bigger picture. Yes, Twilio's third-quarter earnings guidance was disappointing. Its full-year outlook wasn't a whole lot better, either. It's possible, though, that the company is understating its near-term and even long-term potential upside. The world didn't quite recognize it at the time, but Twilio's earliest tech (the company launched in 2008, for reference) was a rudimentary kind of artificial intelligence. That original technology is comically weak compared to far more modern AI solutions like ChatGPT or one of Palantir Technologies' platforms. At the time, though, it was pretty good, creating the premise that digital interactions with customers could be automated for the sake of efficiency and accuracy. Now the company is overhauling its solutions with modern-day artificial intelligence. For instance, in May, Twilio unveiled a solution it calls Conversational Intelligence. This platform aggregates and analyzes a particular consumer's entire communication history with an organization, turning it into concise actionable insight for a live customer service representative, or even for an AI-powered virtual customer service agent. One aspect of Conversational Intelligence is particularly impressive. That's ConversationRelay, which allows developers to monitor and adapt a voice-based AI agent "on the fly" based on its performance with live customers. The end results of all of these new solutions are lower costs and increased revenue. The opportunity is enormous. Outlooks from Precedence Research, SkyQuest Technology, and Market.us all agree that the worldwide AI-powered customer service agent market is set to grow at an average annual pace of more than 40% over the course of the next several years. No other outfit is quite as well-positioned to capture its share of this growth as Twilio, in that it's already so well-established within this customer-communications technology space. But the lackluster third-quarter profit guidance? Sure, that's a legitimate concern. Except maybe it isn't. Yes, Twilio's expected per-share earnings of between $1.01 and $1.06 were shy of analysts' expectation of $1.10. Don't lose perspective, though. That's still better than 2024's Q3 bottom line of $1.02. Let's also not forget that this company is in the habit of topping analysts' quarterly earnings estimates, having only missed them once since 2021. Odds are good that it will be able to continue doing so into the foreseeable future. Arguably, any profit-margin pressure Twilio may be experiencing in the immediate future reflects an investment in artificial intelligence tools or marketing that will ultimately help it grow even more than it was apt to just a year ago. That's an expense that most investors would be OK with if they could just look past the headlines about its disappointing Q3 earnings guidance. They eventually will, of course, turning this exaggerated dip into a fantastic buying opportunity. The pros think so, anyway. Analysts' current consensus target of $130.79 is 36% above the stock's present price. Most of these analysts also currently rate Twilio shares as a strong buy. Several of them doubled down on their bullishness following the release of the company's Q2 numbers, while a handful of them even raised their targets, citing the progress already seen with its AI-powered initiatives. Just be sure you're able to stomach the volatility that's sure to linger while the market figures out what it thinks of Twilio now following its post-earnings tumble.

Twilio (TWLO) Q2 Revenue Jumps 13% | The Motley Fool

Twilio (TWLO -5.74%), a leader in cloud-based communications software, announced its Q2 FY2025 results on August 7, 2025. The company delivered notable beats on both revenue and earnings, with revenue reaching $1.23 billion -- 3.5% above consensus estimates -- and non-GAAP earnings per share of $1.19, outpacing the expected $1.05. The period marked the third consecutive quarter of accelerating revenue growth, improved profitability, and strong cash generation. The quarter's results reflect both robust performance from the Communications segment and continued emphasis on AI-driven innovation, although gross margin pressures and flat performance in the Segment customer data platform persisted. Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report. Twilio operates as a software platform that allows businesses to integrate messaging, voice calls, emails, and other communications into their own applications using application programming interfaces (APIs). Its customers include everything from startups to large enterprises who want to reach their users over SMS, voice, and digital channels without building the infrastructure themselves. The company's recent priorities focus on scaling its Communications products -- like programmable SMS, voice, and email -- and deepening its integration of data and artificial intelligence (AI) capabilities. Twilio also concentrates on improving reliability and scalability, expanding customer relationships, and developing its customer data platform (Segment CDP, which centralizes and analyzes customer information). Core success factors for Twilio include product innovation in AI, maintaining platform reliability, expanding within existing customers, and differentiating its offering versus competitors. Twilio's revenue (GAAP) rose 13% year-over-year, reflecting strong demand for its Communications products. The Communications segment, home to products like SMS messaging and voice APIs, posted a 14% GAAP revenue increase to $1.15 billion. This growth accompanied positive customer trends: active customer accounts climbed to more than 349,000, up by more than 33,000 from the year before. The company reported record non-GAAP profitability, with non-GAAP income from operations reaching $221 million, a 26% gain from a year ago. Free cash flow also hit a quarterly high at $263 million, rising 33% year over year. Dollar-based net expansion, a measure of how existing customer spend changes over time, improved to 108%, up from 102%. This uptick signals greater upselling and cross-sales to existing users, driven in part by successful adoption of products across messaging, voice, and add-on AI features. Gross margin (GAAP) fell to 49.1%, down from 51.3% a year ago. The company cited the end of one-time hosting partner credits and a heavier mix of international messaging (which usually yields lower margins) as specific reasons. Non-GAAP gross margin also declined to 50.7% from 53.3%. While Twilio's Communications segment fueled growth and profits, the Segment CDP business saw GAAP revenue remain flat at $75.5 million. Despite this, Segment remained profitable on a non-GAAP basis, posting $6 million in income from operations. Twilio continued returning capital to shareholders, executing $176.7 million in stock buybacks as part of a multi-year, $2 billion repurchase program. The company ended the quarter with $969 million in cash and equivalents, up from $421 million at December 31, 2024. No acquisitions were announced, though management noted an ongoing interest in small "tuck-in" deals rather than major purchases. Platform innovation remained a central narrative. Twilio invested in new AI and generative AI products, like Conversation Relay (an AI-powered voice agent platform) and Generative Custom Operators, which allow customers to automate and analyze customer conversations using natural language prompts. Management highlighted accelerating interest and adoption from both new startups and established brands, particularly as businesses seek to automate customer engagement with AI-powered voice and text solutions. Management raised its guidance, now expecting organic revenue to grow 9-10% (up from 7.5-8.5%) for FY2025. Twilio projects Q3 2025 revenue between $1.245 billion and $1.255 billion, with organic revenue growth of 8%-9%. Projected non-GAAP income from operations is $205-$215 million, with non-GAAP earnings per share forecasted at $1.01-$1.06 for Q3 2025. Full-year free cash flow expectations were also increased, now at $875-$900 million. The company's outlook reflects confidence in ongoing operational execution but acknowledges macroeconomic uncertainties highlighted by management. Investors should monitor Twilio's non-GAAP gross margin trend, as continued growth in low-margin messaging products could pressure profitability. Another major focus will be whether the Segment CDP business returns to growth or continues to lag. The company's performance in deepening customer relationships, improving upsell rates, and capturing opportunity from AI-driven innovation will be key to its ability to drive durable, profitable growth in coming quarters.

Twilio raises 2025 organic growth outlook to 9-10% with AI-driven product momentum (NYSE:TWLO)

Khozema Z. Shipchandler, CEO, reported, "Twilio had a strong Q2, reaching over $1.2 billion in revenue and achieving another quarter of double-digit revenue growth and year-over-year growth acceleration." He highlighted Twilio's record non-GAAP income from operations and Seeking Alpha's Disclaimer: The earnings call insights are compilations of earnings call transcripts and other content available on the Seeking Alpha website. The insights are generated by an AI tool and have not been curated or reviewed by editors. Due to inherent limitations in using AI-based tools, the accuracy, completeness, or timeliness of the earnings call insights cannot be guaranteed. Please see full earnings call transcripts here. The earnings call insights are intended for informational purposes only. Seeking Alpha does not take account of your objectives or your financial situation and does not offer any personalized investment advice. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank.