Twilio: Catalysts Propel AI Messaging Growth

We are initiating on TWLO with a Strong Buy rating and $194 PT. Twilio Inc. enables software

developers through scalable APIs that embed messaging, voice, and video solutions into customer engagement applications worldwide. Beneath Wall Street’s cautious narrative, three catalysts synthesize to reframe TWLO for durable mid/long-term outperformance: large-scale # message volume growth, nascent AI-led automation, and rapid expansion in high-value enterprise wallet share. Rev. momentum has flouted the narrative, with organic guides edging higher and Q1–Q2 results reinforcing resilience—our FY26 forecast lands a full pt above consensus, at 9% YoY, as DD message growth and 108% net expansion from existing comm. customers spell enterprise demand has legs. Rapid adoption of AI-driven lead gen (now 85% of inbound sales and 3x higher upsell rates) has enabled accretive growth at low marginal cost—a still underappreciated feature by Street. Layer in 37% expansion in $500K+ cohort and cross-sell in Voice Intelligence, Verify, and compliance, and we see ARPUs stretching well into FY26. Backed by a disciplined cap alloc. framework, FCF mgns at 15%, and N-GAAP operating profitability ticking up, we see multiple expansion playing tangible. A 5.3x EV/Sales mlt. will capture both TWLO’s moderating growth and structural improvements, and still will provide upside in the event cyclical risk in telecom and/or macro hangs around. In this context, R/R skews decidedly positive. At its current valuation, TWLO offers investors a rare opportunity to get ahead of the curve before the flywheel reaches full giddy-up.

## Enterprise Expansion Unleashes Upside.