Twilio currently trades at $127.20 per share and has shown little upside over the past six months, posting a middling return of 4.8%. The stock also fell short of the S&P 500’s 14.1% gain during that period.

Is there a buying opportunity in Twilio, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free for active Edge members.

Why Is Twilio Not Exciting?

We're swiping left on Twilio for now. Here are three reasons you should be careful with TWLO and a stock we'd rather own.

1. Weak Billings Point to Soft Demand

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Twilio’s billings came in at $1.31 billion in Q3, and over the last four quarters, its year-on-year growth averaged 13.5%. This performance slightly lagged the sector and suggests that increasing competition is causing challenges in acquiring/retaining customers.

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Twilio’s revenue to rise by 9.1%, close to its 25.9% annualized growth for the past five years. This projection is underwhelming and implies its newer products and services will not catalyze better top-line performance yet.

3. Low Gross Margin Reveals Weak Structural Profitability

For software companies like Twilio, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

Twilio’s gross margin is substantially worse than most software businesses, signaling it has relatively high infrastructure costs compared to asset-lite businesses like ServiceNow. As you can see below, it averaged a 49.4% gross margin over the last year. That means Twilio paid its providers a lot of money ($50.60 for every $100 in revenue) to run its business.

The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. Twilio has seen gross margins improve by 0.8 percentage points over the last 2 year, which is slightly better than average for software.

Final Judgment

Twilio isn’t a terrible business, but it isn’t one of our picks. With its shares lagging the market recently, the stock trades at 3.7× forward price-to-sales (or $127.20 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.

Stocks We Like More Than Twilio

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

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