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Twilio Inc (TWLO)
NYSE:TWLO
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Twilio
(NYSE:TWLO)
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Rating:69Neutral
Price Target:
$138.00
▲(8.76% Upside)
Action:ReiteratedDate:02/14/26
The score is driven primarily by improved financial fundamentals (strong free cash flow and conservative leverage) and a positive earnings outlook with clear profitability/FCF targets. These strengths are partly offset by weak technical trends (trading below major moving averages with negative momentum) and a demanding valuation (very high P/E with no dividend yield).
Positive Factors
Free cash flow generation
Twilio moved to durable positive free cash flow, reaching roughly $1.04B in 2025 with FCF broadly aligning with reported earnings in 2024–2025. Strong cash generation funds reinvestment, share repurchases and provides a buffer to absorb near-term shocks while supporting strategic initiatives.
Conservative balance sheet
Low leverage and a substantial equity base give Twilio financial flexibility to invest in product development and make opportunistic capital allocations. Stable total debt (~$1.1–$1.3B) reduces refinancing risk and preserves optionality through industry cycles over the next several quarters.
Enterprise adoption & large deals
Growth in large deals and multi-product adoption indicates stronger enterprise traction and higher customer stickiness. Bigger contracts and cross-sell opportunities improve revenue visibility and lifetime value, supporting more predictable dollar-based net expansion and longer-term margin improvement.
Negative Factors
Carrier A2P fee headwind
Industry-wide carrier fee increases are a structural cost pressure. Twilio estimates ~$190M of incremental pass-through revenue in 2026 that reduces full-year non-GAAP gross margin by ~170 bps and operating margin by ~60–70 bps, directly compressing profit sustainability unless offset by pricing or mix shift.
High low-margin messaging mix
A persistent ~58% revenue share from lower‑unit‑economics messaging limits gross margin potential and makes overall profitability sensitive to volume or pricing swings. Until multiproduct mix materially increases, messaging concentration is a durable headwind to margin expansion.
Usage-based revenue variability
The usage-driven model creates forecasting and revenue volatility, which, coupled with recently thin net margins and moderated top-line growth, reduces operational leeway. Predictability and margin cushioning are limited if consumption falls, complicating medium-term planning and capital allocation decisions.
Twilio (TWLO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$19.22B
Dividend YieldN/A
Average Volume (3M)2.62M
Price to Earnings (P/E)643.2
Beta (1Y)1.20
Revenue Growth12.84%
EPS GrowthN/A
CountryUS
Employees5,502
SectorTechnology
Sector Strength88
IndustryInternet Content & Information
Share Statistics
EPS (TTM)1.33
Shares Outstanding151,513,990
10 Day Avg. Volume1,679,267
30 Day Avg. Volume2,620,240
Financial Highlights & Ratios
PEG Ratio-4.82
Price to Book (P/B)2.78
Price to Sales (P/S)4.29
P/FCF Ratio21.07
Enterprise Value/Market Cap1.03
Enterprise Value/Revenue3.90
Enterprise Value/Gross Profit7.95
Enterprise Value/Ebitda73.41
Forecast
1Y Price Target
$145.88Price Target Upside14.97% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering19
EPS Forecast (FY)5.42
Revenue Forecast (FY)$5.68B
Twilio Business Overview & Revenue Model
Company DescriptionTwilio Inc., together with its subsidiaries, provides a cloud communications platform that enables developers to build, scale, and operate customer engagement within software applications in the United States and internationally. Its customer engagement platform provides a set of application programming interfaces that handle the higher-level communication logic needed for nearly every type of customer engagement, as well as enable developers to embed voice, messaging, video, and email capabilities into their applications. The company was incorporated in 2008 and is headquartered in San Francisco, California.
How the Company Makes MoneyTwilio primarily makes money by charging businesses to use its cloud platform services, which are generally consumed on a usage-based model. The company’s core revenue stream is its Communications offerings, where customers pay per unit of activity (for example, per message, per minute of voice, or per interaction) as Twilio programmatically routes communications through telecom networks and other service providers; Twilio typically earns a margin between what it charges customers and what it pays underlying carriers and other partners to deliver those communications. Twilio also generates revenue from customer engagement and data products, including email delivery services and customer data/profile management offerings, which may be sold via usage-based pricing and/or subscription-style plans depending on the product. In addition, Twilio can earn revenue from ancillary items tied to its platform (such as phone number provisioning/recurring charges and related add-ons), with overall results influenced by customers’ application usage volumes, mix of channels (e.g., SMS vs. voice vs. email), pricing/discounting for large customers, and pass-through costs paid to telecom carriers and other infrastructure partners.
Twilio Key Performance Indicators (KPIs)
Any
Active Customers
Tracks the number of customers actively using Twilio’s services, reflecting market penetration, customer retention, and potential for future revenue growth.
Tracks the number of customers actively using Twilio’s services, reflecting market penetration, customer retention, and potential for future revenue growth.
Data provided by:
The Fly
The FlyTwilio Earnings Call Summary
Earnings Call Date:Feb 12, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 30, 2026
Earnings Call Sentiment Positive
The call presented strong, broad-based operational and financial progress: record Q4 and full-year revenue, accelerating voice and Voice AI adoption, margin expansion on a non-GAAP basis, robust free cash flow, GAAP profitability for the first full year, large deal momentum, and disciplined capital returns. The primary headwinds are margin pressure from industry-wide A2P carrier fee increases and messaging mix (lower-margin product), plus a planned Q1 cash bonus that will temporarily reduce free cash flow. Management provided constructive guidance for 2026 and a clear path to a 2027 operating income target, indicating confidence in sustaining momentum despite margin-rate headwinds that are largely pass-through in nature.Q4-2025 Updates
Positive Updates
Record Q4 and Full-Year Revenue
Q4 revenue of $1,400,000,000 (record), up 14% year over year reported and 12% organic. Full-year 2025 revenue of $5,100,000,000, up 14% reported and 13% organic.
Strong Profitability and Margin Expansion
Q4 non-GAAP income from operations was $256,000,000 (record), up 30% year over year, with non-GAAP operating margin of 18.7% (up 220 basis points YoY). Full-year non-GAAP income from operations was $924,000,000, up 29% YoY, with full-year non-GAAP operating margin of 18.2% (up 220 basis points YoY).
Robust Free Cash Flow and Share Repurchases
Q4 free cash flow of $256,000,000. Full-year free cash flow of $945,000,000, up 44% year over year. Completed $198,000,000 in share repurchases in Q4 and $855,000,000 for the full year (representing 90% of 2025 free cash flow, above the 50% target).
GAAP Profitability and Improved Capital Efficiency
Generated $158,000,000 in GAAP income for the year, marking the company's first full year of GAAP profitability. Net burn rate was 1.5% in 2025, well below the 3% target. Ending share count 152,000,000, down 18% since 2023 share repurchase program.
Voice and Voice AI Acceleration
Voice revenue growth accelerated to the high teens in Q4 (the strongest since 2022). Voice AI revenue growth accelerated above 60% year over year in Q4. Branded calling revenue grew roughly 6x year over year in Q4.
Channel and Customer Dynamics: Self-Serve, ISVs, Large Deals
Q4 self-serve revenue grew 28% YoY and ISV revenue grew 26% YoY. Full-year self-serve +21% and ISV +24%. Number of large deals (≥ $500,000) increased 36% YoY; signed the largest deal in company history (nine-figure renewal).
Multiproduct Adoption and Software Add-Ons
Multiproduct customer count grew 26% YoY. Software add-on revenue grew over 20% YoY in Q4; Verify grew more than 25% for the second consecutive quarter.
Cyber Week Volume Records
Cyber Week volumes hit record highs: 6,990,000,000 messages (+34.5% YoY), 1,070,000,000 calls (+58% YoY), and 75,100,000,000 emails (+14.6% YoY).
Improving Gross Profit and DBNR
Q4 non-GAAP gross profit of $682,000,000, up 10% YoY, with gross margin 49.9% (Q4) and full-year non-GAAP gross profit $2,600,000,000, up 8% YoY. Dollar-based net expansion rate was 109% in Q4.
Positive 2026/2027 Outlook and Guidance
Q1 2026 revenue guide $1,335,000,000–$1,345,000,000 (14–15% reported, 10–11% organic). Full-year 2026 guidance: 11.5–12.5% reported revenue growth and 8–9% organic growth; full-year non-GAAP income from operations $1,040,000,000–$1,060,000,000; full-year free cash flow $1,000,000,000–$1,040,000,000. 2027 non-GAAP operating income target of at least $1,230,000,000.
Negative Updates
Carrier A2P Fee Increases Pressure Margins
All major U.S. carriers announced A2P fee increases. Incremental pass-through revenue of approximately $190,000,000 is expected in 2026, which the company estimates will reduce full-year 2026 non-GAAP gross margin by ~170 basis points and operating margin by ~60–70 basis points. Q4 included $23,000,000 in carrier pass-through fees that primarily drove a sequential gross margin decline.
Gross Margin Compression from Product Mix
Q4 non-GAAP gross margin was 49.9%, down 200 basis points YoY (partly due to messaging mix and carrier fees). Messaging (lower-margin product) remains ~58% of revenue and growth in messaging mixed down margins.
Usage-Based Revenue Model Requires Prudent Planning
Management emphasized conservative full-year organic guidance (8–9% for 2026) due to the variability inherent in a usage-based revenue model despite strong Q4 and Q1 setup, signaling potential volatility in top-line outcomes.
Q1 Free Cash Flow Impact from One-Time Payment
Q1 2026 free cash flow will be limited to roughly $100,000,000 due to a planned $140,000,000 cash bonus payment related to the company-wide cash bonus program, front-loading a cash outflow.
RCS and Voice AI Growth from Small Base
RCS volumes grew roughly 5x quarter over quarter and branded calling grew ~6x YoY, but management noted these accelerations are off relatively small bases today, tempering near-term scale assumptions.
Messaging Mix Impacted Q4 Margins
Higher proportion of messaging revenue in Q4 (~200 basis point increase in messaging as percent of revenue YoY) acted as a drag on gross margin given messaging's lower unit economics.
Past Hosting Cost 'Double Bubble' for Email
Management referenced a 2025 double-bubble hosting cost from migrating email to the cloud that inflated costs in 2025 (now behind the company), indicating prior cost volatility that required corrective action.
Company Guidance
Twilio guided Q1 revenue of $1,335 million to $1,345 million (14–15% reported, 10–11% organic), which includes an assumed $44 million of incremental U.S. carrier pass‑through fees (up $21M vs. Q4); Q1 non‑GAAP income from operations of $240 million to $250 million and Q1 free cash flow of roughly $100 million (impacted by a planned $140 million cash bonus). For full‑year 2026 the company expects reported revenue growth of 11.5–12.5% and organic growth of 8–9%, about $190 million of incremental pass‑through carrier revenue (which Twilio estimates will reduce 2026 non‑GAAP gross margin by ~170 bps and operating margin by ~60–70 bps), full‑year non‑GAAP income from operations of $1,040 million to $1,060 million, full‑year free cash flow of $1,000 million to $1,040 million, and non‑GAAP gross profit dollar growth roughly in line with organic revenue growth; management also reiterated a 2027 non‑GAAP operating income target of at least $1,230 million (stated as unaffected by carrier fees).Twilio Financial Statement Overview
Summary
Strong free cash flow generation (about $1.04B in 2025) and a conservatively levered balance sheet support financial durability. Profitability has improved to positive EBIT and net income in 2025, but margins are still thin and revenue growth has recently moderated, which tempers the score.Income Statement
Revenue expanded steadily from 2023–2025 (about $4.15B to $5.07B), but growth has moderated sharply in 2025 (low-single-digit). Profitability has improved materially versus prior years, moving from sizable losses (2021–2023) to positive EBIT and net income in 2025; however, net margin remains very thin (~0.7%) and operating margin is still modest (~3.4%), leaving limited cushion if demand softens or costs re-accelerate. Gross margin has been relatively stable in the high-40% range, supporting the improving earnings trajectory, but overall profitability is still early in the recovery.67
Positive
Balance Sheet
Leverage appears conservative, with debt-to-equity consistently low (~0.12–0.15) and equity representing a large portion of the capital base. Total debt has stayed roughly stable around ~$1.1–$1.3B while equity remains substantial (~$7.8B in 2025), which provides financial flexibility. The main weakness is that shareholder returns have been weak/negative for several years, only turning slightly positive in 2025, indicating that the balance sheet strength has not consistently translated into strong profitability.74
Positive
Cash Flow
Cash generation is a key strength: operating cash flow and free cash flow turned solidly positive and scaled meaningfully in 2023–2025, reaching roughly $1.04B of free cash flow in 2025 with strong year-over-year growth. Cash flow quality also looks favorable, with free cash flow broadly aligning with reported earnings in 2024–2025, suggesting profits are backed by cash. The notable risk is historical volatility—cash flow was negative in 2021–2022—so durability through different demand environments remains the key watch item.86
Very Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 5.07B | 4.46B | 4.15B | 3.83B | 2.84B |
| Gross Profit | 2.43B | 2.23B | 1.96B | 1.76B | 1.31B |
| EBITDA | 272.54M | 136.47M | -685.35M | -917.35M | -653.76M |
| Net Income | 33.83M | -109.40M | -1.02B | -1.26B | -949.90M |
Balance Sheet | |||||
| Total Assets | 9.77B | 9.87B | 11.61B | 12.56B | 13.00B |
| Cash, Cash Equivalents and Short-Term Investments | 2.47B | 2.38B | 4.01B | 4.16B | 5.36B |
| Total Debt | 1.14B | 1.11B | 1.16B | 1.24B | 1.29B |
| Total Liabilities | 1.95B | 1.91B | 1.88B | 2.01B | 1.97B |
| Stockholders Equity | 7.82B | 7.95B | 9.73B | 10.56B | 11.03B |
Cash Flow | |||||
| Free Cash Flow | 1.03B | 657.46M | 363.52M | -334.55M | -148.21M |
| Operating Cash Flow | 1.04B | 716.24M | 414.75M | -254.37M | -58.19M |
| Investing Cash Flow | 80.95M | 1.37B | 228.60M | -616.45M | -2.49B |
| Financing Cash Flow | -868.69M | -2.31B | -643.61M | 45.01M | 3.10B |
Twilio Technical Analysis
Positive
126.88
Price Trends
122.37
Positive
125.62
Positive
119.44
Positive
Market Momentum
1.93
Negative
57.92
Neutral
59.09
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TWLO, the sentiment is Positive. The current price of 126.88 is above the 20-day moving average (MA) of 121.07, above the 50-day MA of 122.37, and above the 200-day MA of 119.44, indicating a bullish trend. The MACD of 1.93 indicates Negative momentum. The RSI at 57.92 is Neutral, neither overbought nor oversold. The STOCH value of 59.09 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TWLO.
Twilio Risk Analysis
Twilio disclosed 49 risk factors in its most recent earnings report. Twilio reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Twilio Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
70 Outperform | $22.39B | 14.57 | 20.57% | ― | 3.85% | 72.42% | |
69 Neutral | $19.22B | 643.16 | 0.43% | ― | 12.84% | ― | |
66 Neutral | $3.19B | 57.31 | -8.90% | ― | 5.45% | ― | |
63 Neutral | $1.22B | 39.43 | 5.36% | ― | 12.48% | ― | |
62 Neutral | $472.06M | -35.89 | -3.39% | ― | 7.42% | 34.42% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
60 Neutral | $282.82M | 13.24 | -2.93% | ― | 0.25% | 92.10% |
* Technology Sector Average
TWLO
Twilio
126.88
23.88
23.18%
EGHT
8X8
2.03
-0.21
-9.38%
RNG
RingCentral
37.95
10.79
39.72%
FIVN
Five9
15.98
-14.23
-47.10%
BAND
Bandwidth
15.04
-0.05
-0.33%
ZM
Zoom Video Communications
75.99
-0.27
-0.35%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.