We Need to See Meaningfully Stronger Returns to Demonstrate a Moat for Twilio

With its cloud native communication platform as a service, or CPaaS, we think Twilio is well on its way to unlocking the power of software builders. Twilio’s portfolio of application programming interfaces, or APIs, and ready-made solutions allow software developers to build a communication infrastructure to meet the unique needs of virtually any organization. As organizations have fully embraced the notion that existing clients are the most critical channel from which to generate new revenue, we think Twilio enjoys critical infrastructure, which could be moatworthy. Through extensive innovation efforts and strategic acquisitions, the firm has expanded its portfolio, paving the way for what we think will be robust growth over an extended period. These acquisitions, however, have eroded returns. We believe Twilio is a CPaaS leader, and will remain as such for years to come, and that returns will improve as the company scales and applications grow within the mix.