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“We are a growth company,” Andrew Bialecki declared on the Klaviyo earnings call. The matter-of-fact delivery belies the hard work it takes to pull off a banner year. It is the first time they ended the year at a $1 billion run rate.
Bandwidth too reported a great year bolstered by high profitability, expanding messaging business buttressed by political traffic.
It shouldn’t be a surprise that Klaviyo has impressed me. I’ve covered its journey here, here, here, here, and here. I’ve also discussed how Bandwidth was an early innovator in the CPaaS space when discussing the ZipWhip acquisition.
If you’re ever in the mood for a historical account of the first decade of CPaaS, read my white paper here.
Back on topic, it is great to see the two companies end the year well.
Disclaimer: This is not stock advice. Everything about the messaging business interests me, including asset pricing. Use your judgment to invest your money.
The Good
Profitable Growth at Scale
Klaviyo ended 2024 at a $1 billion run rate. It reported $270 million in Q4 revenue (+34% YoY) and $937 million for the year (+34% YoY). Free cash flow hit $149 million (+35% YoY), with a Non-GAAP 12% operating margin.
Bandwidth closed the year at $748 million in revenue (+25% YoY), including $210 million in Q4 revenue (+27% YoY). Cloud communications revenue reached $144 million (+15% YoY), with non-GAAP gross margins improving to 58%, up three points. Adjusted EBITDA hit $82 million for the year (+70% YoY), with free cash flow surging 206% to $59 million.
Enterprise Growth and Market Expansion
Klaviyo is shifting upmarket (more on this later). It added 10K new customers in Q4, reaching 167K total (+17% YoY), and its $50K+ ARR customer base grew 46% YoY. International expansion is picking up: EMEA grew 49% YoY, and global revenue increased 42% YoY.
Bandwidth’s enterprise business grew 29% YoY, driven by CCaaS and UCaaS adoption. The company’s global communications platform is expanding, supporting growth in enterprise voice and global voice plans.
AI and Automation Are Driving Differentiation
Klaviyo rolled out 200+ new features in 2024, many leveraging AI-powered automation to help customers optimize marketing campaigns, analytics, and segmentation. AI is enhancing customer engagement, making the platform more valuable to mid-market and enterprise clients.
Bandwidth is betting on AI-driven enterprise voice automation via its Maestro platform and AIBridge software.
The Interesting
Beyond Core Offerings: Expanding the Product and Partner Ecosystem
Klaviyo is broadening its focus beyond email and SMS, integrating into restaurants, fitness studios, and hospitality businesses through partnerships with Zenoti, Toast, and OpenTable. It also signed a deal with WooCommerce, giving it access to 4 million merchants worldwide. The company is expanding its footprint but hasn’t yet detailed how these new markets will contribute to revenue.
Bandwidth is positioning itself as the backbone for AI-powered enterprise communications. Its Maestro platform now has hundreds of enterprise customers, with AI-powered automation reducing cloud migration complexity. AI-driven voice interactions are a major opportunity, but widespread adoption is still a work in progress. In this, it is in the same situation as Twilio.
RBM Is Moving—Slowly
Klaviyo expanded SMS coverage to nineteen countries, helping customers scale omnichannel engagement. RCS is on its radar but is not yet a major revenue driver.
Bandwidth was an early partner with Google and is actively supporting RBM. With two of the three major US mobile operators now live for RCS testing, enterprise adoption could pick up in 2025. However, neither company expects RCS to significantly impact revenue in the near term.
The Unknown
Can Growth Be Efficiently Sustained?
Klaviyo is going upmarket, expanding internationally, and embedding AI deeper into its product. But it’s still heavily tied to SMBs, a segment that has struggled. SMB stabilization in Q4 was encouraging, but the company isn’t assuming a full recovery. Pricing changes in 2025 may also lead to some customer churn.
For Bandwidth, political messaging contributed $62 million to revenue in 2024. That revenue won’t return in 2025. Adjusting for that, Bandwidth’s core business grew 9–10% YoY. The company needs enterprise expansion and AI-driven voice adoption to scale quickly to offset the lost political revenue.
How Much of Revenue Will AI Directly Earn?
Bandwidth is betting that AI-powered voice interactions will transform enterprise communications—but how quickly will enterprises adopt?
Klaviyo’s AI-powered marketing automation makes the product stickier and more valuable, but whether AI directly drives revenue growth remains to be seen.
2025 is a test of execution. Both companies have strong growth levers, but enterprise adoption cycles are longer and AI automation is still early in its monetization curve.
Finally
Klaviyo and Bandwidth have shown agility in responding to marketplace changes.
Bandwidth shrewdly pulled off a coup by actively courting political revenue that ended up adding 4% to 2024 revenue. A one-time boost but a well-played move.
Klaviyo has shown the most hustle, creativity, and ambition. Its core segment—SMB—continues to be soft. Last year, it refused to give any guidance for 2025 because it couldn’t predict SMB growth. This year it’s predicting about $1.1B in revenue, perhaps a show of confidence in their upmarket moves.
But that’s a tough road.
According to Snowflake’s Frank Slootman:
“Learning how to make a salesperson (a) effective and (b) economical, and then applying that to an increasing number of them requires a detailed, ongoing analysis of how that process works. You simply cannot invest intelligently in revenue.”
Scaling enterprise sales isn’t easy. It takes discipline, repeatability, and constant refinement. Klaviyo is moving fast, but it still has to prove it can scale its enterprise motion without losing efficiency.
The bigger unknown remains the health of the Small and Medium Business and their use of SMS. According to Andrew:
“What we found is that, you know, for a lot of businesses, when they’re just getting started, SMS isn’t relevant right away — or not for all of those businesses.”
The small business is Main Street. It doesn’t get enough credit for propping up the economy. It’s the long tail that keeps macroeconomic trends humming. If its spend remains unpredictable, where is the economy going?