The demand for Artificial Intelligence (AI) is rapidly evolving as businesses, organizations, and individuals are adopting it in growing numbers to boost efficiency and productivity. This rapid adoption is fueling opportunities for hypergrowth stocks that are increasingly adopting AI to stay competitive.
Given this backdrop, it could be wise for investors to invest in hypergrowth stocks such as Workday, Inc. (WDAY), Twilio Inc. (TWLO), and Smartsheet Inc. (SMAR) for potential revenue growth and expansion in product offerings.
According to a Statista report, the global market size for AI is anticipated to reach $826.70 billion by 2030, exhibiting a CAGR of 28.5%, with the United States having the largest market size of $50.16 billion in 2024. This makes its impact on the market significant, driving investor enthusiasm.
Moreover, with rapid integration and evolving technology, the AI boom “still has some time to go,” says Emily Tan, Chief Executive and Chairman of Foxconn Young Liu. AI is another growing industry, and its infrastructure still has some way to move forward.
Furthermore, with 77% of companies either using or exploring the use of AI in their businesses and 83% claiming it a top priority in their business plans, AI has become an integral part of the economy. As the reports are to be believed, AI is set to create over 97 million jobs by 2025, contributing to the economy.
Considering these conducive trends, let’s look at the fundamentals of the above-mentioned stocks in detail:
Workday, Inc. (WDAY)
WDAY is a global provider of enterprise cloud applications for finance and human resources. It helps customers plan, execute, analyze, and extend to its varied applications to manage their business and operations.
On September 18, WDAY announced the release of Workday Wellness, a new AI-powered solution, providing companies with a real-time view into which benefits and wellness their employees want and use. This new AI-powered solution will enhance employee well-being and create more personalized health benefits.
In the same month, WDAY agreed to acquire Evisort, a leading AI-native document intelligence platform. This acquisition will enable WDAY’s customers to surface critical insights, make decisions, and take faster actions across financial and HR data faster and more efficiently with Evisort’s document intelligence.
For the second quarter of 2025, which ended on July 31, WDAY’s total revenues increased 16.7% year-over-year to $2.09 billion, and its non-GAAP operating income stood at $518 million, indicating a 23% growth from the prior-year quarter period.
Its net income rose 67.1% from the year-ago value to $132 million, while its non-GAAP net income per share stood at $1.75, up 22.4% year-over-year. Also, the company’s free cash flow grew 43.3% from the year-ago value to $516 million.
The company has updated its fiscal year 2025 guidance. It now expects its subscription revenue to range between $7.70 billion and $7.73 billion, representing a growth of approximately 17%. Additionally, WDAY expects its non-GAAP operating margin to be 25.3%.
Analysts expect WDAY’s revenue for the third quarter ending October 31, 2024, to increase 14.2% year-over-year to $2.13 billion, while its EPS for the same period is expected to increase 14.9% from the prior-year quarter to $1.76. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
WDAY’s revenue has grown at CAGRs of 18.9% and 19.4% over the past three and five years, respectively. Likewise, the company’s total assets have increased at a CAGR of 21.2% over the past three years and 22.1% over the past five years.
WDAY shares have surged 12.8% over the past year and 5.4% over the past three months to close the last trading session at $242.47.
WDAY’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
WDAY has an A grade for Growth and B for Sentiment and Quality. It is ranked #22 out of 131 stocks in the Software - Application industry. Click here to see the additional ratings for WDAY (Value, Momentum, and Stability).
Twilio Inc. (TWLO)
TWLO provides a customer engagement platform comprising international communications application programming interfaces. It operates through two segments: Twilio Communications and Twilio Data & Applications.
On October 1, TWLO and OpenAI collaborated to integrate OpenAI’s Realtime API into its platform. This integration will enable TWLO to build conversational AI applications and agents, which will bring customers more natural interactions to the platform.
On September 9, TWLO announced expanded accessibility of Rich Communication Services (RCS) messaging via its Programmable Messaging and Verify APIs to enhance branded and verified messaging and build customer trust in its source.
In the fiscal second quarter that ended on June 30, 2024, TWLO’s revenue increased 4.3% year-over-year to $1.08 billion with a non-GAAP gross margin of 53.3% (up 110 bps year-over-year). The company reported non-GAAP income from operations of $175.32 million, indicating a 45.9% growth from the prior-year quarter.
TWLO’s non-GAAP net income came in at $150.12 million, up 48.9% year-over-year, while its non-GAAP net income per share grew 61.1% from the year-ago value to $0.87. Also, its free cash flow increased 174.7% year-over-year to $197.58 million.
According to the financial guidance for fiscal year 2024, the company’s non-GAAP income from operations is projected to be between $650 million and $675 million, with organic revenue growth anticipated to range from 6%-7%.
The consensus revenue estimate of $1.09 billion for the fiscal third quarter (ended September 2024) represents a 5.8% increase year-over-year. The consensus EPS estimate of $0.86 for the same quarter indicates a 47.6% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
Moreover, TWLO’s revenue has grown at CAGRs of 23.4% and 36.9% over the past three and five years, respectively. In addition, its total assets increased at 15.5% CAGR over the past five years.
The stock has surged 22.7% over the past three months and 27.7% over the past year to close the last trading session at $70.99.
TWLO’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has an A grade for Growth and a B for Value and Sentiment. Within the A-rated Software - SAAS industry, it is ranked #9 out of 18 stocks. Click here to see TWLO’s ratings for Momentum, Stability, and Quality.
Smartsheet Inc. (SMAR)
SMAR provides a work management platform for organizations, allowing them to plan, capture, manage, automate, and report on work at scale. The company’s platform enables teams of all sizes to manage custom processes, programs, and portfolios that fit, and it delivers its cloud-based software platform globally through a subscription model.
On October 8, SMAR announced its strategic collaboration with AWS to launch a new connector for Amazon Q Business that synchronizes data and provides insights to the customers. This new connector will allow the generative AI-powered assistant to answer customers' queries through a unified search experience.
SMAR’s total revenue for the second quarter (ended July 31, 2024) increased 17.3% year-over-year to $276.41 million. Its non-GAAP operating income grew 135.7% from the prior year’s quarter to $45.29 million. The company’s non-GAAP net income amounted to $61.64 million and $0.44 per share, reflecting increases of 180% and 175% year-over-year, respectively. In addition, SMAR’s free cash flow rose 25.6% from the year-ago value to $57.15 million.
As per the fiscal year 2025 financial outlook, SMAR forecasts total revenue to range between $1.116 billion and $1.121 billion. The company also expects non-GAAP operating income between $177 million and $182 million and free cash flow of $240 million. It also expects non-GAAP net income per share to be between $1.36 and $1.39.
Street expects SMAR’s revenue for the fiscal second quarter (ended September 2024) to increase 15.4% year-over-year to $283.87 million. Its EPS for the same period is expected to register a 90.1% growth from the prior year, settling at $0.30. In addition, it surpassed the consensus revenue and EPS in each of the trailing four quarters, which is promising.
Over the past three and five years, SMAR’s revenue income grew at CAGRs of 31.6% and 36.5%, respectively, while its levered FCF grew at 47.3% CAGR over the past five years.
Over the past six months, the stock has gained 48.8%, closing the last trading session at $56.04.
It’s no surprise that SMAR has an overall rating of B, equating to a Buy in our POWR Ratings system. It has an A grade for Growth and a B for Sentiment and Quality. Out of 18 stocks in the Software - SAAS industry, SMAR is ranked #6.
Beyond what is stated above, we’ve also rated SMAR for Value, Momentum, and Stability. Get all SMAR’s ratings here.
What To Do Next?
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WDAY shares were trading at $244.30 per share on Tuesday afternoon, up $1.83 (+0.75%). Year-to-date, WDAY has declined -11.50%, versus a 22.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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