Twilio Inc (NYSE:TWLO) is expected to deliver second quarter results that exceed expectations on revenue and operating income, with investors likely to focus on whether the communications software company's gross profit growth can remain in the mid-teens during the second half of the year, according to Jefferies analysts.
Ahead of Twilio's August 6 earnings release, Jefferies wrote that it expects the company to post revenue and operating income above expectations, although it does not anticipate the same degree of outperformance as in the first quarter.
The firm added that while business fundamentals remain strong, the stock's premium valuation and heavy investor positioning could limit upside unless Twilio significantly raises its outlook.
Jefferies forecasts second-quarter revenue of $1.427 billion, up 16% year over year and broadly in line with consensus expectations and the company's guidance range of $1.42 billion to $1.43 billion.
The firm expects gross profit of $684 million, implying a gross margin of 47.9%, compared with consensus expectations of $690 million and a 48.3% margin. It projects operating income of $255 million, or a 17.9% operating margin, and earnings per share of $1.30, versus Wall Street expectations of $258 million in operating income and EPS of $1.33.
Jefferies expects gross profit dollar growth of 9.7% year over year, a moderation from the 16% growth reported in the first quarter as comparisons become more challenging.
Jefferies noted that investors will be looking for evidence that the broad-based momentum seen in the first quarter can continue, after growth was supported by stronger customer expansion, increased cross-selling and wider adoption of multiple products.
Key areas of focus include whether messaging growth remains resilient, whether voice growth accelerates alongside rising adoption of voice AI, continued strength in self-service and independent software vendor channels, and higher-margin software offerings such as Verify and branded messaging.
The firm also expects investors to assess whether Twilio's platform strategy, go-to-market improvements and AI-related product investments continue translating into sustainable growth beyond a single quarter.
Jefferies believes investors will also be watching for another increase to full-year guidance after the company raised its revenue outlook following first-quarter results. While the firm sees consensus forecasts as reasonable, it noted that many investors appear to be expecting organic revenue growth in the mid-to-high teens.
For the third quarter, Jefferies forecasts revenue of $1.459 billion, gross profit of $704 million, operating income of $266 million and earnings per share of $1.35.
Although Jefferies expects the company's fundamentals to continue improving, it noted that Twilio's strong share price performance this year has raised expectations, potentially making it harder for future earnings reports to drive further gains.
Shares of Twilio were down more than 4% on Tuesday at $196.