Twilio CEO Khozema Shipchandler speaks at Twilio’s Signal event in Sao Paulo on Aug. 14, 2024.
Courtesy: Twilio
Cloud communications software maker Twilio on Thursday issued a hopeful profit forecast for the next few years.
The company sees its adjusted operating margin widening to between 21% and 22% in 2027 as part of a three-year framework for guidance. That’s higher than Visible Alpha’s 19.68% consensus. Twilio’s adjusted operating margin in the most recent quarter was 16.1%.
Twilio revealed its new guidance at a Thursday investor event. There, the company’s executives also committed to generating $3 billion in free cash flow over the next three years, compared with approximately $692 million in free cash flow for 2022, 2023 and 2024. The Visible Alpha consensus for Twilio’s 2025 through 2027 was $2.76 billion.
The company’s stock price rose more than 10% in extended trading after the company released its presentation for the event.
If 2024 was about rebuilding Twilio’s foundation, 2025 is all about execution, CEO Khozema Shipchandler told CNBC ahead of the company’s investor day.
“If we execute well in 2025, I think we write our own story from 2026 on,” said Shipchandler, who joined Twilio as finance chief after 22 years at GE in 2018 and replaced co-founder Jeff Lawson as CEO in January 2024.
Twilio, which sends text messages and emails for customers, did not issue a revenue growth target for 2027 at its Thursday event.
Management on Thursday also provided guidance for 2025. It called for $825 million to $850 million in free cash flow and the same amount in adjusted operating income, with 7% to 8% revenue growth year over year. The Visible Alpha consensus was $814 million in adjusted operating income and about $808 million in free cash flow. The 2025 revenue forecast was in line with LSEG consensus.
Over 9,000 AI companies are already building on Twilio services. That includes OpenAI, which in December announced the 1-800-CHATGPT service that draws on Twilio voice tools.
“We want to be able to take a bunch more of those, as well as large enterprises on,” Shipchandler said. “We’re kind of open season on both.”
Shareholder pressure increases
After Twilio shares debuted on the New York Stock Exchange in 2016, investors piled in as the company delivered consistently high revenue growth rates. The stock drifted lower in 2022 as investors became more interested in profitable companies, with interest rates ratcheting upward. At the same time, Twilio’s revenue growth was slowing down.
Shareholder input influenced a reorganization that included a 17% workforce reduction in early 2023, and activist investors Anson Funds and Legion Partners Asset Management agitated for a sale of Twilio or one of its business units, CNBC reported.
Since activist investor Sachem Head Capital Management won a Twilio board seat last April, Twilio’s stock has jumped about 81%, as revenue growth has accelerated and losses have narrowed.
Twilio has an opportunity to show double-digit growth in 2025 and beyond, Mizuho analysts said in a note earlier this month. The analysts have the equivalent of buy rating on the stock.
By expanding into new areas, such as conversational artificial intelligence, Twilio says it can sell into a $158 billion total addressable market by 2028, compared with $119 billion when only focusing on the communications and customer data platform categories.
The company doesn’t believe acquisitions will be necessary to reach its new total addressable market, a spokesperson said.
Twilio’s preliminary results for the fourth quarter show 11% revenue growth, with adjusted operating income that exceeds the top end of the $185 million to $195 million range that the company issued in October. Analysts surveyed by LSEG had expected 7.9% revenue growth, and according to Visible Alpha, the adjusted operating income consensus was about $190 million.
Google on Thursday blamed a “data error” after users reported that former President Joe Biden was missing from the company’s search results.
Users on Wednesday noticed that results for search queries that included “US Presidents,” “United States Presidents” and “US Presidents in order” did not include Biden, who concluded his four-year presidential term on Monday. Users reported seeing a list of presidents ranging from George Washington to President Donald Trump. Some users posted screenshots of their results showing how the lists omitted Biden.
CNBC tried searching for U.S. presidents on Wednesday night and also encountered the results that omitted Biden. The company restored Biden to its results on Thursday.
“There was a brief data error in our knowledge graph,” a company spokesperson said in an emailed statement to CNBC on Thursday. A knowledge graph is a broad term used to describe a system that holds connected information. “We identified the root cause and resolved it quickly.”
Google’s search results for “United States Presidents” omitted President Joe Biden, who ended his four-year term Monday.
The mistake comes after Google CEO Sundar Pichai sent a memo to employees on Election Day in November, asking them to remember that people turn to the company’s services for “high-quality and reliable information.”
“Whomever the voters entrust, let’s remember the role we play at work, through the products we build and as a business: to be a trusted source of information to people of every background and belief,” Pichai wrote. “We will and must maintain that.”
Google’s Biden omission error comes as the company undergoes a turbulent period that has included several product mishaps and global scrutiny.
“It’s not lost on me that we are facing scrutiny across the world,” Pichai said in a December all-hands meeting first reported by CNBC.“It comes with our size and success. It’s part of a broader trend where tech is now impacting society at scale.”
Amid a year of product mistakes, Google launched Imagen 2, which turned user prompts into artificial intelligence-generated images. Immediately after it was introduced, the product came under scrutiny for historical inaccuracies discovered by users. The company pulled the feature for months before relaunching it, and Pichai told employees the company had “offended our users and shown bias.”
Google also faced problems with its AI summaries product AI Overview atop Google’s traditional search results, where users were also quick to find problems upon that launch.
Pichai has been among tech CEOs getting closer to Trump, who has previously alleged that Google intentionally buried search results of him. Those allegations are unproven.
Google donated $1 million to Trump’s inauguration fund, becoming one of several tech companies working to curry favor with the new administration. Pichai had a prominent standing position on stage alongside other tech CEOs at Trump’s inauguration Monday.
A sign is posted in front of Electronic Arts (EA) headquarters on March 30, 2023 in Redwood City, California. Video game maker Electronic Arts announced plans to cut 6 percent of its nearly 13,000 person workforce.
Justin Sullivan | Getty Images
Shares of Electronic Arts headed for their steepest drop since 1999 after the video game publisher cut its full-year bookings guidance, due mostly to challenges with its soccer franchise.
The stock plummeted 19% to $115.86 as of mid-day on Thursday. That would be its worst day on the market since the dot-com bubble and the stock’s third-biggest drop since EA’s public market debut in 1990.
For the fiscal third quarter, which ended Dec. 31, EA said late Wednesday that it expects to report about $2.215 billion in net bookings, versus previous guidance of $2.4 billion to $2.55 billion. Revenue in the December quarter was about $1.88 billion, with $1.11 in diluted earnings per share, the company said in a statement.
EA said that “Dragon Age” and its EA Sports FC franchise “underperformed our net bookings expectations.”
“Weakness has been seen largely from the Global Football franchises,” analysts at Roth MKM wrote in a report on Thursday, calling the earnings pre-announcement a “big stumble.” They have the equivalent of a hold rating on the stock.
EA said it expects net bookings for the full fiscal year, ending March 31, of between $7 billion and $7.15 billion, below previous guidance of $7.5 billion to $7.8 billion. EA says net bookings include physical game sales as well as revenue from online games.
The warning points to weakness in the most prominent soccer video game franchise since 1993. It used to fall under the FIFA branding, but in 2022 EA’s deal with FIFA ended and the last two EA soccer games have been sold as EA Sports FC.
The company also said that role-playing game “Dragon Age” had 1.5 million players during the quarter, which was about 50% below its expectations.
EA said it expects Global Football sales to be down on a year-over-year basis, and said that bookings from online sales, or live services, would also decline in fiscal 2025. The company’s soccer franchise, accounted for the majority of the live services shortfall.
EA plans to release full third-quarter results on Feb. 4.
The U.S. may have led China in the artificial intelligence race for the past decade, according to Alexandr Wang, CEO of Scale AI, but on Christmas Day, everything changed.
Wang, whose company provides training data to key AI players including OpenAI, Google and Meta, said Thursday at the World Economic Forum in Davos, Switzerland, that DeepSeek, the leading Chinese AI lab, released an “earth-shattering model” on Christmas Day, then followed it up with a powerful reasoning-focused AI model, DeepSeek-R1, which competes with OpenAI’s recently released o1 model.
“What we’ve found is that DeepSeek … is the top performing, or roughly on par with the best American models,” Wang said.
In an interview with CNBC, Wang described the artificial intelligence race between the U.S. and China as an “AI war,” adding that he believes China has significantly more Nvidia H100 GPUs — AI chips that are widely used to build leading powerful AI models — than people may think, especially considering U.S. export controls.
Wang also said he believes the AI sector will reach a trillion dollars, on par with estimates that the generative AI market is poised to top $1 trillion in revenue within a decade.
Read more CNBC reporting on AI
“The United States is going to need a huge amount of computational capacity, a huge amount of infrastructure,” Wang said, later adding, “We need to unleash U.S. energy to enable this AI boom.”
Earlier this week, President Donald Trump announced a joint venture with OpenAI, Oracle and SoftBank to invest billions of dollars in U.S. AI infrastructure. The project, Stargate, was unveiled at the White House by Trump, SoftBank CEO Masayoshi Son, Oracle co-founder Larry Ellison and OpenAI CEO Sam Altman. Key initial technology partners will include Microsoft, Nvidia and Oracle, as well as semiconductor company Arm. They said they would invest $100 billion to start and up to $500 billion over the next four years.
In the interview Thursday, Wang said he believes that it’ll take two to four years to reach artificial general intelligence, or AGI, a widely cited but vaguely defined benchmark used in the AI sector to denote a branch of AI pursuing technology that equals or surpasses human intellect on a wide range of tasks. AGI is a hotly debated topic, with some leaders saying we’re close to attaining it and some saying it’s not possible at all. Wang said his own definition of AGI is “powerful AI systems that are able to use a computer just like you or I could … and basically be a remote worker in the most capable way.”
Anthropic, the Amazon-backed AI startup founded by ex-OpenAI research executives, ramped up its technology development throughout the past year, and in October, the startup said that its AI agents were able to use computers like humans can to complete complex tasks. Anthropic’s Computer Use capability allows its technology to interpret what’s on a computer screen, select buttons, enter text, navigate websites and execute tasks through any software and real-time internet browsing, the startup said.
The tool can “use computers in basically the same way that we do,” Jared Kaplan, Anthropic’s chief science officer, told CNBC in an interview at the time. He said it can do tasks with “tens or even hundreds of steps.”
When asked which U.S. artificial intelligence startups are leading the AI race right now, Wang said that models each have their own strengths — for instance, OpenAI’s models are great at reasoning, while Anthropic’s are great at coding.
“The space is becoming more competitive, not less competitive,” he said.
Correction: This article has been updated to correct the name of DeepSeek’s reasoning-focused AI model, DeepSeek-R1.