This Artificial Intelligence (AI) Shares have experienced an exponential surge, making it an seemingly irresistible investment opportunity at present.

Though shares of Twilio (TWLO) (-1.23%) have lagged behind the broader market's performance in 2024, with gains of 19% compared to the S&P 500's 23.6%, a closer inspection of the recent stock price movements indicates an overwhelmingly bullish sentiment towards the company.

More specifically, Twilio's stock has seen an astronomical surge since its third-quarter results were announced on October 30, rising 28% in the past week. This surge can be attributed to a set of results that exceeded expectations and optimistic forecasts for the year. Such rapid increases in a stock price over a short period of time are known as "parabolic moves."

Let's delve into the role of artificial intelligence (AI) in sustaining Twilio's newfound momentum and unlocking potential long-term growth opportunities.

Twilio's AI-driven efforts are boosting customer growth and spending

Twilio's Q3 revenue increased by 10% year-over-year, reaching $1.13 billion, which surpassed the consensus estimate of $1.09 billion. The company reported a significant year-over-year increase of 76% in its bottom line, reaching $1.02 per share, surpassing the consensus estimate of $0.86 per share. Twilio's improved guidance for the year, anticipating organic revenue growth of 7.5% to 8% compared to the original expectations of 6% to 7%, served as the icing on the cake.

Twilio's focus on containment of costs and the growing popularity of its new AI-enhanced features that aid businesses in generating more revenue from their customers are the primary reasons behind its escalating revenue growth and remarkable increase in earnings. Twilio is a cloud-based communications platform that allows businesses to communicate with their customers across channels such as text, voice, chat, video, email, and more.

Since last year, Twilio has been incorporating AI into its cloud platform to help businesses reach their customers more efficiently and increase their market share. On its most recent earnings call, Twilio CEO Khozema Shipchandler stated:

Increasing numbers of customers are choosing Twilio because we deliver higher returns on investment, resulting in significant revenue growth and cost savings for our clients. By integrating AI with our core product suite, we are able to automate capabilities, enhance productivity, and promote personalization at scale.

Shipchandler also mentioned that Twilio is devoted to embedding AI and machine learning throughout its platform and provided numerous examples of its customers benefiting from the increased adoption of its AI-oriented services. Twilio's AI-focused offerings are currently gaining traction, as predicted by research firm Future Market Insights, which forecasts the communications platform-as-a-service (CPaaS) market that Twilio serves to grow from $12 billion this year to $121 billion by 2034.

The report highlights the vital role of AI tools in driving CPaaS market growth over the coming decade. This likely explains the increase in Twilio's customer base, which ended the third quarter with 320,000 active customer accounts, up from 306,000 in the same quarter the previous year.

More significantly, the company reported a dollar-based net expansion rate of 105% in the recent quarter. A reading above 100% indicates that Twilio's customers have either increased their usage of its services or added additional solutions from Twilio. This metric compares customers' spending in a particular quarter to their spending in the same quarter the previous year.

Notably, Twilio's dollar-based net expansion rate improved from 101% in the same quarter of the previous year. This suggests that Twilio might be on the cusp of a lengthy growth phase due to AI, which has prompted analysts to raise their growth expectations for the company.

Impressive earnings growth and valuation make this stock an irresistible buy

Analysts predict that Twilio will finish 2024 with $3.67 in earnings per share (EPS), representing a nearly 50% increase from the previous year.

As the chart demonstrates, estimates for the following two years have been upgraded, with analysts projecting Twilio to deliver double-digit bottom-line growth in 2025 and 2026. Furthermore, the company is expected to record 20% annual earnings growth for the next five years. However, do not be surprised if the actual growth exceeds these expectations, given the rising demand for its AI solutions.

Consequently, Twilio is currently ranked as one of the top AI stocks to invest in, considering it trades at just 22 times forward earnings, well below the U.S. technology sector's average earnings multiple of 49. If the market rewards Twilio with a higher earnings multiple in the future due to its AI-driven growth, it could generate substantial returns for investors in the long term, given the pace at which its earnings are projected to grow.

Absolutely, it seems like the market's sizzling hot surge with Twilio might be long-term, making it a smart move for investors to jump on the bandwagon before it soars even further.

In light of Twilio's impressive earnings growth and valuation, individuals interested in finance and investing might consider adding Twilio (TWLO) to their portfolios. The company's focus on integrating AI into its platform has resulted in significant revenue growth and cost savings for its clients, leading to a rising customer base and improved net expansion rate. With analysts predicting steady earnings growth for the next five years, Twilio could present lucrative long-term investment opportunities in the realm of finance and technology.