The pandemic emphasized the importance of a digital-first business model, and digital transformation (DX) projects have now taken center stage for many businesses. In fact, data from Statista suggests that DX spending will grow from $1.8 trillion in 2022 to $2.8 trillion by 2025. That should be a growth driver for industry leaders Twilio (TWLO 2.64%) and Adobe (ADBE 2.95%), yet both stocks look like bargain buys at their current prices.

Here's what you should know.

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Image source: Getty Images.

1. Twilio

Twilio specializes in communications software. Its platform helps developers embed features like text, voice, video, and email into their own applications. Twilio also provides pre-built applications for contact centers, account security, and marketing. While many consumers may be unfamiliar with the brand, Twilio powers use cases like messaging on Airbnb, order notifications from DoorDash, and two-factor authentication on crypto exchange Gemini.

In 2020, Twilio completed its acquisition of customer data platform Segment, a tool that helps clients harness customer data to personalize interactions. That move further distinguished the company from its rivals. In fact, the International Data Corp. once again recognized Twilio as the leading cloud communications platform in 2021, highlighting its robust portfolio, reputation for quality, and the Segment acquisition as key differentiators.

That edge has helped Twilio grow its business quickly. Its customer base grew 14% to 268,000 in the past year, and the average customer spent 27% more. In turn, revenue soared 57% to $3.1 billion. On a less optimistic note, the company is still losing money on a GAAP basis, and it generates a negative free cash flow of $172 million.

However, management expects to achieve non-GAAP profitability by 2023, meaning Twilio could be free-cash-flow positive next year. In the meantime, with $5.4 billion on its balance sheet and a $79 billion market opportunity, it makes sense to invest aggressively.

Going forward, as businesses continue to spend money on digital transformation, Twilio should benefit. Its technology helps clients engage consumers and build loyalty through personalized communications, and that value proposition will always be relevant. Currently, Twilio trades at 7.3 times sales, near its cheapest valuation in five years. That's why this growth stock looks like a bargain buy.

2. Adobe

Adobe is best known for its Creative Cloud software. Applications like Photoshop, Premiere Pro, and Illustrator have become the gold standard in image editing, video editing, and vector graphics, respectively. But Adobe Experience Cloud is a complementary suite of software for analytics, marketing, and commerce.

Together, those platforms help clients design content and deliver personalized experiences to consumers across websites, mobile apps, and email. That breadth differentiates Adobe from rivals like Salesforce, and it has made the company a key enabler of digital transformation. In fact, Forrester Research recently recognized Adobe as a leader in digital experience software, citing a stronger portfolio than any rival.

Thanks to that competitive edge, Adobe has consistently posted strong financial results. In the past year, revenue rose 18% to $16.1 billion and free cash flow climbed 18% to $6.8 billion. More importantly, Adobe is executing on a strong growth strategy that should keep it at the forefront of the digital media and digital experience industries.

Last year, the company launched a web version of Photoshop and Illustrator to facilitate collaboration. Specifically, users can now access and edit content simultaneously from their browsers. Adobe is also growing its portfolio of creative software. Newer products like Substance for 3D design and Aero for augmented reality are particularly relevant to the gaming and entertainment industries, and they could make Adobe a key player in the metaverse.

Looking ahead, management puts its addressable market at $205 billion by 2024, and Experience Cloud accounts for $110 billion of that total. That puts Adobe in front of a massive opportunity. And with shares trading at 12.1 times sales, well below the five-year average of 15.3 times sales, now is a good time to buy this growth stock.