Twilio (TWLO) goes into overdrive as virus-driven digital shift gathers pace

When enterprises moved their digital assets to cloud platforms en masse during the virus crisis, most software companies benefited from that, and Twilio Inc. (NASDAQ: TWLO) is one of them. The company’s software solutions helped businesses stay connected when the shift to remote work gained momentum.

The Silicon Valley-based cloud communications specialist remained profitable throughout last year, defying the market’s prediction for loss. That justifies the steady growth of its market value — to a record high this month. Experts are bullish about TWLO’s growth prospects and expect the stock to cross the $500 mark this year, even after the recent rally. While analysts recommend tapping this unusual investment opportunity, many buyers would find the stock too expensive.

The optimism can mostly be linked to the elevated demand, driven by the mass adoption of digital technology during the pandemic. The shift to home-based work/study has created a huge demand for software and related services, a trend that is expected to stay even in the post-COVID era. Twilio’s growth strategy is currently focused on heavy investment in all areas of the business, to stay prepared for tapping long-term opportunities.

Growth Drivers

Segment, the customer data platform that joined the Twilio fold late last year, should contribute to revenues this year while providing a unified view to help better understand customers and engage more effectively over digital channels. At the same time, the appointment of Jeremiah Brazeau as chief technology officer is expected to invigorate innovation. As part of its expansion program, Twilio this week clinched a partnership with Syniverse to take mobile communications solutions to the next level.

As the company continues to add new users, its customer base expanded by almost a quarter to $221,000 in the fourth quarter. Consequently, revenues grew a whopping 65% to $548 million. Earnings, excluding special items, remained unchanged at $0.04 per share, defying the market’s forecast for a loss. Encouraged by the impressive top-line performance, Twilio executives are looking for a repeat performance in the current quarter.

Long-term Opportunity

The demand for cloud-communication solutions accelerated after the onset of the coronavirus outbreak and is expected to remain high even after normalcy returns to markets. Companies that invested in digital transformation would continue using those facilities irrespective of the external situations.

Our 2020 results reinforce the idea that there is a massive generational opportunity in front of us. We have long known that there is a huge shift to more digital experiences and that every company is becoming a software company and that has been fueling our growth for more than a decade. And what 2020 showed us is just how true it is that companies that embrace building, that embrace software agility, that empowers their developers are the companies that are prepared for the unknown.

Jeff Lawson, chief executive officer of Twilio

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Read analysts/managements’ comments on Twilio’s Q4 report

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Unusual Rally

Twilio’s shares grew about four-fold in less than a year, outperforming the broad market and the industry it belongs to. The stock, which is up 23% since the beginning of 2021, traded higher throughout Monday.