Twilio Inc. (TWLO) Earnings & Analysis

Latest quarter

Twilio reported Q3 FY2026 revenue of $1.6 billion, up 19.9% from $1.3 billion a year earlier and above the $1.5 billion consensus. Adjusted earnings were $1.65 per share, above the $1.46 consensus. Revenue also came in above Twilio’s own guidance for the quarter.

CFO Aidan Viggiano said organic revenue grew 16% year over year, excluding incremental U.S. carrier pass-through fees. She said messaging revenue grew 24%, primarily on volumes, while voice revenue grew more than 20%, supported by volumes and software add-ons. Twilio’s filing said increased usage by existing customers was a primary driver of revenue growth; it also identified $53.1 million in incremental carrier-fee revenue, which the company passes through at cost.

Twilio’s gross margin was 48.8%, compared with 48.6% a year earlier, while operating margin rose to 9.53% from 3.15%. Diluted earnings per share increased to $1.00 from $0.23, and free cash flow rose to $381.8 million from $247.5 million.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CFO Aidan Viggiano said self-service revenue grew more than 30% in Q3, while revenue from independent software vendors grew more than 20%. She said software add-on revenue grew more than 25%, and support and services revenue grew more than 30%. On the call, she attributed the smaller revenue outperformance against Twilio’s guidance primarily to messaging: its organic growth slowed to 17% in Q3 from 18% in Q2, while voice, add-ons and self-service grew consistently quarter to quarter.

CEO Khozema Shipchandler said Twilio secured its first eight-figure conversations deal with a health insurer using its voice AI and transcription tools. Chief Operating Officer Thomas Wyatt said voice AI projects that had been proofs of concept were moving into production, with AI-native customers and software vendors increasing their usage. Shipchandler said adoption in regulated industries was taking time as customers continued to experiment.

Discussing competition, Shipchandler described Twilio as a neutral infrastructure provider that can add capabilities such as intelligence and branded calling. He said its identity offering, designed to validate whom an AI agent represents, was in private beta. Asked about monetization, he said the model had not been settled, although he anticipated usage-based pricing; Twilio plans to discuss pricing and packaging when the product reaches general availability next year.

On margins, Viggiano said incremental U.S. carrier fees caused the year-over-year decline in non-GAAP gross margin because they are passed through without adding gross profit. She said Q3 non-GAAP operating income benefited from roughly $11 million in platform credits, more than anticipated, and that investments in research and development and go-to-market staff were incorporated into guidance.

For Q4, Viggiano said Twilio expects revenue of $1.595 to $1.605 billion and organic growth of 11 to 12%. She said the company plans prudently because usage-based revenue and holiday activity can make the quarter volatile.

Guidance

Viggiano said Twilio raised its FY2026 organic revenue growth outlook to 15% from 13% to 13.5%, and its reported revenue growth outlook to 20% from 18 to 18.5%. She said Twilio raised its FY2026 non-GAAP operating income range to $1.19 to $1.2 billion from $1.135 to $1.155 billion, and raised its free cash flow outlook to $1.19 to $1.2 billion from the same prior range.

For FY2027, Viggiano said Twilio expects at least $1.35 billion in non-GAAP operating income, compared with its earlier guidance of at least $1.23 billion.