Can Twilio's Cross-Sell Strategy Unlock Higher Profitability?

Twilio Inc. TWLO is working hard to turn its strong revenue growth into lasting profits. Notably, the company’s revenues grew 12% year over year in the first quarter of 2025, but non-GAAP gross margin contracted 280 basis points.One of its main strategies to boost margins is cross-selling, where its sales team encourages customers to use more than one of its products. This approach aims to improve customer loyalty, increase spending per customer and boost profit margins over time. During the first quarter, Twilio showed that cross-sell efforts are gaining traction. Many customers who started with just one service, like messaging, are now adding other channels, such as voice, email, and advanced features like voice intelligence and SMS protection.Twilio’s large customers, especially those spending over $500,000 annually, grew 37% year over year. These customers tend to use multiple Twilio products, helping the company earn more from its clients.Cross-selling also supports Twilio’s plan to reduce its reliance on messaging, which has lower profit margins. By shifting customers toward higher-margin products and add-ons, Twilio hopes to improve its overall profitability. The company is also investing in training its sales teams and making its products easier to integrate so that customers can get more value across channels.However, this strategy will take time to show full results. Cross-sell motions require careful execution, and Twilio faces competition from other communication platforms. But, if successful, cross-selling could help Twilio balance growth with stronger, more stable profits in the years ahead.How Twilio Stacks Up Against Competitors?Twilio faces competition from RingCentral, Inc. RNG and Bandwidth Inc. BAND as it works to grow profits through cross-selling. RingCentral started as a leader in cloud phone systems but now offers messaging, video and AI-powered contact center tools. This lets RingCentral cross-sell a full set of communication services to its business customers, often bundled in package. Its strong presence in the enterprise market helps it push these bundled solutions.Bandwidth, on the other hand, focuses mostly on voice and messaging services through application programming interfaces. It is expanding into emergency services and call protection features to give customers more reasons to stick with its platform. Both companies are trying to sell more products to existing customers. Twilio’s edge lies in its broader platform and AI tools, but competition remains tough.Twilio’s Price Performance, Valuation and EstimatesShares of Twilio have gained 7.2% year to date compared with the Zacks Internet – Software industry’s growth of 12.8%.Image Source: Zacks Investment ResearchFrom a valuation standpoint, TWLO trades at a forward price-to-sales ratio of 3.56, significantly below the industry’s average of 5.65.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for Twilio’s 2025 and 2026 earnings implies a year-over-year increase of approximately 22.3% and 13%, respectively. The bottom-line estimate for 2025 has been revised upward over the past 30 days, while that for 2026 has been revised downward.Image Source: Zacks Investment ResearchTwilio currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.5% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ringcentral, Inc. (RNG): Free Stock Analysis Report Twilio Inc. (TWLO): Free Stock Analysis Report Bandwidth Inc. (BAND): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks