Twilio Inc. (NYSE:TWLO) shares plunged more than 12% in premarket trading on Friday after the company issued third-quarter earnings guidance that fell short of expectations, despite reporting better-than-expected results for the second quarter.
For the quarter ending June 30, 2025, Twilio reported adjusted earnings of $1.19 per share on revenue of $1.23 billion, surpassing analyst expectations of around $1.05 EPS and $1.19 billion in revenue. The performance was bolstered by ongoing momentum in its customer engagement platform and advances in artificial intelligence.
Despite the earnings beat, gross margins came in at 50.7%, missing the 52.3% consensus. Gross profit totaled $623 million, largely in line with projections of $620.9 million. Gross profit grew 7.9% year-over-year, improving from the 6.4% increase in the first quarter. However, analysts at Jefferies expressed some skepticism about the pace of that growth.
“The growth rate in absolute terms does not reflect that TWLO is a massive AI winner today,” Jefferies said in a note following the release.
Looking ahead, Twilio projected third-quarter adjusted EPS between $1.01 and $1.06, falling short of the $1.15 analysts had anticipated. However, its revenue forecast of $1.245 billion to $1.255 billion came in above expectations of $1.21 billion. Operating income on a non-GAAP basis is expected to range from $205 million to $215 million.
Twilio also raised its full-year 2025 outlook for organic revenue growth, increasing the midpoint to 9.5% year-over-year from a prior estimate of 8%. This revision implies fourth-quarter organic revenue growth of 5.2%, bringing the full-year growth rate to 6.8%.
Analysts at Jefferies flagged potential challenges ahead, particularly around profitability. “If we flow through the incremental 50 bps headwind to gross margins, it implies a significant decel in GP$ growth as we progress through the year. We now model a GP$ growth decel from +7.9% y/y in 2Q25 to +3.1% y/y in 4Q25,” they noted.
Despite a strong quarter, Twilio faces a cautious investor response as margin pressures and weaker-than-expected earnings guidance cast doubt on how much benefit the company is currently realizing from its AI initiatives.
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