TWLO Upgraded to 'Price Below Value' After Record $1.4B Q4

Record Q4 revenue of $1.4B (+12% organic), first full year of GAAP profitability ($158M), and $945M in free cash flow — all while the stock dropped 4% to $113.98. Our thesis classification upgraded from “Price At Value” to “Price Below Value” as all 10 signal classifications were confirmed unchanged with strengthened evidence.

Price At Value

MEDIUM confidence

Price Below Value

MEDIUM confidence

−4.0%

$118.79 → $113.98

$1.4B

Q4 Revenue

+12% organic YoY

$945M

FY2025 FCF

+44% YoY · beat guide

$158M

GAAP Profit

First full year ever

10 / 10

Signals Confirmed

No classification changes

What Drove the Upgrade

The upgrade rests on the divergence between improving fundamentals and a declining stock price. FY2025 revenue reached $5.1B (+13% organic) with growth broad-based across self-serve (+28%), ISV (+26%), and voice (high teens). Enterprise momentum deepened: $500K+ deals grew 36% YoY, multiproduct customers increased 26%, and a nine-figure renewal confirmed the largest deal in company history.

Three of seven prediction markets resolved, removing the single largest source of uncertainty. The ensemble correctly predicted Q4 growth sustaining above 10% (Brier 0.012) and gross margin breaking below 50% (Brier 0.116). The guidance miss (Brier 0.462) reflected management's established conservatism pattern rather than fundamental weakness.

Guide-and-Raise Pattern

Management guided FY2026 organic growth at 8-9% — below the 10% threshold some expected. But FY2025 started with 7-8% guidance and ended at 13%. Q1 2026 is guided at 10-11%, the highest quarterly guidance in 3+ years. At approximately 17x forward FCF ($1,000-1,040M guided), the price appears to embed the conservative guide at face value rather than adjusting for the documented under-promise-and-over-deliver pattern.

Four Markets Still Active

Lowery v. OpenAI/Twilio MTD denied52%0.89 agreement

DBNE exceeds 110% by Q2 202655% → 30%0.88 agreement

Goodwill impairment by FY202620% → 16%0.95 agreement

AI revenue disclosure by Q2 202620% → 18%0.90 agreement

Key Risks Persist

The Lowery v. OpenAI/Twilio ruling remains a genuine coin flip (52%) that could materially escalate regulatory risk for ConversationRelay, Twilio's fastest-growing product. DBNE plateaued at 109% in Q4, breaking the 1pp/quarter improvement trend — the largest prediction shift in the market set (−25pp). And gross margin breached 50% (49.9%), though approximately 80bps of the decline is from carrier fee pass-throughs with no economic impact on profit dollars.

Full thesis with market-by-market analysis, resolved predictions, balancing factors, and key uncertainties

TWLO Full Thesis Assessment

TWLO Upgraded to ‘Price Below Value’ After Record $1.4B Q4

What Drove the Upgrade

Four Markets Still Active