Key Points
Twilio stock has been weighed down by fears that AI will make software stocks irrelevant.
Much to investors' surprise, the company delivered quarterly results that beat expectations and raised its full-year guidance.
Shares of Twilio (NYSE: TWLO) charged sharply higher on Friday, surging as much as 26.5%. As of 10:34 a.m. ET, the stock was still up 25.9%.
The catalyst that sent the cloud communications specialist higher was its quarterly earnings report, which was far better than expected.
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Surprisingly robust result
For the second quarter, Twilio generated revenue of $1.5 billion, which climbed 22% year over year. This resulted in adjusted earnings per share (EPS) of $1.47, up 24%.
To put those numbers in context, analysts' consensus estimates called for revenue of $1.43 billion and EPS of $1.32, so Twilio exceeded both metrics by a wide margin.
The strength of the results was broad-based, with growth coming from the company's voice, messaging, software add-ons, and AI-powered products. Not only did Twilio continue to add new customers, but existing customers continued to spend more, as evidenced by the company's dollar-based net expansion rate of 116%. Put another way, existing customers spend 16% more this quarter than in the prior-year period.
CEO Khozema Shipchandler lauded the record results, saying, "We are in a powerful new chapter at Twilio, marked by another quarter of organic growth acceleration as well as record profitability and free cash flow."
In light of the company's robust results, management raised Twilio's full-year forecast to 18% to 18.5% growth, up from its previous outlook of 14.5% growth at the midpoint of its guidance range.
The past year has been marked by fears that artificial intelligence (AI) will eliminate the need for many software-as-a-service (SaaS) offerings. The strength of Twilio's results suggests those fears are overblown.
Danny Vena, CPA has positions in Twilio. The Motley Fool has positions in and recommends Twilio. The Motley Fool has a disclosure policy.