Twilio (TWLO) AI Stock Analysis

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Twilio

(NYSE:TWLO)

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Neutral 69 (OpenAI - 5.2)

Rating:69Neutral

Price Target:

$121.00

▲(6.28% 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's conversion to sustained positive free cash flow (~$1.0B in 2025) is a durable strength: it funds reinvestment, strategic M&A, and sizeable share repurchases while improving financial optionality. FCF alignment with reported earnings signals quality and supports multi‑year capital allocation plans.

Conservative Balance Sheet

Low leverage and a large equity base give Twilio flexibility to fund growth, absorb cyclical shocks, and maintain capital returns without stressing liquidity. Conservative debt metrics support enduring investment in product development and go-to-market while limiting refinancing risk across a 2–6 month horizon and beyond.

Multiproduct Adoption & Software Upsell

Rising multiproduct adoption and strong software add-on growth indicate deeper customer integration and higher lifetime value. Cross-sell reduces churn risk, increases dollar-based net expansion, and makes revenue more stickier—structural drivers that support sustained revenue quality and margin improvement over multiple quarters.

Negative Factors

Carrier A2P Fee Headwind

Industry-level A2P fee increases create a structural margin headwind largely outside Twilio's control. Incremental pass-through revenue (~$190M) is expected to reduce gross margin by ~170bps and operating margin by ~60–70bps, pressuring unit economics and requiring sustained offsetting productivity or higher-value mix to restore margins.

Messaging Revenue Concentration

A high share of lower-margin messaging revenue makes Twilio's profitability sensitive to pricing, carrier fees, and mix shifts. When messaging growth dominates, revenue expansion yields muted margin gains, increasing operational leverage risk and making durable margin improvement contingent on faster growth in higher-margin products.

Thin Net Margins & Moderating Growth

Although Twilio returned to GAAP profitability, net margins remain very thin and operating margin modest, providing limited cushion against demand weakness or cost inflation. Slowing revenue growth reduces the rate at which operating leverage can expand, leaving profitability sensitive to adverse shocks over the medium term.

Twilio (TWLO) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$17.26B

Dividend YieldN/A

Average Volume (3M)2.77M

Price to Earnings (P/E)577.6

Beta (1Y)1.24

Revenue Growth12.84%

EPS GrowthN/A

CountryUS

Employees5,502

SectorTechnology

Sector Strength88

IndustryInternet Content & Information

Share Statistics

EPS (TTM)1.33

Shares Outstanding151,612,820

10 Day Avg. Volume3,202,515

30 Day Avg. Volume2,767,616

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 Cap1.08

Enterprise Value/Revenue3.67

Enterprise Value/Gross Profit7.49

Enterprise Value/Ebitda69.16

Forecast

1Y Price Target

$143.82

Price Target Upside26.32% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering19

EPS Forecast (FY)5.42

Revenue Forecast (FY)$5.67B

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 generates revenue primarily through a consumption-based model, charging customers based on the volume of communications they send and receive using its services. Key revenue streams include charges for SMS messages, voice calls, video conferencing, and email services. Twilio also offers various pricing tiers and packages that cater to different customer needs, such as pay-as-you-go plans and subscription services. Significant partnerships with major companies, like Salesforce and Zendesk, enhance Twilio's ecosystem and drive additional revenue through integrations that allow businesses to streamline their communication processes. Additionally, Twilio's acquisition of companies like Segment has expanded its capabilities and customer base, contributing to its overall earnings.

Twilio Key Performance Indicators (KPIs)

Any

Active Customers

Active Customers
Tracks the number of customers actively using Twilio’s services, reflecting market penetration, customer retention, and potential for future revenue growth.

Chart InsightsTwilio's active customer base has shown consistent growth, reaching 392,000 by Q3 2025. This upward trajectory aligns with the company's strategic initiatives, including a partnership with Microsoft to enhance AI capabilities, which likely boosted customer engagement. Despite challenges like gross margin decline, Twilio's focus on new product offerings and increased large deals have strengthened its market position. The company's raised revenue growth guidance and strong performance in messaging and voice services underscore its resilience and potential for sustained expansion.

Data provided by:

The Fly

Twilio 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

Positive

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.

Balance Sheet

Positive

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.

Cash Flow

Very Positive

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.

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

Technical Analysis Sentiment

Negative

Last Price113.85

Price Trends

50DMA

126.85

Negative

100DMA

123.20

Negative

200DMA

118.68

Negative

Market Momentum

MACD

-4.32

Negative

RSI

45.77

Neutral

STOCH

42.51

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TWLO, the sentiment is Negative. The current price of 113.85 is below the 20-day moving average (MA) of 115.72, below the 50-day MA of 126.85, and below the 200-day MA of 118.68, indicating a bearish trend. The MACD of -4.32 indicates Negative momentum. The RSI at 45.77 is Neutral, neither overbought nor oversold. The STOCH value of 42.51 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TWLO.

Twilio Risk Analysis

Twilio disclosed 50 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

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ZM	81 Outperform	$25.91B	17.00	17.74%	―	3.85%	72.42%
TWLO	69 Neutral	$17.26B	577.63	0.43%	―	12.84%	―
RNG	66 Neutral	$3.01B	73.02	―	―	5.45%	―
FIVN	63 Neutral	$1.36B	39.46	5.60%	―	12.48%	―
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
EGHT	60 Neutral	$296.75M	-67.41	-3.02%	―	0.25%	92.10%
BAND	60 Neutral	$432.83M	-31.89	-3.62%	―	7.42%	34.42%

* Technology Sector Average

Performance Comparison

TWLO

Twilio

113.85

-3.39

-2.89%

EGHT

8X8

2.13

-0.37

-14.80%

RNG

RingCentral

35.19

6.59

23.04%

FIVN

Five9

17.83

-18.76

-51.27%

BAND

Bandwidth

13.79

-2.39

-14.77%

Zoom Video Communications

87.51

14.63

20.07%

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.Date of analysis: Feb 14, 2026