Twilio Issues Optimistic Profit Forecast, Sees 21-22% Adjusted Operating Margin by 2027
Twilio, a cloud communications software maker, issued a hopeful profit forecast for the next few years, with its adjusted operating margin expected to widen to between 21% and 22% in 2027. The company’s adjusted operating margin in the most recent quarter was 16.1%. Twilio also committed to generating $3 billion in free cash flow over the next three years, up from approximately $692 million in 2022, 2023, and 2024.
The company’s executives, including CEO Khozema Shipchandler, revealed the new guidance at a Thursday investor event, where they also provided guidance for 2025. The company expects $825 million to $850 million in free cash flow and the same amount in adjusted operating income, with 7% to 8% revenue growth year over year.
Twilio’s stock price rose more than 10% in extended trading after the company released its presentation for the event. The company’s new guidance is higher than Visible Alpha’s 19.68% consensus, and the company’s revenue growth is expected to accelerate in 2025 and beyond.
The company is expanding into new areas, such as conversational artificial intelligence, and believes it can sell into a $158 billion total addressable market by 2028, compared with $119 billion when only focusing on the communications and customer data platform categories. Twilio does not believe acquisitions will be necessary to reach its new total addressable market.
Twilio’s preliminary results for the fourth quarter show 11% revenue growth, with adjusted operating income that exceeds the top end of the $185 million to $195 million range that the company issued in October. The company’s stock has jumped about 81% since activist investor Sachem Head Capital Management won a Twilio board seat last April.