By Nate Wolf

Investors have had a tough time finding good news in the software industry in 2026, a solid few weeks in April notwithstanding. Twilio emerged Friday as one of the few exceptions.

Shares jumped 19% to $176.09 after the customer engagement platform reported better-than-expected earnings after the closing bell on Thursday. Twilio stock is now up 24% on the year and more than 75% over the last 12 months. It was a Barron's stock pick last September.

The company reported adjusted earnings of $1.50 a share for the first quarter, up from $1.14 last year and above analysts' consensus call for $1.27. Revenue grew 16% on an organic basis to $1.41 billion, surpassing Wall Street's forecast of $1.34 billion.

The quarter marked Twilio's highest growth rate for both revenue and gross profit in over three years, CEO Khozema Shipchandler pointed out.

Fears that artificial intelligence tools will replace legacy software solutions have ravaged software stocks in 2026. The iShares Expanded Tech-Software Sector exchange-traded fund -- or IGV -- is down 21% on the year as of Thursday's close. It doesn't help that growth in the sector had been slowing since 2022, even before the AI era.

Twilio has overcome that backdrop with a combination of AI integration and accelerating growth.

The company's messaging and voice solutions have expanded with the help of AI. Enterprises can use Twilio's AI tools to streamline customer support or integrate their own large-language models into Twilio's platform.

Most notably, the platform's VoiceAI tool helped the voice segment to a sixth-straight quarter of accelerating growth, Oppenheimer analyst Ittai Kidron pointed out in a research note. AI and the cross-selling of products are driving strong customer retention, the firm said, reiterating an Outperform rating and bumping its price target to $200 from $170.

BTIG analyst Nick Altmann agreed. The firm maintained Twilio stock as a "top pick" and raised its target to $215 from $175.

"After several years of increased innovation and tighter financial rigor, efforts are manifesting in a materially healthier financial profile and growth trajectory," Altmann wrote in a note Friday.

AI is pushing customers to consolidate communication channels onto a single platform. This dynamic, which should mean more business for Twilio, may not even be showing up in the numbers yet, Altmann added.

Margins are the final piece of the puzzle for investors. Twilio's cost of revenue was around $18.3 million higher than anticipated in the first quarter, KeyBanc Capital Markets analyst Jackson Ader noted. That contributed to the company's adjusted gross margin falling to 49% from 50% last year.

While Ader is keeping an eye on potential margin compression, the top-line growth is tough to ignore. KeyBanc maintained an Overweight rating on Twilio stock and lifted its price target to $200 from $156 in a research note.

Write to Nate Wolf at nate.wolf@barrons.com

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May 01, 2026 12:40 ET (16:40 GMT)

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