Twilio Stock Sinks as Slowing Growth Throws ‘Cold Water’ on Benefits From AI

Twilio posted better-than-expected third-quarter earnings. (Dreamstime)

Key Points

Twilio’s slowing revenue growth raises concerns that its artificial-intelligence business isn’t living up to expectations.
The company projects fourth-quarter organic revenue growth of 11% to 12%, down from 15.7% in the third quarter.
KeyBanc analyst Jackson Ader argues the projected slowdown could dampen expectations.

Twilio shares fell sharply Friday after the communications software company reported better-than-expected third-quarter earnings, but slowing revenue growth raised concerns that its artificial-intelligence business isn’t living up to expectations.

Twilio stock fell 19% to $196.60 in premarket trading after ending Thursday’s session down 4.6% to $241.90.

The company reported third-quarter adjusted earnings of $1.65 a share on Thursday, above consensus calls for $1.47, according to FactSet. Revenue grew 20% year over year to $1.55 billion, ahead of Wall Street’s estimate of $1.51 billion.

KeyBanc analyst Jackson Ader wrote in a note Friday the biggest concern in Twilio’s earnings report was its fourth-quarter outlook. The company called for organic revenue growth of 11% to 12%, down from 15.7% in the third quarter. The slowdown could “throw some cold water on Twilio’s benefit of personal AI agents as we head into the holiday season,” Ader said.

A roughly 30% rally in Twilio shares over the past three months heightened investor expectations heading into the earnings report, said Morgan Stanley analyst Elizabeth Porter.

Twilio had exceeded organic growth estimates by more than five percentage points in each of the first two quarters in 2026, making its narrower outperformance in the third quarter a disappointment, Porter said.

Porter remained bullish. She argued that Twilio’s underlying business is still healthy, pointing to continued strength in its voice communications and improving profitability. Voice services revenue grew more than 20% in the third quarter, while software add-ons grew more than 25%.

Twilio also offered an early glimpse into 2027, forecasting organic revenue growth of at least 10%, alongside adjusted operating income and free cash flow of at least $1.35 billion each.

That outlook could prove conservative, Porter said, noting that Twilio initially projected organic revenue growth of 8% to 9% for 2026 before raising its forecast to 15%.

BTIG analyst Nick Altmann was similarly optimistic. He called Twilio’s stock pullback a “highly compelling buying opportunity,” arguing that the company remains in the early stages of capitalizing on demand for AI-powered communications, with AI accounting for just 1% of its voice interactions.

Twilio stock has been pressured in recent weeks as concerns spread about AI spending, with shares falling below their 50-day moving average earlier this month. That marked a reversal in burgeoning demand following its recent entry into the S&P 500 and its role in powering AI agents, like Meta Platform’s Muse.

Write to Ty Roush at tyler.roush@barrons.com

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