Klaviyo (KVYO) Q2 FY26 earnings call: guidance and Q&A

How does Composer, by removing marketing headcount constraints, translate to higher campaign creation velocity, increased customer contract volumes, and incremental platform usage for early adopters?

Composer helps with research, campaign generation, and optimization. Early adopters are using Composer to create more campaigns and are using more of Klaviyo's platform, driving more engagement per profile and higher Klaviyo Attributed Value. Customers are willing to pay for Composer credits due to the incremental revenue and sales it generates.

“One thing we've definitely seen is that customers, they're rate limited by the ideas they have and then how fast they can execute. So we are seeing folks that use Composer. They actually do -- they're using more of Klaviyo.”

asked by Elizabeth Porter · answered by Andrew Bialecki

Is there an inflection point in SMS traction, or is it due to moving upmarket? Also, how much are carrier fees weighing on gross margin, and how will the new pricing impact models?

SMS and WhatsApp are seeing great growth as customers consolidate messaging channels for personalization and coordination. Larger enterprises are also consolidating to text. Gross margin was impacted by carrier fees, infrastructure investments, and the increasing portion of text business. New mobile pricing in Q3 will pass carrier fees to customers, expected to be neutral to FY26 revenue and gross margin due to renewal timing, but positive long-term.

“On carrier fees, as we mentioned, we made a change in Q3, and we are now pricing our [ T-Mobile ] business to pass through the carrier fee increases that we have seen to our customers. As you look out over the balance of the year, we would expect that to be neutral, both to gross margin and to revenue just due to the timing of how it flows through renewals as contracts come up for renewal.”

asked by Arjun Bhatia · answered by Amanda Whalen

How is Klaviyo strategically thinking about investing in growth on the op margin side, and what should be read into margin expansion beyond 2026?

Klaviyo is making deliberate investments in the Agency acquisition and product innovation to drive long-term growth. These investments are yielding strong early results in product adoption and enterprise traction. Excluding the Agency impact, the business is still driving over 1 percentage point of leverage year-on-year, indicating continued ability to grow efficiently and expand margins over time.

“if you exclude that from our numbers this year, we're still driving over 1 percentage point of leverage year-on-year. So this is a business that can continue to grow strong, make these investments in innovation and drive leverage over time.”

asked by Tyler Radke · answered by Amanda Whalen

What specific benefits does the Agency acquisition bring, and how will the division of labor work with Elias Torres as CPO, given AB's focus on product?

The acquisition of Agency and Elias Torres as CPO aims to accelerate Klaviyo's progress in AI agents, as both Andrew and Elias believe every business will have an agent. Elias brings deep expertise in AI agents for customer experiences. The co-CEO model allows Andrew to focus on customer engagement and enterprise needs, while Elias will help expand the surface area and ambition for agents like Composer and Customer Agent, enabling faster execution.

“I mean that was kind of the headline for us when I talked with Elias about this. It really is that like, hey, how do we attack on -- or build on more dimensions at once.”

asked by Samad Samana · answered by Andrew Bialecki

How does Klaviyo's broader vision, including customer agents and Composer, help in enterprise conversations, especially for legacy replacements?

Enterprise customers seek consolidation and innovation on a single platform, valuing Klaviyo's unified data for context and agent outcomes. Composer and Customer Agent are strategic components, enabling rip-and-replace scenarios against legacy systems. The robustness of Klaviyo's infrastructure, handling 100 million messages in under 20 minutes, and its AI vision are key differentiators, as evidenced by wins like Country Road Group.

“his answer was like you won, we decided for you because of your AI vision and openings, your interoperability, especially as well with some of the forward players like the Anthropics and Open AIs and the connections that you bring. And because of the robustness of your infrastructure, those were the reasons why you guys won.”

asked by Raimo Lenschow · answered by Luciano Fernandez Gomez

How will Composer and Customer Agent be monetized over the next 1-2 years, and what is the average ARR uplift for customers using these products?

Composer uses a credit-based model, with customers already paying for credits due to demonstrable ROI in generating new marketing and improving existing campaigns. Customer Agent is outcome-based, with customers paying per resolved conversation. Both products show meaningful uplift to total average ARR for customers, with variability based on adoption. Klaviyo is investing in agent builders and trainers to increase resolution rates and ease of deployment, driving more usage and value.

“So for Composer, we think of it as like it's intelligence to help you run and grow your business. So it's a credit-based model.”

asked by Matthew VanVliet · answered by Andrew Bialecki

With recent large deals, how is Klaviyo managing sales capacity, leveraging agency partnerships, and is there anything missing in product market fit for enterprise?

Klaviyo has strengthened sales leadership and has the necessary sales capacity, focusing on productivity per head rather than just adding headcount. The enterprise motion is a journey, shifting to consultative sales and multi-stakeholder relationships. The company is expanding its ecosystem with new agency partners and investing in infrastructure (EU data center, security) to meet enterprise demands. Early signals are positive, and the product market fit is strong, with AI vision and robust infrastructure being key differentiators.

“We do have the sales capacity we need. I am not someone that likes to just add feet on the street with our productivity. So I can also tell you that we remain flat, but definitely, our productivity per head is much higher than it was kind of a year ago.”

asked by Terry Tillman · answered by Luciano Fernandez Gomez

Given improving gross retention, SMS strength, and multiproduct adoption, why is NRR not inflecting upwards? How much is profile enforcement impacting it, and should NRR be expected to rise from here?

NRR's current level of 109% reflects strengthening gross retention, increasing text messaging expansion, and strong cross-sell. These benefits are offset by the lapping of last year's profile enforcement, which will continue to impact the trailing 12-month metric through Q1 next year. Klaviyo is positive about long-term NRR trajectory as customers are staying, expanding, and buying more products.

“Net revenue retention was 109% in Q2, reflecting strengthening gross retention, increasing text messaging expansion and our strongest quarter of cross-sell since our IPO. These were offset by the lapping of last year's profile enforcement, which will continue to impact NRR through Q1.”

asked by David Hynes · answered by Amanda Whalen

What are the next phases for international expansion, both on the product and go-to-market sides, to sustain momentum?

On the product side, Klaviyo is investing in features for multi-market businesses, such as managing product catalogs across regions and leveraging data across regions. They are expanding their data center footprint into Europe. On the go-to-market side, they are increasing sales headcount in Europe (France, Germany) and expanding user conferences. WhatsApp has opened new markets like Brazil. The long-term ambition is for the majority of revenue to come from outside North America, with significant opportunities in large markets like Germany and APAC.

“So that's one big area where we see there's a lot of market share out there, and our share is relatively small. So international continues to grow really nicely, about 35% year-on-year.”

asked by Derrick Wood · answered by Andrew Bialecki

Are there compelling data points about how smaller customers are choosing Klaviyo's AI over other vendors or general LLMs, given the potential for disruption?

Klaviyo is seeing that new SMB sign-ups using Composer are more successful and convert to paid customers faster. Composer offers domain-specific AI advantages over general LLMs by understanding a business's data (products, customers, preferences), past marketing, and proprietary knowledge of what works. This tailored approach, combined with an integrated software interface, makes Klaviyo's AI more accessible and effective for entrepreneurs and SMBs who may not know where to start with marketing or AI.

“And probably not surprisingly, those that are using Composer are the ones that end up being more successful with Klaviyo, literally in the first few weeks and end up converting to paid customers.”

asked by Brett Huff · answered by Andrew Bialecki