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    TWLO
    Earnings call· Sep 2025(Q3 FY25)

    TWILIO INC TWLO

    Oct 30, 2025 Source

    Executive summary

    Twilio Q3 FY25 — Record Revenue and Profitability Driven by Broad-Based Strength

    Twilio delivered a strong Q3 FY25, achieving record revenue and profitability, driven by broad-based execution across customer segments and product lines. The company exceeded its quarterly guidance and raised full-year targets, demonstrating operational rigor. Key growth drivers included messaging, voice, and software add-ons, with significant traction in AI-powered communication solutions and continued strength in ISV and self-serve channels. Management remains focused on driving durable revenue and gross profit dollar growth, while strategically investing in platform capabilities and AI-driven innovation.

    Highlights

    5

    • Record revenue of $1.3 billion, up 15% year-over-year reported and 13% organic.

    • Record non-GAAP income from operations of $235 million, up 29% year-over-year.

    • Free cash flow of $248 million, with $350 million in share repurchases (up 100% quarter-over-quarter).

    • Messaging revenue grew in the high teens, and voice revenue accelerated to mid-teens, its fastest rate in over three years.

    • ISV and self-serve customers both grew revenue more than 20% year-over-year.

    Concerns

    2

    • Non-GAAP gross margin declined to 50.1%, down 280 basis points year-over-year and 60 basis points quarter-over-quarter.

    • Incurred $20 million in carrier pass-through fees in Q3 due to increased Verizon A2P fees, with $22 million expected in Q4.

    Guidance & targets

    8
    CategoryTargetConfidence
    Q4 Revenue
    $1.31 billion to $1.32 billion
    high materiality
    High
    Q4 Reported Revenue Growth
    9.5% to 10.5%
    high materiality
    High
    Q4 Organic Revenue Growth
    8% to 9%
    high materiality
    High
    Q4 Non-GAAP Income from Operations
    $230 million to $240 million
    high materiality
    High
    Full Year FY25 Organic Revenue Growth
    11.3% to 11.5%
    high materiality
    High
    Full Year FY25 Reported Revenue Growth
    12.4% to 12.6%
    high materiality
    High
    Full Year FY25 Non-GAAP Income from Operations
    $900 million to $910 million
    high materiality
    High
    Full Year FY25 Free Cash Flow
    $920 million to $930 million
    high materiality
    High

    Operational metrics

    23
    Revenue
    $1.3 billionup 15% year-over-year
    Q3 FY25

    Record revenue.

    Organic Revenue Growth
    13%year-over-year
    Q3 FY25

    Reported on an organic basis.

    Non-GAAP Income from Operations
    $235 millionup 29% year-over-year
    Q3 FY25

    Record non-GAAP income from operations.

    Messaging Revenue Growth
    high teens
    Q3 FY25

    Second consecutive quarter of high teens growth.

    Voice Revenue Growth
    mid-teens
    Q3 FY25

    Accelerated growth.

    Voice AI Customer Growth
    nearly 60%year-over-year
    Q3 FY25

    Growth for the cohort of voice AI customers.

    Top 10 Voice AI Start-up Customers Growth
    more than 10xyear-over-year
    Q3 FY25

    Increase in revenue from top 10 largest voice AI start-up customers.

    Software Add-on Revenue Growth
    accelerated
    Q3 FY25

    Led by Verify.

    Verify Product Growth
    more than 25%year-over-year
    Q3 FY25

    One of the fastest-growing products.

    ISV Customer Revenue Growth
    20%+year-over-year
    Q3 FY25

    Continued strength from ISV customers.

    Self-Serve Customer Revenue Growth
    20%+year-over-year
    Q3 FY25

    Continued strength from self-serve customers.

    Non-GAAP Gross Profit
    $652 millionup 9% year-over-year
    Q3 FY25

    Reported non-GAAP gross profit.

    Non-GAAP Gross Margin
    50.1%down 280 basis points year-over-year and 60 basis points quarter-over-quarter
    Q3 FY25

    Impacted by carrier pass-through fees.

    Carrier Pass-Through Fees
    $20 million
    Q3 FY25

    Associated with increased Verizon A2P fees, driving sequential decline in gross margin.

    Non-GAAP Operating Margin
    18%up 190 basis points year-over-year and 10 basis points quarter-over-quarter
    Q3 FY25

    Driven by strong revenue growth and continued cost discipline.

    GAAP Income from Operations
    $41 million
    Q3 FY25

    Reported GAAP income from operations.

    Stock-Based Compensation as % of Revenue
    12.2%down 150 basis points year-over-year and flat quarter-over-quarter
    Q3 FY25

    As a percentage of revenue.

    Share Repurchases
    $350 millionup roughly 100% quarter-over-quarter
    Q3 FY25

    Completed in the quarter.

    Year-to-Date Share Repurchases
    $657 million
    YTD Q3 FY25

    Through the end of Q3.

    ConversationRelay Call Volume
    more than tripledquarter-over-quarter
    Q3 FY25

    As customers increasingly rely on Twilio's technology to power context-aware voice AI agents.

    RCS Messaging Volume
    more than doubledquarter-over-quarter
    Q3 FY25

    Following RCS becoming generally available around the world.

    Self-Serve Customer Additions in Voice
    40%
    Q3 FY25

    Percentage of self-service growth that was in voice.

    Q4 Carrier Pass-Through Revenue
    $22 million
    Q4 FY25

    Assumed in Q4 revenue guidance from incremental U.S. carrier fees.

    Industry KPIs

    6
    MetricValueDetails
    Headcount dsorelatively steady state
    Customer logo metricsbig quarter
    Large customer cohortsmore than 10x
    Sales capacity productivityefficient manner
    Net revenue dollar retention109%%
    Ai agentic channel product adoptionmore than tripled

    Product announcements

    1
    ProductTypeDetails
    RCS Messagingexpansion

    Deals & partnerships

    2
    StytchAcquisition of an identity platform for AI agents built for developers.less than $100 million

    A small tech and talent tuck-in acquisition to augment Twilio's ability to enable digital interactions by delivering next-generation authentication capabilities built for the era of generative AI.

    Leading cloud providerNine-figure renewal spanning multiple products.nine-figure

    The largest deal in Twilio's company history, reflecting continued trust in the Twilio platform.

    Risks & headwinds

    3
    Carrier pass-through feesQ3 FY25 and Q4 FY25

    $20 million in Q3 FY25; $22 million expected in Q4 FY25

    Mitigation: Taking price actions across the business and investing in platform efficiency to stabilize and improve gross margins.

    Potential for additional carrier A2P feesFuture quarters

    Not quantified, but would present additional pressure to gross margins.

    Mitigation: Management has only factored known impacts (Verizon) into guidance; will continue to monitor.

    Challenging holiday season comparisonQ4 FY25

    Not quantified, but creates a more challenging comparison due to strong prior year.

    Mitigation: Acknowledged by management; guidance provided reflects current expectations despite mixed macro and usage-based business.

    What to watch in Q4 FY25

    5

    Other Carrier A2P Fees

    Next quarter/Future quarters
    CurrentVerizon A2P fees $20M in Q3, $22M expected in Q4.
    TargetNo additional carrier A2P fee increases from T-Mobile or AT&T.

    Why it matters

    Potential for additional carrier fees from T-Mobile and AT&T could further pressure gross margins, impacting profitability.

    Yes, they may. I mean, listen, what we've factored in is what we know, which is the Verizon impact. We don't know of anything else. We haven't forecasted anything else in our guidance yet, but there could be a day when those AT&T and T-Mob follow the Verizon action. And that would present an additional pressure to kind of our gross margins.

    Q&A highlights

    6

    What functions does Stytch complement with Verify, why acquire instead of build, and what is the financial impact?

    Stytch expands Twilio's authentication capabilities for trusted digital interactions, especially for AI agents, complementing Verify. It's a small tech and talent acquisition for less than $100 million, with an immaterial financial impact on revenue and P&L.

    “The revenue and the P&L altogether is pretty immaterial in the scheme of things. We don't think it's going to have a material impact on our financials going forward. In fact, it won't. And it's a small kind of tech and talent acquisition that we ultimately did for less than $100 million.”

    asked by James Fish · answered by Khozema Shipchandler

    2 min read6 chapters

    Detailed Narrative

    01

    Broad-Based Strength and Exceeding Guidance

    Twilio reported a strong Q3 FY25, achieving record revenue of $1.3 billion and record non-GAAP income from operations of $235 million. The company exceeded its quarterly guidance for revenue, profitability, and free cash flow, leading to raised full-year targets. This performance was attributed to broad-based strength across customer segments, including innovative start-ups and large global enterprises, and continued revenue growth in messaging, voice, and software add-ons.

    02

    AI and Conversational Capabilities Driving Growth

    Innovation in conversational AI and branded communications is paying off, with ConversationRelay call volume more than tripling quarter-over-quarter. Voice AI customers grew nearly 60% year-over-year, and the top 10 voice AI start-up customers increased more than 10x year-over-year. RCS messaging volume also more than doubled quarter-over-quarter following its general availability, offering branded experiences that enhance trust and efficacy.

    03

    Go-to-Market Execution and Cross-Sell Traction

    Go-to-market execution was a key driver, highlighted by a nine-figure renewal with a leading cloud provider, the largest deal in company history. The new agent productivity solution, a bundled offering, saw its first deals signed, showing encouraging traction in financial services, retail, travel, and healthcare. ISV and self-serve customers continued to be strong growth drivers, both growing revenue more than 20% year-over-year, with self-serve acting as a foundational entry path for customer growth.

    04

    Strategic Acquisition of Stytch

    Twilio announced a definitive agreement to acquire Stytch, an identity platform for AI agents built for developers. This small tech and talent tuck-in acquisition, valued at less than $100 million, aims to augment Twilio's capabilities in delivering next-generation authentication for the generative AI era, expanding trust between businesses and consumers. The acquisition is not expected to have a material financial impact.

    05

    Gross Margin Management and Carrier Fees

    Non-GAAP gross margin was 50.1%, down 280 basis points year-over-year and 60 basis points quarter-over-quarter, primarily due to $20 million in carrier pass-through fees from increased Verizon A2P fees. Management is actively taking price actions and investing in platform efficiency to stabilize and improve gross margins, with high-margin products like voice and software add-ons expected to contribute positively over time⏳.

    06

    Capital Allocation and Share Repurchases

    The company generated $248 million in free cash flow during the quarter and completed $350 million in share repurchases, representing a 100% increase quarter-over-quarter. Year-to-date share repurchases totaled $657 million, approximately 95% of year-to-date free cash flow, reflecting a commitment to returning capital to shareholders when the stock is deemed a good value.

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