Twilio (TWLO) Could Be 20% Overvalued As Earnings And Guidance Lift The Debate

What Twilio’s latest earnings and guidance mean for shareholders

Twilio (TWLO) has just released a packed second quarter update, combining strong headline results, fresh guidance and progress on its share buyback that together give investors more concrete data to work with.

The company reported second quarter 2026 sales of US$1,499.09 million compared with US$1,228.43 million a year earlier, while net income was US$1,067.21 million compared with US$22.42 million. Basic earnings per share from continuing operations were US$6.99 compared with US$0.15, and diluted earnings per share from continuing operations were US$6.68 compared with US$0.14.

Alongside these figures, Twilio has been active in the market for its own stock. From 1 April 2026 to 6 August 2026, the company repurchased 497,845 shares for US$91.8 million, representing 0.33% of its share count. This completes a wider buyback program announced on 23 January 2025, under which Twilio repurchased 10,634,845 shares for US$1,200 million, equivalent to 6.96% of the company.

Management also provided more detail on the near term outlook. For the third quarter ending 30 September 2026, Twilio expects revenue between US$1.505b and US$1.515b. The company states that this implies reported revenue growth of 16% to 16.5%. For the full fiscal year 2026, Twilio has raised its reported revenue growth range to 18% to 18.5% compared with the previous range of 14% to 15%.

The market reaction has been strong. Twilio shares gained around 25% to 30% after the release, touching a new all time high, alongside a broader move in software stocks such as Atlassian, JFrog and Cloudflare following their own earnings updates. Softer recent jobs data, which investors interpret as increasing the likelihood that the Federal Reserve holds interest rates steady in September, has also supported risk appetite across equities.

Commentary around the release has highlighted several operational points. Summaries of the quarter point to accelerating organic growth, stronger free cash flow, higher operating income and margin expansion. Twilio also lifted guidance for non GAAP income from operations and free cash flow, and reported a dollar based net expansion rate of 116%, which suggests existing customers, in aggregate, are increasing their spending on the platform.

Twilio’s CEO Khozema Shipchandler described the company as entering a “powerful new chapter” driven by organic growth, record profitability and demand for its AI powered communications platform. Some analysts have responded by updating their views and price targets, while also citing AI related trends and improving fundamentals as key themes to watch.

See our latest analysis for Twilio.

Twilio’s latest update comes on top of strong recent momentum, with a 1 day share price return of 24.89% taking the stock to US$241.28 and a year to date share price return of 74.39%. The 1 year total shareholder return of 144.53% and 3 year total shareholder return of almost 3x suggest the current enthusiasm follows a longer recovery phase, even though the 5 year total shareholder return is still down 33.88%.

If you are interested in how other software and AI focused businesses are trading after earnings, this is a good moment to scan the market using the 33 AI small caps

Twilio is now trading near its all time high after a sharp rerating, which leaves investors weighing two views. Has the recent surge already priced in most of the gains, or is meaningful upside still ahead as results compound?

Most Popular Narrative: 20.1% Overvalued

Twilio last closed at $241.28 compared with a most popular narrative fair value of $200.92, so the current share price sits well above that central estimate, even after factoring in strong recent earnings and AI themed enthusiasm.

Growing adoption of AI-powered communications and automation is fueling incremental demand for Twilio's programmable infrastructure and platform products (e.g., ConversationRelay, conversational intelligence), expanding the company's addressable market and driving higher-margin revenue growth, which supports future revenue and net margin expansion.

Read the complete narrative.

The fair value hinges on a specific mix of revenue growth, a higher profit margin profile, and a rich future earnings multiple. Want to see how those pieces fit together and what kind of earnings base they assume for Twilio in a few years time.

Result: Fair Value of $200.92 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, the Twilio narrative could be challenged if higher carrier fees keep squeezing messaging margins or if AI driven customers increasingly build or adopt alternative platforms.

Find out about the key risks to this Twilio narrative.

Next Steps

With Twilio drawing mixed reactions around risks and rewards, this is a moment to check the numbers yourself and decide quickly where you stand. To see both sides of the story in one place, start with the 1 key reward and 3 important warning signs

Looking for more investment ideas beyond Twilio?

If Twilio has your attention, do not stop here. A few targeted screeners can quickly surface other stocks that match the profile you are actually looking for.

• Target potential value with quality by reviewing companies in the 52 high quality undervalued stocks that combine fundamentals with appealing pricing signals.
• Focus on resilience and sleep better at night by scanning companies in the 83 resilient stocks with low risk scores that score well on stability metrics.
• Hunt for future standouts early by checking the screener containing 21 high quality undiscovered gems before the wider market pays attention.

Use these ideas now so you do not end up watching the next move from the sidelines while others act on the data first.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com