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    TWLO
    Earnings call· Jun 2026(Q2 FY26)

    TWILIO Q2 FY26 earnings call TWLO

    Aug 6, 2026 Source

    Executive summary

    Twilio Q2 FY26 — Strong Organic Growth and AI Momentum

    Twilio delivered an exceptional quarter, marked by accelerating organic revenue growth and strong profitability, driven by broad-based strength across products and sales channels. The company is seeing significant momentum in AI-driven customer engagement, with new conversational platform capabilities and a redesigned console driving adoption and cross-sell. Management remains focused on execution and leveraging its infrastructure to capitalize on the evolving AI landscape.

    Highlights

    5

    • Revenue reached $1.5 billion, with organic growth accelerating to 17% year-over-year.

    • Non-GAAP gross profit growth accelerated to 18% year-over-year, marking the fifth consecutive quarter of acceleration.

    • Non-GAAP income from operations increased 29% year-over-year to $285 million.

    • Generated record free cash flow of $353 million in the quarter.

    • Dollar-based net expansion rate improved to 116%, reflecting healthy growth with existing customers.

    Concerns

    3

    • Non-GAAP gross margin declined 160 basis points year-over-year and 50 basis points quarter-over-quarter to 49.1%, primarily due to $71 million in incremental U.S. carrier pass-through fees.

    • Non-GAAP operating margin was negatively impacted by approximately 90 basis points from incremental U.S. carrier fees.

    • GAAP income from operations was impacted by a $33 million prepaid asset impairment.

    Guidance & targets

    9
    CategoryTargetConfidence
    Revenue
    $1.505 billion to $1.515 billion
    high materiality
    High
    Organic Revenue Growth
    11% to 12%
    high materiality
    High
    Non-GAAP Income from Operations
    $285 million to $295 million
    high materiality
    High
    Full-Year Organic Revenue Growth
    13% to 13.5%
    high materiality
    High
    Full-Year Reported Revenue Growth
    18% to 18.5%
    high materiality
    High
    Full-Year Non-GAAP Gross Profit Growth
    similar to organic revenue growth rate
    medium materiality
    High
    Full-Year Non-GAAP Income from Operations
    $1.135 billion to $1.155 billion
    high materiality
    High
    Full-Year Free Cash Flow
    $1.135 billion to $1.155 billion
    high materiality
    High
    Full-Year Non-GAAP Gross Margin Impact from Carrier Fees
    reduced by roughly 210 basis points
    medium materiality
    High

    Operational metrics

    23
    Revenue
    $1.5 billionup 22% reported year-over-year
    Q2 FY26
    Non-GAAP Gross Profit
    $736 millionup 18% year-over-year
    Q2 FY26
    Non-GAAP Gross Margin
    49.1%down 160 basis points year-over-year, down 50 basis points quarter-over-quarter
    Q2 FY26

    The decline was driven by incremental U.S. carrier pass-through fees.

    Non-GAAP Income from Operations
    $285 millionup 29% year-over-year
    Q2 FY26
    Non-GAAP Operating Margin
    19%up 100 basis points year-over-year, down 80 basis points quarter-over-quarter
    Q2 FY26
    GAAP Income from Operations
    $85 million
    Q2 FY26

    The prepaid asset impairment did not impact non-GAAP results or free cash flow.

    GAAP Net Income
    positively impacted by $944 million
    Q2 FY26

    The release did not have an impact on non-GAAP results.

    Stock-Based Compensation as % of Revenue
    9.5%down 270 basis points year-over-year, down 20 basis points quarter-over-quarter
    Q2 FY26
    Share Repurchases
    $66 million
    Q2 FY26
    Incremental U.S. Carrier Pass-Through Fees
    $71 million
    Q2 FY26

    These fees drove the year-over-year and quarter-over-quarter declines in non-GAAP gross margin.

    Self-Serve Channel Revenue Growth
    30%+
    Q2 FY26
    ISV Revenue Growth
    25%+
    Q2 FY26
    Messaging Revenue Growth
    28%
    Q2 FY26

    Driven primarily by strong volumes and aided by growth in WhatsApp and RCS.

    Voice Growth
    above 20%year-over-year
    Q2 FY26
    Branded Calling and Conversational Intelligence Growth
    triple-digit growth
    Q2 FY26

    Part of Voice software add-ons.

    Total Software Add-on Revenue Growth
    25%+
    Q2 FY26
    Verify Growth
    30%+
    Q2 FY26

    Led total software add-on revenue growth.

    Dollar-Based Net Expansion Rate
    116%
    Q2 FY26

    Reflects improving growth trends and strong expansion rates from ISVs and multiproduct customers.

    Largest Customer Cohort Growth ($1M+ customers)
    over 20%
    Q2 FY26

    Another example of expansion seen in the business.

    Self-Service Voice Growth
    over 50%year-over-year
    Q2 FY26

    Many AI customers are originating as Voice customers in the self-service channel.

    AI-Native Customer Annual Run Rate (Example 1)
    $6 milliongrowing 65% a year
    Current

    Example of an AI-native customer's expansion path with Twilio.

    AI-Native Customer Annual Run Rate (Example 2)
    $9 million
    Current

    Example of a verticalized conversational AI company's expansion path with Twilio.

    New Twilio Console Conversion Uplift
    90%+compared to the old console
    Since May launch

    Reflects reduced friction in signing up and getting started with Twilio.

    Industry KPIs

    5
    MetricValueDetails
    Customer logo metricsstrong customer additions
    Large customer cohortsover 20%%
    Genai ai book of business8-figure deal with a leading AI company; 7-figure deal with Eltropy (AI voice agent); 7-figure deal with Car Finance 247 (AI assistant Carla)USD
    Net revenue dollar retention116%%
    Ai agentic channel product adoptionnearly 300,000customer conversations

    Product announcements

    2
    ProductTypeDetails
    Twilio's Next-Generation Platform (Conversations Layer)launch
    Redesigned Twilio Consolelaunch

    Deals & partnerships

    8
    Car Finance 247Implementation of Twilio's new conversations layer, including an AI assistant 'Carla'.7-figure deal

    Leading automotive fintech company joined private beta program, quickly evolved into a deal.

    Leading AI companySigned a significant deal for Twilio's platform.8-figure deal

    One of the key wins during the quarter, demonstrating momentum in the AI era.

    OloCross-sell deal to expand utilization of Messaging and Voice.

    Digital commerce platform for restaurants leveraging Twilio for real-time order notifications and delivery updates.

    EltropyLeveraging Messaging, RCS, Voice, and Branded Calling across the Twilio platform, and built an AI voice agent using Conversation Relay.7-figure deal

    Agentic AI platform for credit unions and community banks.

    Leading home improvement retailerConsolidating legacy communication traffic onto Twilio to utilize Messaging, Voice, and Branded Calling.7-figure deal

    Leveraging trusted voice capabilities and rich RCS 2-way interactions.

    Leading HR and payroll technology platformLeveraging Twilio Messaging and Verify to scale unified employee engagement infrastructure.7-figure deal

    Embedding messaging for secure 2-way employee communications and batch-workforce text alerts, and using Verify for 2-factor authentication for payroll access.

    AtlassianUtilizes Twilio's communications infrastructure to deliver contextual, AI-powered, omnichannel support within its new Customer Service Management app.

    Helps Atlassian reimagine customer experiences while scaling global channel coverage via Twilio's Flex SDK & Super Network.

    OpenEvidenceChose Twilio for its reliability, performance, global reach, and software orchestration layer.

    AI decision platform for physicians.

    Risks & headwinds

    2
    Incremental U.S. Carrier Pass-Through FeesQ2 FY26 and Full Year FY26

    $71 million in Q2 FY26; expected $250 million for full year FY26. Reduced Q2 non-GAAP gross margin by 160 basis points year-over-year and 50 basis points quarter-over-quarter. Reduced Q2 non-GAAP operating margin by roughly 90 basis points. Expected to reduce full year 2026 non-GAAP gross margin by roughly 210 basis points compared to full year 2025.

    Mitigation: Twilio's platform strategy enables customers to diversify engagement channels and maintain cost efficiency. Twilio also optimizes costs through direct connections with carriers to improve Messaging business efficiency.

    Tougher Year-over-Year ComparisonsQ3 FY26 and Q4 FY26

    Not explicitly quantified, but noted that Voice and software add-ons started to accelerate in the back half of last year, creating more challenging comparisons for Q3 and Q4 FY26.

    Mitigation: Management is flowing through strong first-half performance to guidance while acknowledging the more challenging comparisons.

    What to watch in Q3 FY26

    5

    AI-Native Customer Expansion

    next quarter
    CurrentExamples of AI-native customers growing to $6M and $9M ARR, with software add-ons growing 100% YoY.
    TargetContinued strong growth and expansion of AI-native customer cohorts, particularly in software add-ons and cross-product adoption.

    Why it matters

    Indicates the success of Twilio's strategy to capture AI-driven demand and the durability of this tailwind.

    So you can kind of get a sense for the production scale that these things are starting to happen at.

    Q&A highlights

    5

    Where is AI most pronounced, what's driving Messaging strength, and what's different about Voice AI vs. expectations?

    Khozema noted broad-based strength in Messaging and Voice, with AI tailwinds primarily showing up in Voice. Thomas provided examples of AI-native customers starting with Voice and expanding significantly, with one growing to $6M ARR and another to $9M ARR.

    “Generally speaking, I guess, I would call it broad-based strength across both channels and some of the newer products.”

    asked by Aleksandr Zukin · answered by Khozema Shipchandler

    1 min read5 chapters

    Detailed Narrative

    01

    AI-Driven Conversational Platform

    Twilio launched its next-generation conversational platform, including Conversation Memory, Orchestrator, Intelligence, Relay, and Agent Connect, now generally available. These building blocks enable context-rich customer conversations, serving both human and AI agents in a hybrid agentic era. Early adoption, such as a 7-figure deal with Car Finance 247, demonstrates significant ROI with 1.6x faster lead conversion and multi-million dollar revenue uplift.

    02

    New Twilio Console

    The redesigned Twilio Console, launched in May, provides a single command center for all Twilio workloads with an intuitive UX, AI-guided onboarding, and frictionless trials. This has led to a majority of existing customers migrating and a 90%+ uplift in conversions, accelerating self-serve adoption and multiproduct engagement.

    03

    Broad-Based Strength and Multiproduct Adoption

    The company reported strong performance across its business, including robust messaging growth despite carrier fee increases, and accelerated voice growth. Multiproduct customers are driving increased revenue, with examples like Olo expanding messaging and voice, Eltropy leveraging multiple channels for an AI voice agent, and a home improvement retailer consolidating traffic for logistics.

    04

    Industry Recognition and Strategic Positioning

    Twilio was recognized as a Leader in Gartner's 2026 Magic Quadrant CPaaS Report and IDC MarketScape for AI-enabled CDP, highlighting its strong execution and innovation. The company positions itself as a neutral infrastructure provider, integrating with various LLMs and data models, which allows customers flexibility and ensures Twilio wins regardless of specific tool choices.

    05

    AI Momentum and Early Innings

    While AI tailwinds are still in early stages, particularly in messaging, Voice AI is showing significant traction with both scaled companies and startups choosing Twilio's infrastructure. The company emphasizes the high ROI of its AI-driven solutions, which reduce token spend through context, and anticipates long-term durability as interactions evolve from human-to-human to human-to-agent and agent-to-human.

    AI-generated summary of the company’s earnings call. Not investment advice.