Shares of cloud communications specialist Twilio have unexpectedly surged, jumping more than 20% in the past three months despite an overall market decline. This recent uptick was driven by an announcement on Oct. 2 that Twilio will integrate OpenAI’s Realtime API into its platform.
Twilio’s integration of the Realtime API is poised to revolutionize its cloud communications platform. This API supports speech-to-speech technology, enabling the creation of conversational AI assistants that sound remarkably human. Twilio management emphasizes that these AI assistants can significantly enhance customer service by improving satisfaction levels and overall customer experience.
The company aims to offer a unified platform for customers to build, deploy, and manage conversational AI assistants. This move is expected to reduce operational costs and increase efficiency for Twilio’s clients. According to Insight Partners, the conversational AI market was valued at $8.4 billion last year and could surge to nearly $40 billion by 2031.
Twilio ended the second quarter of 2024 with over 316,000 active customer accounts, up from 304,000 in the same period last year.
Twilio integrates OpenAI for growth
Its dollar-based net retention rate was 102%, showing that existing customers continue to spend more on Twilio’s offerings.
However, there is still room for growth in this metric, and AI-driven enhancements may help boost these figures. Twilio’s revenue in the second quarter increased by 4% year over year to $1.08 billion. Analysts project that the company’s top line will grow by 5% this year, aligning with management’s guidance.
Revenue growth is expected to slightly improve to 7% next year. The addition of AI-related features is anticipated to sustain healthier growth rates and enhance Twilio’s earnings potential. Analysts forecast the company’s earnings to grow at an annual pace of nearly 20% over the next five years.
Given Twilio’s current trading multiple of 17 times, it is considered attractively valued compared to the U.S. tech sector’s average earnings multiple of 45. Twilio’s integration of AI technology positions it for stronger future growth, both in revenue and customer base expansion. Investors looking for a value deal in the tech sector might consider acting on this opportunity before Twilio’s stock potentially rises higher.
