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Twilio CEO Josema Shipchandler speaks at Twilio’s Signal event in Sao Paulo on August 14, 2024.
Courtesy of Twilio
Creator of cloud communications software Twilio on Thursday released an encouraging profit forecast for the next few years.
The company sees its adjusted operating margin increasing to 21-22% in 2027 as part of its three-year guidance plan. This is higher than the Visible Alpha consensus of 19.68%. Twilio’s adjusted operating margin at the last quarter was 16.1%.
Twilio revealed his new leadership at an investor event Thursday. There, the company’s executives also committed to generate $3 billion in free cash flow over the next three years, compared to approximately $692 million in free cash flow in 2022, 2023 and 2024. Consensus Visible Alpha for Twilio from 2025 to 2027 was $2.76 billion.
The company’s shares rose more than 10% in extended trading after the company released its presentation for the event.
If 2024 is Twilio’s fundamental recovery, then 2025 is execution, CEO Josema Shipchandler told CNBC ahead of the company’s investor day.
“If we do well in 2025, I think from 2026 we will write our own story,” said Shipchandler, who joined Twilio as CFO after 22 years at GE in 2018 and succeeded co-founder Jeff Lawson as CEO in January 2024.
Twilio, which sends text messages and email to customers, did not disclose a revenue growth target for 2027 at its event on Thursday.
The management also presented guidance for 2025 on Thursday. It called for $825 million to $850 million in free cash flow and the same amount in adjusted operating income, with revenue growth of 7% to 8% for the year. The Visible Alpha consensus was $814 million in adjusted operating income and about $808 million in free cash flow. The 2025 revenue forecast was in line with the LSEG consensus.
More than 9,000 AI companies already rely on Twilio services. That includes OpenAI, which in December announced a 1-800-CHATGPT service that relies on Twilio’s voice tools.
“We want to be able to host many more of these, as well as larger businesses,” Shipchandler said. “We’re sort of open season on both.”
The pressure from shareholders is increasing
After Twilio stock debuted on the New York Stock Exchange in 2016, investors piled in as the company delivered consistently strong earnings growth. Stocks have fallen in 2022 as investors become more interested in profitable companies and interest rates are rising rapidly. At the same time, Twilio’s revenue growth has slowed.
Shareholder input influenced the reorganization, which included workforce reduction by 17%. in early 2023, and activist investors Anson Funds and Legion Partners Asset Management campaigned to sell Twilio or one of its business units, This is reported by CNBC.
Since activist investor Sachem Head Capital Management won a seat on Twilio’s board last April, Twilio shares have jumped about 81% as revenue growth accelerated and losses narrowed.
Twilio has the potential to show double-digit growth in 2025 and beyond, Mizuho analysts said in a note earlier this month. Analysts have a buy-equivalent rating on the stock.
Thanks to expansion into new areas such as conversational artificial intelligence, Twilio says it will be able to sell to a total addressable market of $158 billion by 2028, compared to $119 billion if it focused only on the communications platform and customer data categories.
The company does not believe that acquisitions will be necessary to enter a new addressable market, the spokesperson said.
Twilio’s preliminary results for the fourth quarter show revenue growth of 11%, with adjusted operating income above the upper end of the company’s $185 million to $195 million range. issued in October. Analysts polled by LSEG had expected revenue growth of 7.9%, and the consensus estimate for adjusted operating income was about $190 million, according to Visible Alpha.
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