Twilio Beats Q2 Expectations But Analysts See Challenges Ahead: 'Macro Headwinds Remain'

Shares of Twilio Inc TWLO spiked in early trading on Wednesday, after the company reported a revenue beat for the second quarter.

The results came amid an exciting earnings season. Here are some key analyst takeaways from the earnings release.

Needham On Twilio

Analyst Ryan Koontz maintained a Buy rating, while raising the price target from $65 to $75.

While Twilio reported its second-quarter results higher than expected, it provided mixed guidance for the third quarter, Koontz said.

“Management conceded its Communications segment is further slowing but delivering improved profitability while its emerging Data & Applications segment growth remains challenged due to sales execution,” the analyst wrote. “We see value in cash-cowing its slow growth Communications segment to aggressively invest in D&A which could inflect to hypergrowth if it can monetize its position in the AI ecosystem,” he added.

Oppenheimer On Twilio

Analyst Ittai Kidron reiterated an Outperform rating and price target of $75.

Twilio delivered a revenue beat but announced slightly disappointing revenue guidance, Kidron said in a note. “Macro headwinds remain, and tough YoY comps are weighing on growth while the headcount reduction has boosted operating margins,” he added.

Twilio's fundamentals seem to be bottoming and the “strong decline in crypto-currency customer usage should peak in 3Q23,” the analyst wrote.

Check out other analyst stock ratings.

RBC Capital Markets On Twilio

Analyst Rishi Jaluria reaffirmed an Underperform rating and price target of $50.

“On the surface, upside to revenue and non-GAAP operating margins was solidly above average,” Jaluria wrote in a note. He added, however, that Data & Apps growth decelerated to merely 12% and the revenue guidance for the third quarter came in below consensus.

“In other words, there was not much to relieve our long-term concerns on competition, AI positioning, and terminal margins,” the analyst stated.

KeyBanc Capital Markets On Twilio

Analyst Thomas Blakey maintained a Sector Weight rating on the stock.

Twilio’s total revenue growth decelerated sequentially from 14% to 10% “as management highlighted some volume stabilization in usage-based TC segment and a record messaging deal signed in 2Q23, but continued macro headwinds,” Blakey said.

“We continue to view Twilio well positioned to benefit from digital customer engagement secular trends, including AI possibly serving as an accelerant as it aims to monetize its data assets by using AI,” the analyst wrote. “That said, its expansive solution set and complex GTM strategy appear to be in relative early stages with decelerating D&A segment revenue growth,” he added.

TWLO Price Action: Shares of Twilio were up 1.11% to $59.05 at the time of publication Wednesday.

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