Twilio Inc.TWLO saw its stock plunge 15% following its fourth-quarter 2024 earnings release, largely due to a slight earnings miss and cautious guidance. The company reported non-GAAP EPS of $1.00, just shy of the Zacks Consensus Estimate of $1.02, while revenues of $1.19 billion narrowly beat expectations.

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Management’s first-quarter 2025 EPS guidance of 88-93 cents also fell below consensus estimates of 95 cents, spooking investors. Meanwhile, revenue projections in the band of $1.13-$1.14 billion suggested a sequential decline, reinforcing short-term concerns about demand and profitability.

Despite the pullback, Twilio remains up 15.9% year to date, though the drop erased much of its earlier 2024 gains. However, short-term volatility does not reflect the strong fundamentals, strategic positioning and AI-driven growth catalysts that make Twilio a compelling buy on this dip.

YTD Price Return Performance

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Twilio’s Unmatched Leadership in Customer Engagement Market

Twilio remains a dominant player in the communications and customer engagement market, powering real-time, personalized interactions for businesses worldwide.

One of its strongest long-term growth drivers is its investment in artificial intelligence (AI). Twilio’s AI-powered tools, such as Twilio Verify and Voice Intelligence, enable businesses to automate and optimize customer interactions, improving both efficiency and satisfaction.

Additionally, Twilio Segment, its customer data platform, is gaining rapid traction. By unifying customer data across multiple touchpoints, Segment allows businesses to run highly personalized and data-driven marketing campaigns — a critical advantage in an era when companies are prioritizing customer retention and targeted engagement.

With AI adoption accelerating, Twilio’s ability to offer data-rich, AI-driven customer solutions puts it ahead of competitors and positions it for significant long-term upside.

Twilio’s Competitive Edge Over Tech Giants

While Twilio competes with tech behemoths like Cisco CSCO, Microsoft MSFT and Amazon AMZN, it has successfully differentiated itself through its developer-first approach and highly customizable API ecosystem.

Unlike competitors that offer standardized, bundled solutions, Twilio provides businesses with the flexibility to create tailor-made communication and engagement experiences. This API-first strategy has helped it attract a broad customer base, ranging from startups to global enterprises.

Additionally, Twilio’s global footprint, spanning more than 180 countries, gives it a reach that many regionalized competitors lack. The company’s deep integration across messaging, voice, email and video positions it as the go-to provider for companies seeking a comprehensive customer engagement platform.

Twilio’s Robust Financial Strength

Though Twilio’s fourth-quarter bottom-line results missed analysts’ expectations, it registered strong 16.3% year-over-year growth. Revenues for the quarter also soared 11%, underscoring the company’s growth trajectory.

Twilio Quarterly Revenue Growth Trend

Image Source: Twilio Inc.

Twilio’s dollar-based net expansion rate was 106% in the fourth quarter, up from the previous quarter’s 105% and the year-ago quarter’s 102%. Active customer accounts increased to more than 325,000 as of Dec. 31 from 320,000 at the end of the third quarter of 2024.

Twilio Dollar-Based Net Expansion Rate Trend

Image Source: Twilio Inc.

Twilio’s solid balance sheet adds to its appeal. At the end of the fourth quarter of 2024, the company had $2.38 billion in cash, cash equivalents and short-term marketable securities. In 2024, it generated operating cash flow and free cash flow of $716.2 million and $657.5 million, respectively.

Shareholder returns are another bright spot. In 2024, Twilio repurchased stocks worth $2.33 billion and completed the previously authorized $3 billion share buyback plan. In January 2025, its board of directors approved a new share repurchase authorization of $2 billion, which will expire on Dec. 31, 2027. This commitment to returning value to shareholders underscores the company’s confidence in its long-term prospects.

Conclusion: Buy TWLO Stock on the Dip

Twilio’s post-earnings selloff is an overreaction to short-term guidance issues rather than a reflection of its long-term potential. The company is executing well in its transition toward sustainable profitability while maintaining strong revenue growth, particularly in high-margin AI and customer engagement solutions.

With AI-driven tailwinds, a differentiated product offering, expanding enterprise adoption, strong cash flow generation and aggressive buybacks, Twilio presents an attractive buying opportunity at current levels. Investors should take advantage of this dip, as TWLO remains well-positioned for long-term gains.

Currently, TWLO sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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