Stock transformation at Twilio accentuated by AI innovation
In the dynamic world of technology, Twilio continues to make waves, with its current conservative valuation on the stock market boasting a price-to-earnings ratio of 20, lower than the S&P 500's 23.
At the heart of Twilio's platform is Twilio Segment, a customer data tool that aggregates data for personalised engagement. This, coupled with the company's APIs, enables businesses to integrate messaging, voice, email, or video into their applications.
The renewed momentum at Twilio is due to the creation of new business opportunities by Artificial Intelligence. AI makes messaging even more important as it becomes the connecting element between voice, SMS, and email. This is evident in the growth of Twilio's voice segment, where margins are over 80%, significantly higher than the company average and potentially boosting overall profitability.
Some Twilio voice segment customers are already generating seven-figure revenues, and the segment is experiencing growth driven by AI, with new voice services growing by double digits.
AI startups like Manus AI use Twilio's "Verify" for user identity verification and "ConversationRelay" for real-time connection of speech, text, and AI models. Twilio's partnerships with tech giants such as Microsoft, OpenAI, Databricks, Snowflake, and others position it as an independent intermediary in the AI ecosystem.
Twilio's restructuring efforts, such as reducing staff, realigning business areas, and developing a focused sales strategy, are now bearing fruit. The company has optimised its self-service sales model and uses AI to support onboarding new customers.
The net expansion rate for Twilio was 108%, and it was 109% in the core segment. Messaging remains a strong driver for Twilio, making up more than half of revenues and growing for four consecutive quarters.
A mid- to high-double-digit earnings growth is expected for Twilio. The risk-reward profile for Twilio looks favorable, as it continues to validate its AI story, a re-rating could be plausible.
However, potential risks include the waning of positive momentum in customer business or budget cuts for IT services, which could falter the turnaround, and fees in the messaging area potentially impacting margins.
Founded by Jeff Lawson, Evan Cooke, and John Wolthuis, Twilio's journey is a testament to the power of technology and innovation in shaping the future of communication. As Twilio continues to innovate and grow, it promises to redefine the way businesses interact with their customers in the AI-driven world.
