Analyst resets Twilio stock forecast on hidden profit lever
A bullish Wall Street call on Twilio is now centered around a metric that can get overlooked when investors focus mostly on revenue growth. Bank of America argues the company's profit mix could become a bigger driver for the stock as Twilio pushes deeper into higher-margin product areas.
In a Bank of America note given to TheStreet, analyst Koji Ikeda reiterated a Buy rating on Twilio (TWLO) and raised the firm's price objective to $235 from $225. The new target implies roughly 24% upside from the $189.65 share price cited in the note.
Bank of America said its deeper gross profit and gross margin analysis made it more bullish on Twilio's execution path. The firm said gross profit dollar growth is the key growth metric for the communications-platform-as-a-service company, especially as its revenue mix shifts toward products outside of core messaging.
Twilio's recent results give that argument a stronger backdrop. The company reported first-quarter revenue of $1.41 billion, up 20% year over year, while organic revenue rose 16%. Non-GAAP gross profit increased 16% to $697 million, with a non-GAAP gross margin of 50%.
The company also raised its full-year 2026 outlook after the quarter. Twilio now expects reported revenue growth of 14% to 15%, organic revenue growth of 9.5% to 10.5%, non-GAAP income from operations of $1.08 billion to $1.10 billion, and free cash flow of $1.08 billion to $1.10 billion.
Twilio has one lever analysts are watching
Bank of America's analysis breaks Twilio's product lines into very different margin profiles. The firm estimates messaging carries the lowest gross margin at 31%, while voice, email, other communications revenue, and Segment carry much higher margins.
That creates the heart of the upside case. If those higher-margin categories become a larger share of Twilio's business, gross profit can grow faster than the company's top line even if overall revenue growth eventually slows.
More Tech Stocks
- AT&T rolls out new phone plan to keep customers from leaving
- Microsoft CEO sends shocking message to employees
- 5-star analyst resets Micron stock price target
Twilio's own filings point to the same issue. The company says gross profit and gross margin are affected by product mix, cloud infrastructure costs, network service provider fees, A2P messaging fees, foreign exchange, pricing decisions, and investment timing.
The company also says Messaging and Voice are primarily usage-based products, while Email and Segment are primarily subscription-based products. Twilio generated 74% of its revenue from usage-based fees in 2025, compared with 26% from non-usage-based fees.
Bank of America's product-level work suggests that mix can help explain why Twilio's profit story may look better than a simple revenue-growth model suggests. Messaging still represents the biggest part of the company's revenue base, but higher-margin products create room for operating leverage if they continue to gain share.
Bank of America lays out bull and bear cases
Bank of America's base case forecasts Twilio reaching $7.11 billion in total revenue in fiscal 2028, with a 48.4% gross margin and $3.44 billion in gross profit. The firm's Blue Sky case assumes stronger contribution from higher-margin product lines, pushing fiscal 2028 gross margin to 50.4% and gross profit to $3.83 billion.
That would put gross profit about 11% above Bank of America's base-case estimate. It would also give the stock more room for estimate revisions and potentially a higher valuation multiple if investors become more confident in the company's margin trajectory.
Related: BofA gives Spotify stock price a target many will love
The bear case is more cautious. Bank of America's downside scenario assumes weaker growth and margin deterioration across most product segments, with fiscal 2028 gross margin falling to 46.3% and gross profit dropping to $3.22 billion.
Twilio's filings highlight one reason margins can remain noisy. The company said recent A2P messaging fee increases from major U.S. mobile carriers are expected to create a modest margin headwind, even though the fees are passed through to customers at cost and do not affect gross profit dollars.
Twilio's setup depends on execution
Twilio entered 2026 with momentum after full-year 2025 revenue rose 14% to $5.07 billion, while organic revenue increased 13%. The company also reported full-year non-GAAP income from operations of $924 million and free cash flow of $945 million.
Bank of America sees that performance continuing as the company balances revenue growth, product mix, and free cash flow expansion. The firm raised its target multiple to 27 times calendar 2027 estimated free cash flow from 26.6 times, citing higher confidence in execution.
The stock debate now centers on whether Twilio can prove the profit mix story has staying power. Bank of America is betting that the company's higher-margin products can make the next phase of growth more profitable than investors may expect.
Related: Bank of America has a blunt message for Twilio stock investors
The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
This story was originally published May 28, 2026 at 11:47 AM.