Twilio Inc.

Twilio reported Q3 revenue of $1.56 billion, up 20% year over year on a reported basis and 16% organically. Non-GAAP gross profit was $768 million, up 18% year over year, and non-GAAP gross margin was 49.2%, down 90 basis points year over year and up 20 basis points sequentially; the decline reflected $53 million of incremental U.S. carrier pass-through fees. Non-GAAP income from operations was $326 million, up 39% year over year, GAAP income from operations was $149 million, up 263% year over year, and free cash flow was a record $370 million. For Q4, Twilio guided to revenue of $1.595 billion to $1.605 billion, implying 17% to 17.5% reported growth and 11% to 12% organic growth, and non-GAAP income from operations of $300 million to $310 million. For full-year 2026, Twilio raised organic revenue growth guidance to 15% from 13% to 13.5%, raised reported revenue growth guidance to 20% from 18% to 18.5%, raised non-GAAP income from operations to $1.19 billion to $1.2 billion, and raised free cash flow guidance to $1.19 billion to $1.2 billion. The company also said 2027 organic revenue growth is expected to be at least 10%, with non-GAAP income from operations and free cash flow both at least $1.35 billion.

Khozema Shipchandler framed the quarter as evidence that Twilio is well positioned for an AI adoption cycle, emphasizing that voice AI and consumer AI are still at very low penetration levels. He stressed Twilio’s role as a neutral infrastructure layer with context, identity, orchestration, and trusted communications, and said customers want fast ROI, global scale, and secure interactions. His tone was confident and upbeat, but he repeatedly noted that broader adoption is still early and will take time.

Aidan Viggiano highlighted broad-based strength across the portfolio, including self-serve revenue growth of 30%+, ISV revenue growth of 20%+, Messaging revenue growth of 24%, Voice growth of 20%+, and software add-on growth of 25%+. She pointed to record non-GAAP gross profit of $768 million, a 49.2% gross margin, 21% non-GAAP operating margin, and record free cash flow of $370 million; she also noted $127 million of share repurchases and about $700 million remaining on the buyback authorization. On margins, she said incremental carrier fees reduced gross margin and that Q4 gross profit growth should be similar to organic revenue growth because of higher holiday-season hosting costs and the end of e-mail cloud migration tailwinds. She also said the company made some headcount investments in R&D and go-to-market, and that 2027 gross profit growth is expected to be similar to organic revenue growth.

Analysts focused on the apparent moderation in the Q3 beat versus the first half, Messaging deceleration, the pace of AI voice adoption, identity monetization, and whether gross profit could outgrow revenue next year. Management said the smaller beat was mainly due to Messaging decelerating modestly as ISVs lapped tougher comparisons, and reiterated that 5%+ beats should not be treated as the new normal. On AI, management said voice and consumer AI are still early but that Twilio is already working with leading companies; they described the identity product as a likely usage-based, software-like add-on that should help trust and margins over time, with pricing and packaging to be discussed at GA next year. They also said 2027 guidance is directional for now and will be revisited on the Q4 call.