Twilio Forecasts Strong Profit Growth, Stock Surges 10%

SAN FRANCISCO, Calif. — Cloud communications software maker Twilio on Thursday issued an optimistic profit forecast, projecting significant growth in adjusted operating margins and free cash flow over the next three years. The company’s stock surged more than 10% in extended trading following the announcement.

Twilio expects its adjusted operating margin to expand to between 21% and 22% by 2027, up from 16.1% in recent years. The company also committed to generating $3 billion in free cash flow over the same period, compared to approximately $692 million from 2022 to 2024. These projections exceed Visible Alpha‘s consensus estimates of $2.76 billion in free cash flow and a 19.68% operating margin.

“If 2024 was about rebuilding Twilio’s foundation, 2025 is all about execution,” CEO Khozema Shipchandler told CNBC ahead of the company’s investor day. “If we execute well in 2025, I think we write our own story from 2026 on.” Shipchandler, who joined Twilio as finance chief in 2018 and became CEO in January 2024, emphasized the company’s focus on growth and innovation.

For 2025, Twilio provided guidance of $825 million to $850 million in free cash flow and adjusted operating income, with revenue growth projected at 7% to 8% year over year. These figures align with LSEG consensus estimates and reflect the company’s confidence in its strategic direction.

Twilio, known for enabling businesses to send text messages and emails, has also seen significant adoption of its services by artificial intelligence companies. Over 9,000 AI companies, including OpenAI, are building on Twilio’s platform. OpenAI’s 1-800-CHATGPT service, launched in December, utilizes Twilio’s voice tools.

“We want to be able to take a bunch more of those, as well as large enterprises on,” Shipchandler said. “We’re kind of open season on both.”

Twilio’s stock has rebounded strongly since activist investor Sachem Head Capital Management secured a board seat in April 2023. The company’s shares have risen approximately 81% since then, driven by accelerating revenue growth and narrowing losses. Mizuho analysts recently reiterated a buy rating on the stock, citing potential for double-digit growth in 2025 and beyond.

By expanding into new areas like conversational AI, Twilio aims to tap into a $158 billion total addressable market by 2028, up from $119 billion when focusing solely on communications and customer data platforms. The company does not anticipate needing acquisitions to achieve this goal.

Twilio’s preliminary fourth-quarter results show 11% revenue growth, exceeding analyst expectations of 7.9%. Adjusted operating income also surpassed the top end of the company’s October forecast range of $185 million to $195 million.