Twilio's share price surged by more than 22% today.
Twilio's shares soared on Friday, jumping 22.4% by 12:43 p.m. ET, following the communications platform-as-a-service company's 2025 Investor Day. The event saw Twilio unveiling new product innovations and giving medium-term financial targets, impressing analysts and investors alike.
Yesterday's presentation emphasized Twilio's shift towards profitability. Twilio's leadership projected robust double-digit revenue growth through 2027, with adjusted operating margins expanding from 16% in 2024 to 21%-22% by 2027. They also projected dilution from stock-based compensation below 3% by that time.
Moreover, representatives highlighted that if revenue growth slows relative to our projections, Twilio can adjust spending to maintain margin expansion. They anticipate cumulative free cash flow of $3 billion from 2025 to 2027, up from the $650 million to $675 million expected in 2024. Twilio intends to return at least 50% of that cash flow to shareholders through share repurchases, authorizing a new $2 billion repurchase program.
Artificial intelligence (AI) was another focus point in the presentation, with Twilio noting 90% of the Fortune 50 AI start-ups are using its platform. Twilio has also generated $260 million in revenue from these start-ups to date and presently enables access to ChatGPT via text and voice.
Twilio's market cap skyrocketed to $21.2 billion as of now, reflecting a promising valuation considering the $1 billion-plus free cash flow it projects in 2027. While the stock-based compensation will surely eat into that, Twilio's leadership aims for less than $500 million in 2025 equity grants, significantly lower than the $1.9 billion figure in 2022.
Despite slower growth compared to previous years, Twilio's refocus on profitability, free cash flow, and shareholder returns over the coming years is an encouraging sign for its future.
Sources:[1] Seeking Alpha - Twilio Sets Sights On Profitability and Strong Free Cash Flow[2] Bloomberg - Twilio Investor Day 2023: What Investors Need to Know[3] MarketWatch - Twilio Rallies 22% as Investor Day Sparks Surge for Communications Firm
Twilio's leadership discussed their focus on investing money wisely to drive profitability, with projected robust double-digit revenue growth and expanding adjusted operating margins. Analysts and investors are optimistic about Twilio's future financial prospects, leading to a significant increase in the company's market cap.
As part of their strategy, Twilio plans to return at least half of their projected free cash flow to shareholders through share repurchases, demonstrating their commitment to financing their growth and rewarding investors.
