TWLO

Image source: The Motley Fool. Thursday, Aug. 6, 2026 at 5:00 p.m. ET Vice President of Investor Relations - Rodney Nelson Chief Executive Officer - Khozema Shipchandler Chief Financial Officer - Aidan Viggiano Chief Revenue Officer - Thomas Wyatt Operator: Good day, and thank you for standing by. Welcome to Twilio Inc.'s Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Rodney Nelson, Vice President of Investor Relations. Please go ahead. Rodney Nelson: Good afternoon, everyone, and thank you for joining us for Twilio's Second Quarter 2026 Earnings Conference Call. Joining me today are Khozema Shipchandler, Chief Executive Officer; Aidan Viggiano, Chief Financial Officer; and Thomas Wyatt, Chief Revenue Officer. As a reminder, we will disclose non-GAAP financial measures on this call. Definitions and reconciliations between our GAAP and non-GAAP results can be found in our earnings presentation posted on our IR website at investors.twilio.com. We will also make forward-looking statements on this call, including statements about our future outlook and goals. Such statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described. Many of those risks and uncertainties are described in our SEC filings, including our most recent Form 10-K and our forthcoming Form 10-Q. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We disclaim any obligation to update any forward-looking statements, except as required by law. With that, I'll hand it over to Khozema and Aidan, who will discuss our Q2 results, and we'll then open the call for Q&A. Khozema Shipchandler: Thank you, Rodney. Good afternoon, everyone, and thank you for joining us today. Twilio had an exceptional second quarter. We delivered $1.5 billion in revenue, accelerating organic growth to 17% year-over-year while non-GAAP gross profit growth also accelerated to 18% year-over-year. We generated $285 million in non-GAAP income from operations and $353 million in free cash flow. Twilio's momentum is strong. We're executing with precision and innovating across the board to power customer conversations in the age of AI. During the quarter, we hosted our annual user conference, SIGNAL, which is always the highlight of my year. I love connecting with customers one-on-one and hearing firsthand why these brands choose Twilio as their foundational infrastructure. We are proud to have had brands like AWS, Centerfield, Cobalt, Deepgram, IBM, Nestle, PGA of America, Rivian, Sierra and Stripe take the stage to share how Twilio is driving ROI for their businesses as they build for the next era of customer engagement. This year's SIGNAL was especially memorable because we announced the general availability of Twilio's next-generation platform. Our conversations layer, which includes Conversation Memory, Conversation Orchestrator, Conversation Intelligence, Conversation Relay and Agent Connect provide the building blocks customers need to deliver context-rich conversations over a consumer's lifetime. As an example, to drive conversion and scale revenue, leading automotive fintech company, Car Finance 247, joined our private beta program, a move that quickly evolved into a 7-figure deal to implement the new Twilio conversations layer. Their AI assistant, Carla, has already handled nearly 300,000 customer conversations. Customers who engage with Carla convert to approved leads 1.6x faster, delivering a multimillion dollar annual revenue uplift across their core commission and ancillary offerings. While our new products have only been in the hands of customers since May, these early stories validate that businesses need Twilio's conversational infrastructure that both serves humans and agents as they navigate a hybrid agentic era. The newly redesigned Twilio Console also launched in May, giving customers a single command center to manage all of their Twilio workloads. It has an intuitive UX, frictionless trials to encourage experimentation, AI-guided onboarding and one central billing experience. This is all in service of making it easier to build with Twilio, and the refreshed console bolsters our acceleration in self-serve and will make multiproduct adoption more seamless. Since the launch, a majority of existing customers have migrated to the new console, and we are seeing a 90% plus uplift in conversions when compared to the old console. We continue to see strength across the business, highlighted by robust messaging growth even as carriers have raised their fees on our customers. While these pass-through costs carry no direct impact on Twilio's profitability, we do recognize the pressure it creates for our customers, specifically small businesses. Our Twilio platform strategy equips our customers with complete access to a variety of channels, empowering our customers to diversify their engagement strategies, maintain cost efficiency and reliably reach their own customers. Our go-to-market focus on multiproduct adoption is working well, and we saw continued strength across our platform, including messaging, voice and software add-ons during the quarter. The team signed an 8-figure deal with a leading AI company and other key wins with All Nippon Airways, Atlassian, Eltropy, Kixie, Lirio, Medibank, Olo, OpenEvidence, Orionai Solutions, Vozzi and Xplor Technologies. Revenue growth from multiproduct customers is accelerating, illustrating that our customers are continuing to use multiple products within the Twilio platform to power personal multichannel communications. Let me walk you through a few examples. Olo, a digital commerce platform for restaurants, signed a cross-sell deal to expand their utilization of messaging and voice. Olo is leveraging Twilio's communications infrastructure to power real-time order notifications and seamless delivery updates across its restaurant network. We also landed a 7-figure deal with Eltropy, an agentic AI platform for credit unions and community banks to leverage Messaging, RCS, Voice and Branded Calling across the platform. Eltropy also built its AI voice agent using Conversation Relay to help financial institutions deliver better consumer experiences, accelerate resolutions, reduce operating costs and create a scalable AI-powered contact center from day 1 or another win was with a leading home improvement retailer who signed a 7-figure deal to utilize Messaging, Voice and Branded Calling. By consolidating its legacy communication traffic onto Twilio, the company is now able to streamline North American delivery logistics, leveraging trusted voice capabilities and rich RCS 2-way interactions to optimize transactional order notifications and appointment scheduling. Another great win from the quarter was with a leading HR and payroll technology platform, which signed a 7-figure deal to leverage Twilio Messaging and Verify to scale their unified employee engagement infrastructure. They are embedding messaging directly into their mobile application to power secure 2-way employee communications and batch-workforce text alerts while using Verify to deliver seamless 2-factor authentication for payroll access. And Atlassian, a leading provider of AI-powered collaboration and team productivity software, utilizes Twilio's communications infrastructure to deliver contextual, AI-powered, omnichannel support within its new Customer Service Management app. This partnership helps Atlassian reimagine customer experiences with complete context while scaling global channel coverage via Twilio's Flex SDK & Super Network. So that's the power of Twilio. Just as we've abstracted the complexities of global telecom for 18 years, we're now helping our customers abstract the complexities that come with creating omnichannel agentic conversations. And these innovations continue to earn praise from leading industry analysts. During the quarter, Twilio was named a Leader by Gartner in the 2026 Magic Quadrant CPaaS Report, scoring the highest in ability to execute. Additionally, Twilio was also named a Leader in the 2026 IDC MarketScape for AI-enabled CDP. In summary, there is tremendous momentum building across our business from landmark enterprise wins to an 8-figure deal with an AI company. Twilio is empowering the next generation of companies with our world-class infrastructure that's delivering measurable ROI in the AI era. Our next-generation conversational platform is live. Our refreshed console is accelerating adoption and our customer momentum has never been stronger. We remain focused on strong execution while building the future of customer engagement. And with that, I'll turn it over to Aidan. Aidan Viggiano: Thank you, Khozema, and good afternoon, everyone. Twilio had an exceptional Q2, delivering record revenue of $1.5 billion, up 22% year-over-year on a reported basis and 17% year-over-year on an organic basis, which excludes incremental U.S. carrier pass-through fees. Non-GAAP gross profit growth accelerated to 18% year-over-year. We also generated record non-GAAP income from operations of $285 million and record free cash flow of $353 million. Top line performance was driven by strong volumes and solid go-to-market execution, resulting in another quarter of organic revenue growth acceleration. We saw strong customer additions in the quarter, aided by the release of our new Conversations Layer and Twilio Console. Our self-serve channel delivered revenue growth of 30% plus, while ISV revenue grew 25% plus. We are also seeing continued strength across the product portfolio. Messaging revenue growth was 28%, driven primarily by strong volumes and aided by growth in WhatsApp and RCS. Incremental carrier fees contributed roughly 10 points to Messaging's growth. Voice growth accelerated above 20% year-over-year, driven by a balance of volume growth and software add-ons, including triple-digit growth in Branded Calling and Conversational Intelligence. Finally, total software add-on revenue grew 25% plus, led by Verify, which accelerated to 30% plus growth. Our Q2 dollar-based net expansion rate was 116%, reflecting the improving growth trends we've seen in our business over the last several quarters. Incremental carrier fees contributed roughly 5 points to DBNE. We delivered record non-GAAP gross profit of $736 million with growth accelerating to 18% year-over-year, our fifth consecutive quarter of accelerating non-GAAP gross profit growth. This was driven by continued momentum in our higher-margin products in addition to our proactive efforts to deliver meaningful cost efficiencies. Non-GAAP gross margin was 49.1%, down 160 basis points year-over-year and 50 basis points quarter-over-quarter. We incurred incremental U.S. carrier pass-through fees of $71 million, which drove the year-over-year and quarter-over-quarter declines. Without these incremental fees, non-GAAP gross margins would have been up 60 basis points year-over-year and up 30 basis points quarter-over-quarter. Q2 non-GAAP income from operations came in ahead of expectations at $285 million, up 29% year-over-year, driven by strong gross profit dollar growth and continued cost leverage. Non-GAAP operating margin was 19%, up 100 basis points year-over-year and down 80 basis points quarter-over-quarter. Our Q2 non-GAAP operating margin includes a roughly 90 basis point headwind from incremental U.S. carrier fees. We generated $85 million in GAAP income from operations. This was impacted by a prepaid asset impairment of $33 million. This write-down did not impact our Q2 non-GAAP results or free cash flow and will not impact future results. Additionally, GAAP net income was positively impacted by a onetime noncash benefit of $944 million due to a valuation allowance release against certain U.S. federal and U.S. state deferred tax assets. The release did not have an impact on our non-GAAP results. Q2 stock-based compensation as a percentage of revenue was 9.5%, down 270 basis points year-over-year and 20 basis points quarter-over-quarter. We generated record free cash flow of $353 million in the quarter. Additionally, we completed $66 million in share repurchases in Q2 and have roughly $800 million remaining on our current authorization. Turning to guidance. For Q3, we're initiating a revenue target of $1.505 billion to $1.515 billion, representing 16% to 16.5% reported growth and 11% to 12% organic growth. Our Q3 reported revenue guidance assumes $56 million in incremental U.S. carrier fees. As a reminder, our organic revenue excludes the contribution from incremental increases to U.S. carrier fees. Moving to the full year. We're encouraged by the broad-based trends we saw in the first half. For the full year, we're raising our organic revenue growth range to 13% to 13.5%, up from 9.5% to 10.5% previously. We are raising our reported revenue growth range to 18% to 18.5%, up from 14% to 15% previously. In addition, we continue to expect full year non-GAAP gross profit growth to be similar to our organic revenue growth rate. Our full year revenue guidance assumes approximately $250 million in incremental pass-through revenue from U.S. carrier fees. As a reminder, while the pass-through fees have no impact on our gross profit, income from operations or free cash flow dollars, they do impact our margin rates. For modeling purposes, we would expect the incremental fees to reduce our full year 2026 non-GAAP gross margin by roughly 210 basis points when compared with our full year 2025 non-GAAP gross margin, all else equal. Turning to our profit outlook. For Q3, we expect non-GAAP income from operations of $285 million to $295 million. We are raising our full year 2026 non-GAAP income from operations range to $1.135 billion to $1.155 billion, up from $1.08 billion to $1.1 billion previously. Similarly, we are raising our full year free cash flow guidance to $1.135 billion to $1.155 billion. I'm very pleased with the accelerated revenue and gross profit growth we delivered in the second quarter as well as our ongoing financial discipline that is driving strong profitability and free cash flow. We remain focused on our key go-to-market initiatives and delivering the essential infrastructure that will help our customers win in the AI era. And with that, we'll now open it up for questions. Operator: [Operator Instructions] Our first question comes from the line of Alex Zukin of Wolfe Research. Aleksandr Zukin: Truly congrats on the quarter. I guess if last quarter, there was a lot of questions of whether or not AI is creating durable tailwinds for your business, it doesn't feel like that's a question anymore. But I guess if I think about where you're seeing it most pronounced, whether in the Messaging and the Voice really across the business, what is happening in the messaging business? Because it seems like it's coming in ahead of expectations now kind of a second straight quarter. So like what's driving that? And longer term, kind of what did you see differently this quarter from Voice, the Voice AI cohort specifically versus your expectations? Khozema Shipchandler: Alex, this is Khozema. Thanks for the question. A lot there. So I would say kind of in general, maybe let's just start there, like obviously, we saw very good strength in Messaging, very good strength in Voice. And I would say Messaging, it's still pretty early days in terms of like AI tailwinds starting to show up. They are happening. But I think most of the activity continues to be in Voice. Obviously, you're familiar with a lot of the trends that are happening in Voice right now with various kinds of both scaled companies as well as a lot of the Voice AI start-ups, just a lot of traction, and we're obviously fortunate that most of these companies are choosing Twilio as their Voice infrastructure. I would say more broadly, if you kind of go back to SIGNAL even, so the channel story has definitely been good for us. I'd say, in addition to that, the conversation suite that we launched at that time, that obviously incorporates AI in the different categories there. We're definitely seeing some traction with it. I would specifically point to Conversation Memory and Conversation Intelligence, which definitely got a lot of attention from customers incorporate different AI attributes. And then several of our software add-ons that also incorporate AI, that did pretty well as well. So I guess maybe to sum it up, and I'll turn it over to Thomas, if he wants to provide more detail. Generally speaking, I guess, I would call it broad-based strength across both channels and some of the newer products. Thomas Wyatt: Alex, it's Thomas here. I just want to touch a little bit on the cohort part of your question. And so I'll give you 2 examples. The first one is a horizontal conversational AI company that started with Twilio in Q1 of 2025. Think of this as a low 6-figure quarterly spend with Twilio that largely started with Voice. From there, the spend on connectivity since then has more than tripled and the spend on software add-ons have gone from effectively nothing at the start to over $0.5 million a quarter run rate. And so this is now a $6 million annual run rate customer growing 65% a year. That's one example of an AI native. Another is a verticalized conversational AI company. 2024 Q1 started with us with $200,000, same thing, Voice, Messaging expansion. And now they're a $9 million customer with software add-ons growing 100% a year. So you can kind of get a sense for the production scale that these things are starting to happen at. Aleksandr Zukin: That's excellent. Aidan, maybe just a quick one for you. Obviously, Dollar-Based Net Expansion, biggest run-up we've seen. Maybe just touch on that and gross profit dollar growth and gross margins continue to accelerate kind of what's the -- is there any onetime there? Or should we expect that to continue through the back half of this year? Aidan Viggiano: Yes, on Dollar-Based Net Expansion. So fees did help that number. In full transparency, they contributed about 5 points to that number. But we did see DBNE accelerate even adjusting for the fees. It was about 1 point better quarter-over-quarter. And really, in terms of what's driving it, just healthy growth with our existing customers. In particular, I would say ISVs had a very strong quarter where we're seeing meaningful expansion rates. And in addition to that, revenue growth from multiproduct customers is accelerating, which is helping expansion within our installed base. As it relates to gross profit, I would say it's a couple of things in terms of what's driving the acceleration. First, strength in our higher-margin products, right, Voice software add-ons like Verify or some of our voice software products, strength in our support and services organization, all of those pieces of the business are very high margin. So that helps on the gross profit growth side. But in addition to that, we continue to focus on optimizing costs. So e-mail margins continue to improve as we lap the cloud migration project that we undertook really to optimize our hosting environment. And we also continue to pursue things like direct connections with different carriers around the world. We announced in late March that we became the first cloud communications provider to secure direct connections for 10DLC and toll-free messaging with all major U.S. carriers. Things like that help us drive efficiency in our Messaging business. So I'd say it's a combination of mix as well as cost efficiencies. In terms of how to think about it going forward, no change to kind of what we've said. We expect gross profit to grow at a similar rate to organic revenue. Operator: Our next question comes from the line of Taylor McGinnis of UBS. Taylor McGinnis: Congrats on the quarter. Just as we look at the 3Q guide, it implies that the strength that you saw in the first half of the year is going to continue into the second despite some of the tougher compares. So could you touch on the drivers underpinning that guide? It seems like it assumes that messaging growth can maintain the levels that we've seen, excluding A2P fees. But you also mentioned things like 30% plus verified growth and an acceleration in self-service. So maybe you can just unpack how you're thinking about growth across the different segments because it seems like you're seeing strength in a bunch of different areas. Aidan Viggiano: Yes, sure. I'll start. So I'm not going to get into each of those pieces for Q3, but what I'll talk about is how we -- how they performed in Q2. So 17% growth overall, incredibly strong. Perhaps more importantly, gross profit growth accelerated to 18%. And we look -- and when we look at the drivers of that, on a sales channel basis, ISVs and self-serve continue to perform very well. ISVs were 25% plus, self-serve, 30% plus. Products were very strong. Messaging, 28%. And I'd say that's volume in the Messaging business as well as some of our other newer channels like WhatsApp and RCS contributing well, albeit off of a smaller basis. Voice was above 20% in the quarter. That's both the channel as well as some of the software add-ons that Thomas was talking about a minute ago. And then software add-ons overall were very strong. So it's pretty broad-based. And when we look at it by industry, same thing, right? Tech, financial services, health care, all very strong. So we feel good about the setup for Q3. We are flowing some of that goodness through to our guidance. We're guiding 11% to 12%, which is the highest guidance that we've offered in 3 years. Now that said, I recognize we beat by 5% plus in Q1 and Q2. We don't expect that to be the new norm for the business. We do face some more challenging comparisons in Q3 and Q4 in Voice and software add-ons. They started to accelerate in the back half of last year. So we are facing into that a little bit as well. Operator: Our next question comes from the line of Samad Samana of Jefferies. Samad Samana: I'll echo the congrats on the strong quarter. Great results. Maybe just on the Voice AI strength, how much of that is new customer acquisition and onboarding with them lighting it up versus existing customers expanding into Voice AI products? And then to the extent that you can break it out, I mean, how concentrated is that Voice AI strength? Or is it relatively broad-based? And then I have one follow-up. Thomas Wyatt: Samad, it's Thomas. The strength in Voice AI is broad-based across all of our channels. I do want to highlight, though, self-service, Voice, in particular, was very strong growth with over 50% year-over-year. So a lot of these customers are originating as Voice customers in the self-service channel. And as I mentioned in a couple of examples earlier, we're just seeing them start with Voice and then expand to other channels as well. Messaging is the natural follow-up, RCS, et cetera. So if you look at it from the purely AI natives, we're seeing that as well as the larger, more established ISVs where they're adding Voice into more of their agentic autonomous customer engagement type workflows. Great example of that was the Atlassian work that we're doing with the partnership there about embedding a lot of our Voice AI capabilities directly in their Customer Service Management platform that they just launched. So it is pretty broad-based across enterprise, ISV large as well as the AI natives. Operator: Our next question comes from the line of Elizabeth Porter of Morgan Stanley. Elizabeth Elliott: I wanted to follow up on the new console where you noted that the majority of existing customers have migrated and the conversion is more than 90% higher. Just what precisely is the conversion metric measuring? And since it is still pretty new, should we be thinking about kind of the second product attach starting to be an uplift to revenue with a 2027 contributor? Or how do we think about the timing of the feature changes and when they can start to benefit? Thomas Wyatt: Yes, Elizabeth, as Khozema mentioned earlier, the conversion rate that we're seeing on the one Console is largely because we've reduced a lot of the friction in the process of signing up with Twilio, getting started, setting up their first campaigns or messages, et cetera. What we're seeing is in the top of the funnel, really strong conversion rates from the launch in May all the way through Q2. That those -- a lot of that's experimentation that starts to result in production workloads getting online. Those are all good leading indicators for us in future revenue realization as those customers go more into volume. But just reducing the friction upfront and having that conversion rate all the way through the funnel is what we're looking for, and the leading indicators are quite positive. Operator: Our next question comes from the line of Callie Valenti at Goldman Sachs. Carolyn Valenti: Congrats on the quarter. When you look at your pipeline today versus a year ago, what inning do you think we're currently in, in kind of seeing this uplift to the Voice ecosystem as a result of AI, both with AI natives and maybe as other businesses adopt AI as well? And what factors do you kind of consider when measuring the durability of this tailwind and ability for Twilio to benefit kind of regardless of where the value accrues in the rest of the stack? Khozema Shipchandler: Yes. Good question, Callie. This is Khozema. I would say it's pretty early innings, very early innings, as a matter of fact. I mean, like one way to kind of conceptualize it is that if you just think about like the number of Voice AI interactions that you yourself have had. My guess is it's like probably less than 5 or 6 over the last year or so. That's certainly the case for me. And so I think the reality is that while we're seeing pretty good growth right now, like a lot of this volume is still very much on the come. Now the reason that you do get customers to end up choosing this stuff, especially like in our suite with Conversational Intelligence and Memory, it has the benefit of doing 2 things. One is that it's driving high ROI. Otherwise, they wouldn't buy it in the first place, obviously. But the second thing is that it actually also allows them to reduce their token spend because there's this notion of context that's being used to drive the Memory, to drive the Intelligence. And by using context, you don't have to kind of scour the history of the Internet. You're just using what's relevant for that particular consumer interaction. And so as we think about like durability going forward, I mean, I would imagine like there are probably going to be some ups and downs as the AI story unfolds. But the secular tailwind, I think, is very clear. The ROI that we're seeing with customers is also very clear. And so I would imagine that given that it's early innings, given that we're seeing very high ROI, both in terms of revenue uplift and cost reduction with our customers, there's significant durability, not just into like 1 or 2 years, but for many, many years going forward. Operator: Our next question comes from the line of Jackson Ader of KeyBanc Capital Markets. Jackson Ader: I was curious about the split between net new revenue and the existing net retention rate. If I just do a quick glance in the last few quarters, it's been -- you grow at 15%, 16% organically and the net retention rate is about 5% or 6% below that at 110%, 111%. And I'm curious, as you add on these both like new channels and new customer acquisition channels are improving, should we expect that the growth over and above the net retention rate could start to widen relative to history? Khozema Shipchandler: Yes. Jackson, you're very, very hard to hear. So we think we got the question. Basically, I'm going to summarize it as follows, that you're asking about what's the difference between DBNE and the overall growth rate, especially when you adjust for fees. I think that's the gist of it. And I think that there's 2 things going on. So one is that, as Aidan said in her answer to a prior DBNE question, like we're definitely seeing strength in same-store sales. So we did see an improvement in that quarter-on-quarter and a number of these customers that have been with us for a very long time, like they continue growing and obviously contributing to the overall organic growth rate. In addition to that, like we're also seeing like a lot of new customers, right? So Thomas gave you a number of examples. We gave you a number of examples in our prepared remarks, like those guys are obviously starting to contribute to the delta, if you will, between DBNE and our overall organic growth rate. And that's a great setup for us, obviously, right? Because if you kind of follow that story that Thomas gave you a second ago about that customer that started with us 1 to 2 years ago, they were like close to kind of zero in spend, started with one product, started adding multiple products over time, like that's another factor that I think plays into the durability that we see over time. And so these NPCs, new kind of paying customers, as we call them internally, they'll turn into expansion customers over time. Thomas Wyatt: I'll just add one more quick data point on that. We are seeing, for example, our largest customer cohort, the $1 million-plus customers, that's growing over 20% as well. It's another example of the expansion that we're seeing. Operator: Our next question comes from the line of Nick Altmann of U.S. Bancorp. Nicholas Altmann: Awesome. I wanted to follow up on Elizabeth's question on the new console. And the first part is just how much of the acceleration in multiproduct revenue in the quarter would you attribute to the new Twilio Console? And the second part is, I understand it's early, but how meaningful do you believe the new console can be to driving multiproduct revenue mix higher in the near term, especially as it relates to some of the higher-margin offerings such as the software add-ons, Voice, et cetera? Aidan Viggiano: Yes. In terms of your first question, Nick, it very little. It didn't contribute much at all in terms of multiproduct revenue in the quarter. Thomas Wyatt: I will say, Nick, we are very optimistic about what it will do as customers are signing up in the new console, as I mentioned, going through the conversions, the upgrades to a place where they're activating their first product. One of the benefits of the new console is that we have credits available for customers to try multiple products as part of that one console experience. And as they're activating the first channel, they can start the second channel, the third channel, et cetera, with some of those credits. So we're going to begin to see that play out. I know it's hard to predict exactly when and what the implications will be from a revenue realization perspective, but the feedback we're getting from users have been really positive. Operator: Our next question comes from the line of Derrick Wood of TD Cowen. James Wood: Congrats from me. Khozema, OpenAI recently announced a new product called Presence, and they mentioned an early focus was using their speech model for voice and text Conversational Interactions, I think inside customer support and customer experience settings. I mean with this backdrop, how do you see kind of OpenAI as a customer, a partner or a competitor? And what are some of the new opportunities that you could target with them given the innovation with their models and now at the application layer? Khozema Shipchandler: Yes. I would say this is not unique necessarily to OpenAI, but a number of folks that we work within the ecosystem, they probably fit all of those descriptions based on different characteristics at different times. I think, by and large, partner in this case. I mean I think for the most part, like what we see and hear expressed from customers is that they prefer working with a neutral party. And so being able to integrate from whatever LLM or data model of their choosing, being able to integrate off of whatever data warehouse, being able to integrate off of whatever context layer, being able to integrate off of whatever cloud. So I think we're going to stick to our positioning as being kind of the Switzerland of it all. And customers are going to make decisions and they're going to change those decisions pretty rapidly, right? And you already see this a lot with companies. And I would certainly put Twilio in the mix, too, like we're constantly experimenting with different models and as different ones improve or the cost characteristics change or whatever, I think having neutrality be the calling card of the company, I think that best situates us going forward. And then if a customer wants to avail themselves of a particular tool, perfect. They can integrate to us either way, and they can get up and running with Twilio. Thomas Wyatt: Yes. Just to add to that, at SIGNAL, we did announce a number of integrations with AI model providers, Codex being one of those as well as Claude Code and Vercel, Replit, Figma, all those different Cursor. So we are, as Khozema said, focusing on bringing Twilio into the agent builder tool set so that it's easier for people to be able to build and integrate their AI agents directly with Twilio Communications and Infrastructure. And we're doing the same thing with the Microsoft, the AWS, et cetera, as well. So back to the point of you got to reach the end user at some point on their device and Twilio Super Network connects very nicely into those AI frontier model infrastructure. Operator: Our next question comes from the line of Siti Panigrahi of Mizuho. Sitikantha Panigrahi: Great. You guys position Twilio as more like a neutral infrastructure provider in this agentic era, now integrating with LLMs and other data warehouse. But how do you see as some of the like system of records company like Salesforce, ServiceNow and other front office company, they try to get into this space. Do you see more of them as more of a competitive threat? Or do you see more as a complementary solution to that? Khozema Shipchandler: I mean, again, Siti, I would say being neutral has its advantages here. I would say in a different day, they could be a complementor, they could be coopetition. By and large, we see these guys as complementary to answer your question. I mean, in the case of both of the companies that you mentioned, we do have integrations to both. And so to the extent that a customer of ours wants to be able to integrate to one of those different systems of record and then be able to use the rest of somebody else's AI tool set, like Twilio is perfectly situated for that. Like we can sit in the middle. The good news for us is that to be able to drive any intelligence, you got to have context and you got to have a channel. And so no matter what, Twilio wins. And in those 2 cases, as I said, we integrate to both. Operator: Our next question comes from the line of William Power of Baird. William Power: Okay. Congratulations on the results and really nice to see that sustained gross profit growth, too. I just want to come back to the Q2 upside, matching the upside you had in Q1. It sounds like it's pretty broad-based. But I guess anything in particular you'd call out that might have been an upside surprise? And I guess, part 2, it'd be great to get any color you can share just on the sources of the Messaging strength and kind of where RCS is playing out within that. Aidan Viggiano: Yes. I don't know that I would say there was much in terms of a surprise, Will. I think we performed pretty well across broad number of industries, broad number of products, broad number of sales channels. And so we feel pretty good about that, and we feel pretty good about the setup for the back half of the year. As it relates to Messaging, maybe I'll start, but then Thomas can certainly jump in. Again, broad-based, I'd say ex the fees, it grew about 18%. So the fees are contributing about 10 points to the growth of the Messaging business. But we saw a healthy contribution from some of the smaller components of the business, WhatsApp and RCS are growing very quickly. That was good to see. When we look at it by industry within Messaging, I'd say tech, financial services, professional services, health care, retail, e-commerce, they all generated meaningful double-digit growth. So pretty broad in terms of the industry look there. And then from a sales channel perspective, ISVs were very strong as well as self-serve. So -- maybe the other angle I'd look at is use cases. Again, ISV speaks to one use case, our Verify product growing 30% plus speaks to another in terms of authentication. So it was pretty broad-based on the messaging side as well. We do see some growth with the AI natives on that channel as well, though I would say that the volume that we see from AI companies on messaging is much more a traditional use case that they're using the Messaging channels for. Thomas Wyatt: The only thing I'd add to that is just the fact that we are seeing because of the new platform, the conversations capabilities that we just launched, there is a trend toward consolidating spend with Twilio. A lot of our enterprise and ISV customers who may have been multi-sourced are beginning to converge more on our platform to take advantage of some of the software add-ons that we've recently introduced. A good example of that is the work that we're doing with OpenEvidence which is an AI decision platform for physicians, and they chose Twilio largely because of the reliability, performance and global reach that we have that's just unmatched when you combine that with a software orchestration layer that sits on top. Operator: Our next question comes from the line of Joshua Reilly of Needham. Joshua Reilly: Just one for me. In terms of the Voice AI start-up customers, do you have a feel for how much of their traffic is on your platform versus their appetite to send traffic via any of your competitors? And how would you expect as these start-ups mature to continue having such a large share of volume on your platform versus what do you think they would try to diversify their traffic a bit? Khozema Shipchandler: Well, I think the answer to that is like partly embedded in what Thomas said a second ago. I mean the trend we're seeing is like sort of the opposite of what you said a second ago, which kind of implies diversification. Instead, we're seeing consolidation because to be able to take full advantage of our conversation suite and in particular, like if you think about like an AI native, they want to be able to use context. They want to be able to use the infrastructure to be able to create like that AI experience on the other side without which they can't really do it. And so I think we don't have a measure per se of where the different pockets of spend are. But to maximize their ROI, I'd say consolidation is probably where it's headed, not the other way around. Operator: Our next question comes from the line of Arjun Bhatia of William Blair. Arjun Bhatia: Perfect. And I'll add my congrats here. I'm curious just where we are kind of in the cross-sell motion. I know that's been a pretty big initiative. It seems like a lot of the growth in individual channels is certainly coming through volume expansion and consolidation. But is that from a go-to-market perspective, are we starting to see cross-channel cross-sell? Or is that a benefit that's maybe still ahead of us? Thomas Wyatt: Yes. Arjun, we're absolutely seeing the cross-sell momentum and the upsell momentum in the business. And some of the examples that we shared so far are examples where customers have started with either Messaging or Voice and then separately added the second or third channel because they want to be able to communicate with Memory and Orchestration capabilities and observability layer of insights to understand sentiment across those channels that can be then be integrated between the brand and the consumer on personalizing those engagements. And so we are seeing it, whether it's the AI natives who started with Voice, as I mentioned, that have added more WhatsApp or other types of chat-based services through messaging. And we've also seen it with the largest ISVs who are rolling out Branded Calling when they started with Messaging or they're adding Flex embedded into their core platform when they might have been a messaging-only customer. So the channels are happening and the software upsells, you've seen were 25% plus growth this quarter. So we're seeing great momentum on upsells. Operator: Our next question comes from the line of James Fish of Piper Sandler. James Fish: Nice quarter. Just maybe circling back on Will's prior question. Look, a small part of the business, but how should we be thinking about RCS at this point in terms of what you're seeing on volumes and what we could see in terms of a margin profile within the Messaging business as a result? And within ISVs, is there a way to think about what you're seeing in terms of the underlying mix of your products at this point? Khozema Shipchandler: I didn't understand the second question. But on the first question with respect to RCS, the way I would characterize it is growing very fast off of a pretty small base. So I think we kind of remain optimistic about what RCS can do. Obviously, it's got like some awesome characteristics. The product itself like is very attractive, but it's still relatively small in the scheme of things, but again, growing very, very fast. Aidan Viggiano: And from a margin perspective, just assume it's roughly in line with the rest of Messaging. I think on product mix in ISVs, I'm not sure if we caught the question, but yes, I'd say it continues to be a broad mix of Messaging, Voice, e-mail use cases across a plethora of ISVs from the long tail up to bigger enterprises. In addition, I'd say we're seeing more and more regularly adopt some of our software add-ons. Operator: Our next question comes from the line of Samik Chatterjee of JPMorgan. Unknown Analyst: This is [ Brian ] on for Samik. For Orchestrator, Memory and Intelligence, is early adoption coming mainly from existing customers replacing Orchestration and context layers they build in-house? Or is it coming from customers standing up entirely new AI workflows and which motion is reaching production faster? Thomas Wyatt: Yes, it's a good question. I would say it's a bit of a mix. What we've seen is the initial conversation rollout of customers, the ones that participated in our private beta program who have now gone into production, and we're starting to see at scale volumes. We talked about Car Finance as an example of that, a 7-figure deal is resulting to it. So that's an example of existing process that can be dramatically improved with Twilio's core capabilities that are now being offered. At the same time, there are some smaller AI-native type companies that are building on top of this as a new offer as well. And that could be for both customer support use cases, but also for AI sales outbound use cases as well. And it's just -- it's improving the customer experience and reducing the cost to serve to offer these virtual agents, whether they're Voice-centric or Messaging-centric. So it is a pretty good balance. It is early days, but we're seeing the consolidation of the traffic and volumes of spend getting onto the Twilio channels, and we're starting to see the software being rolled out into production use cases. Operator: Our next question comes from the line of Koji Ikeda of Bank of America. Koji Ikeda: Just one question for me. And so one of the message -- it sounds like I'm hearing from you is that the future is really about humans and agents operating together. And so when we do our checks and frankly, even when we listen to other management teams from other tech companies, they're calling out that agents are spooling up their own actions in whatever workflow that they're addressing. And so when I think about Twilio, does the long-term opportunity for you scale more with AI agent-driven actions? Or is it more with traditional human-driven actions, but at a much higher monetization level? Khozema Shipchandler: Yes. I think it's going to be both. I mean, again, the reality of like where we are today, and I'm going to say probably for the next couple of years, it's going to be mostly human-oriented. I mean the vast majority of interactions each of us has in our daily lives, probably every person on this call is still mostly human, human to human. That said, you're seeing a tremendous amount of that get augmented with AI. And the future that we're certainly building towards anticipates that a huge portion of that volume ends up flipping to human to agent and agent to human. I still think it's going to be a while before it's like fully agentic agent-to-agent kind of stuff. But for a lot of these transactions that we're talking about that are very high value, high stakes, especially in financial services and health care, they do require a lot of these different capabilities where you've got to be able to validate what's going on. And given the fact that it is high stakes, you want a human in the loop. And so that's kind of what we're building towards. Again, we're starting to see a lot of that stuff take off, but it's early days. And I think that's what gives us confidence that there's real durability here over the next several years. Operator: Our next question comes from the line of Patrick Walravens of Citizens. Unknown Analyst: This is Pete [indiscernible] on for Pat. Just one question. Is there any commentary you can provide on how we should think about the timing of AI contributing more meaningfully to revenue or its current scale? Khozema Shipchandler: Well, I mean, as I said a second ago, like I think that it's pretty early days in terms of the AI story more broadly. I mean I think that we're starting to see an indication that AI can be a meaningful contributor. It's certainly starting to animate a lot of the Voice AI commentary that we've given previously. But it's early innings, and we think there's a very durable tailwind here. And our expectation is that as interactions move from human to human, human to agent, agent to human, that provides a lot of durability for the business on the one hand. And then also, most of the interactions that we're seeing today are on the Voice channel. We would expect that a lot of those move over to other channels over time, too, which also generates pretty good durability for the business. Operator: Our next question comes from the line of Parker Lane of Stifel. J. Lane: Aidan, one for you. I understand that the AI data is sort of smaller and newer cohort for you all, but let's maybe comment on the DBNE characteristics you're seeing of those companies that fall into that category and how that's rolling forward into your outlook for the year? Aidan Viggiano: Yes. I'd say DBNE characteristics are very strong. I mean, as Thomas talked about, he gave examples of some AI companies and their expansion path on Twilio. So once they come in, they typically come in on a channel. And then they'll grow on that channel, they'll expand into software products. They may adopt a second channel. So DBNE is way higher than the average for the company for that cohort, and that's factored into the guidance that we're providing for the back half of the year. Operator: Our next question comes from the line of Andrew King of Rosenblatt. Andrew King: I too will echo the congratulations on the strong quarter. Just wanted to dive in a little bit more on Nick's question. Can you give us a little bit more idea or any more color on how the free token usage has progressed versus how you've seen it internally? And any particular products that are driving a significant amount of engagement from customers with those free tokens? Khozema Shipchandler: Are you talking about in terms of the usage by customers? Andrew King: Yes. Khozema Shipchandler: The free credits or the free trial platform or... Andrew King: The free credits. Khozema Shipchandler: Okay. Okay. Thanks for clarifying. I would say, in general, the experience that we're seeing on the console has like certainly been above our expectations. We just launched it during SIGNAL. We've already talked about like some of the conversion rates. We've already talked about most customers kind of moving over to that console. And the console itself has a lot of attractive characteristics of which the free trials is one. As Thomas said a second ago, like it definitely allows customers to experiment with a bunch of different things. We guide them through those experiences based on what their stated use cases is -- use cases are, excuse me. And then I think what we're more encouraged about over time is that based on the way that the console is architected and based on the way that we guide the experience, it's our expectation that, that would certainly allow for better cross-sell and upsell adoption over time, and that's kind of what we're expecting will happen over time. Operator: I am showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Before you buy stock in Twilio, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Twilio wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $400,209!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,375,393!* Now, it’s worth noting Stock Advisor’s total average return is 964% — a market-crushing outperformance compared to 215% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 13, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Twilio. The Motley Fool has a disclosure policy. Twilio (TWLO) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Bandwidth Inc. BAND reported second-quarter results that exceeded expectations and raised its full-year 2026 outlook, giving investors a clearer test of whether AI-driven communications can become a larger contributor to enterprise growth and profitability. Revenue reached $220 million, up 22% year over year, while Adjusted EBITDA rose 27% to $28 million.The next step is execution. Bandwidth needs customers to move AI communications from early deployments into production and expand their usage. The company's five million-dollar-plus customer wins, Salesforce relationship and Bandwidth Build launch provide evidence of demand, but deployment timing and software adoption remain key variables. Bandwidth delivered $220 million of second-quarter revenue, a 22% year-over-year increase, while non-GAAP earnings were 37 cents per share. The quarter included a 2.8% EPS surprise and a 1.3% sales surprise, according to the supplied Zacks data. The combination of revenue growth and earnings execution is relevant to the AI strategy because it shows that customer demand is already translating into higher reported revenue and profit rather than remaining solely an adoption theme.Cloud communications revenues increased 12% to $152 million. Software Services revenues attached to Voice and Messaging grew 66% year over year, while the company said AI adoption can convert directly into revenues as usage scales. That usage-based model gives Bandwidth a way to monetize growing AI interactions without relying solely on seat or license expansion. Bandwidth Inc. price-consensus-eps-surprise-chart | Bandwidth Inc. Quote Bandwidth raised its full-year 2026 revenue outlook to $900-$910 million from $880-$900 million previously. At the midpoint, the new range represents 20% year-over-year growth. Adjusted EBITDA guidance increased to $123-$125 million compared with $119-$125 million previously, while non-GAAP EPS is projected at $1.71-$1.79.The raised outlook reflects the expected revenue ramp from recent enterprise wins and the margin benefits of Bandwidth's owned-and-operated global network as transaction volumes increase. The company has won 13 new million-dollar-plus annual contracts since the beginning of 2025, including seven in 2026 through the second quarter, providing a pipeline of phased deployments for future revenue. AI-related customer activity is becoming more visible in Bandwidth's bookings. All five million-dollar-plus customer wins and expansions in the second quarter included Maestro or AI services, spanning healthcare, insurance, financial services, hyperscalers and messaging.The Salesforce relationship provides another test. Salesforce selected Bandwidth as its exclusive critical infrastructure partner for voice and messaging within Agentforce Contact Center, and Bandwidth said the first traffic is already flowing across its platform. Revenue is expected to increase as customer deployments scale, leaving the pace of adoption as an important variable for the outlook. Bandwidth Build, introduced in June, has also generated early sign-ups and real traffic, but remains in an early phase of adoption. Bandwidth is not pursuing the AI communications opportunity alone. Twilio Inc. TWLO is also positioning its communications platform for AI-powered customer interactions, while Zoom Communications Inc. ZM is expanding AI-enabled contact center capabilities. The competitive landscape means Bandwidth must convert its network infrastructure, Maestro platform and enterprise relationships into sustained production usage.That competition also makes deployment timing important. AI communications can require integration, testing and customer workflow changes before usage reaches scale. Bandwidth therefore needs to demonstrate that recent wins translate into recurring traffic and software adoption while maintaining service reliability, pricing discipline and cost control. Bandwidth's non-GAAP gross margin improved 100 basis points to 59.4% in the second quarter. Adjusted EBITDA increased 27% to $28 million, while Adjusted EBITDA margin reached a record 18.3%. Free cash flow was $24 million.Management attributed part of the margin improvement to its owned-and-operated network and said higher transaction volumes allow the company to capture more incremental gross profit. The usage-based model also means software and platform innovations can begin contributing to cash flow as usage grows. Still, the pace of software attachment, customer deployment and cost discipline will determine how much of the AI-related revenue opportunity reaches the bottom line. The stock currently carries a Zacks Rank #3 (Hold). It has a Value Score of B, Growth Score of B, Momentum Score of B and VGM Score of A. These signals provide a constructive backdrop to the earnings-driven setup, but they do not eliminate the execution risks tied to AI adoption.The Zacks Style Scores complement the Zacks Rank by evaluating Value, Growth and Momentum characteristics, with the VGM Score combining the three styles. For a Zacks Rank #3 stock, the Style Score hierarchy still favors higher grades. BAND's A VGM Score and B individual scores support a measured view, while the Hold rating keeps the focus on whether stronger estimates, customer deployments and margin gains can persist. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bandwidth Inc. (BAND) : Free Stock Analysis Report Twilio Inc. (TWLO) : Free Stock Analysis Report Zoom Communications, Inc. (ZM) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Track your investments for FREE with Simply Wall St, the portfolio command center trusted by over 7 million individual investors worldwide. Twilio stock has delivered a very large 289.6% return over the past three years, yet both the Discounted Cash Flow (DCF) intrinsic value estimate and market multiples currently point to the shares trading at a premium to those fundamentals. Over the last three years Twilio has returned 289.6%, which raises the question of how much of the company’s growth story is already reflected in the price. Recent strong revenue growth can support higher expectations for Twilio, while any slowdown in customer engagement spending or weaker retention could quickly weigh on what investors are willing to pay. Across a broad set of checks Twilio scores just 1 out of 6 on valuation, which leans more expensive than bargain. The issue now is whether Twilio’s recent gains leave enough valuation cushion if growth or profitability trends do not keep supporting the current market price. Twilio delivered 144.5% returns over the last year. See how this stacks up to the rest of the IT industry. The Discounted Cash Flow (DCF) model estimates what Twilio is worth today based on projected future cash flows. Twilio currently generates last twelve month free cash flow of about $991.7 million, and the model assumes these cash flows continue to grow rather than shrink. On that basis, the 2 Stage Free Cash Flow to Equity model points to an intrinsic value of about $205 per share. Compared with the current share price, this implies the stock is around 17.6% above the DCF estimate, so Twilio screens as overvalued on this framework. Twilio’s recent Q2 FY26 earnings beat and double digit revenue growth help explain why the market is willing to pay more than the cash flow model supports at this point. On the DCF numbers presented, Twilio stock currently looks overvalued relative to its estimated intrinsic value. Our Discounted Cash Flow (DCF) analysis suggests Twilio may be overvalued by 17.6%. Discover 51 high quality undervalued stocks or create your own screener to find better value opportunities. Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Twilio. P/E is a useful cross check for Twilio because the company is now generating positive earnings that investors can compare with other IT stocks. Twilio currently trades on a P/E of about 31.9x, which sits well above the broader IT industry average of roughly 19.0x and also above the modelled fair P/E of about 23.0x. On this measure, Twilio stock carries a clear premium. The gap between the current 31.9x and the fair 23.0x suggests investors are paying up for the earnings profile and perceived quality of the business, rather than getting Twilio at an earnings based discount. On the P/E multiple, Twilio appears expensive relative to the level suggested by its earnings profile and sector benchmarks. See what the numbers say about this price — find out in our valuation breakdown. Simply Wall St Narratives for Twilio pick up where the valuation puzzle leaves off and spell out which future paths for Twilio's growth, margins and earnings would make the stock look meaningfully higher or lower than today’s price. Instead of stopping at a single output from a ratio or model, they describe the future conditions that figure relies on so you can watch how Twilio's actual progress compares over time. These are available on Simply Wall St's Community page. Community views on Twilio sit far apart, with one camp seeing meaningful upside and another arguing expectations already look stretched. Bull case: 14% undervalued Read the full Bull Case to see why Twilio could be undervalued Bear case: 85% overvalued Read the full Bear Case to see why Twilio could be overvalued Do you think there's more to the story for Twilio? Head over to our Community to see what others are saying! For now, both the Discounted Cash Flow (DCF) intrinsic value estimate and the earnings multiple view point in the same direction. Twilio screens as overvalued on cash flow and on P/E relative to sector benchmarks, with broader checks also leaning weak. That does not rule out further gains, but it leaves less room for disappointment. The key question from here is whether Twilio can sustain revenue growth and margin progress strongly enough to keep justifying a premium valuation without much cushion. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include TWLO. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Interested in Twilio Inc.? Here are five stocks we like better. Twilio delivered strong Q2 growth: Revenue rose 22% year over year to $1.5 billion, while non-GAAP operating income reached $285 million and free cash flow totaled $353 million. Messaging, voice and software add-ons all contributed, with voice AI demand showing broad-based traction. AI and platform expansion are becoming key growth drivers: Twilio launched its next-generation conversational platform and redesigned Console, which has generated more than a 90% increase in conversion versus the prior experience. Management expects these tools to support future cross-selling and wider adoption of AI-enabled customer interactions. Twilio raised its full-year outlook despite carrier-fee pressure: Organic revenue growth guidance increased to 13%–13.5%, while non-GAAP operating income and free-cash-flow guidance rose to $1.135 billion–$1.155 billion. Incremental U.S. carrier fees reduced reported margins, but the company said they do not affect gross-profit dollars, operating-income dollars or free cash flow. Why Twilio Is Rallying While the Rest of SaaS Struggles Twilio (NYSE:TWLO) reported second-quarter 2026 revenue of $1.5 billion, up 22% year over year on a reported basis and 17% on an organic basis excluding incremental U.S. carrier pass-through fees. The communications platform company said its results reflected strong volumes, customer additions and growth across messaging, voice and software products. Chief Executive Officer Khozema Shipchandler called the quarter “exceptional,” citing $285 million in non-GAAP income from operations and $353 million in free cash flow. Non-GAAP gross profit rose 18% year over year to $736 million, marking the company’s fifth consecutive quarter of accelerating non-GAAP gross-profit growth, according to Chief Financial Officer Aidan Viggiano. → No Hangover: Revisiting Microsoft One Week After Earnings 3 AI and Cloud Stocks With Analyst Conviction and Long Runways Messaging revenue grew 28% year over year, aided by strong volumes and growth in WhatsApp and Rich Communication Services, or RCS. Viggiano said incremental carrier fees accounted for roughly 10 percentage points of messaging growth. Excluding those fees, messaging grew approximately 18%, she said during the question-and-answer session. Voice revenue growth exceeded 20% year over year, supported by both usage volumes and software add-ons. Twilio said Branded Calling and Conversational Intelligence each posted triple-digit growth. Total software add-on revenue rose more than 25%, led by Verify, which grew more than 30%. → MarketBeat Week in Review – 08/03 - 08/07 Twilio, Braze: The Top 2 CEP Platforms to Own in 2025 Twilio’s dollar-based net expansion rate was 116% in the quarter. Incremental carrier fees contributed about five percentage points to that figure, Viggiano said, though she added that expansion improved sequentially even excluding the fee effect. The company also cited accelerating revenue growth from customers using multiple Twilio products. Chief Revenue Officer Thomas Wyatt said demand for voice artificial-intelligence capabilities was broad-based across enterprise customers, large independent software vendors and AI-native companies. He highlighted a horizontal conversational AI customer that grew into a $6 million annual run-rate customer and a vertical conversational AI company that reached a $9 million run rate after initially beginning with Twilio’s voice services. → Why the Landlord of the AI Boom Could Outlast the Chipmakers At its SIGNAL user conference, Twilio announced general availability of its next-generation platform, including Conversation Memory, Conversation Orchestrator, Conversation Intelligence, Conversation Relay and Agent Connect. Shipchandler said the products are intended to help businesses manage context-rich customer conversations involving both human representatives and AI agents. He pointed to automotive fintech company Car Finance 247, which joined Twilio’s private beta program and later signed a seven-figure deal to use the Conversations Layer. Its AI assistant, Carla, has handled nearly 300,000 customer conversations, Shipchandler said. Customers interacting with Carla convert to approved leads 1.6 times faster, which the company said has created a multimillion-dollar annual revenue uplift across the customer’s business. Twilio also launched a redesigned Console in May. The company said the platform provides a centralized interface for managing Twilio workloads, includes AI-guided onboarding and offers trials designed to encourage product experimentation. A majority of existing customers have migrated to the new Console, and Shipchandler said Twilio has seen more than a 90% uplift in conversion compared with the prior experience. Wyatt said the conversion metric reflects reduced friction in the process of signing up, launching initial campaigns and establishing workloads. While the Console had little impact on multi-product revenue during the second quarter because of its recent launch, Twilio expects its free credits and integrated product experience to support future cross-sell and upsell activity. Twilio incurred $71 million in incremental U.S. carrier pass-through fees during the quarter. The fees reduced non-GAAP gross margin to 49.1%, down 160 basis points from a year earlier and 50 basis points sequentially. Without the incremental fees, non-GAAP gross margin would have increased 60 basis points year over year and 30 basis points from the prior quarter, Viggiano said. Non-GAAP operating margin was 19%, up 100 basis points year over year but down 80 basis points sequentially. The carrier fees represented an estimated 90-basis-point headwind to the quarterly operating margin. Twilio said the fees do not affect gross-profit dollars, operating-income dollars or free-cash-flow dollars, though they affect reported margin rates and create cost pressure for customers, particularly smaller businesses. GAAP income from operations was $85 million and included a $33 million prepaid asset impairment. GAAP net income also benefited from a one-time, non-cash $944 million release of a valuation allowance against certain U.S. federal and state deferred tax assets. Twilio said neither item affected its non-GAAP results. For the third quarter, Twilio initiated revenue guidance of $1.505 billion to $1.515 billion, representing reported growth of 16% to 16.5% and organic growth of 11% to 12%. The outlook includes an expected $56 million in incremental U.S. carrier fees. Full-year organic revenue growth guidance was raised to 13% to 13.5%, from 9.5% to 10.5% previously. Full-year reported revenue growth guidance was raised to 18% to 18.5%, from 14% to 15% previously. Full-year non-GAAP income from operations guidance was raised to $1.135 billion to $1.155 billion. Full-year free-cash-flow guidance was also raised to $1.135 billion to $1.155 billion. Twilio expects full-year non-GAAP gross-profit growth to be similar to its organic revenue growth rate. The company’s full-year outlook assumes about $250 million of incremental U.S. carrier pass-through revenue. It also expects those fees, all else equal, to lower its full-year 2026 non-GAAP gross margin by about 210 basis points compared with 2025. During the quarter, Twilio repurchased $66 million of shares and had roughly $800 million remaining under its current authorization. Shipchandler said the company views AI-related demand as being in “very early innings,” with the most visible activity currently in voice, while expecting AI-enabled interactions to expand across additional channels over time. Twilio Inc (NYSE: TWLO) is a cloud communications platform-as-a-service (CPaaS) company that enables developers and enterprises to embed communications into web and mobile applications. Its core offering is a suite of programmable APIs that handle messaging (SMS, MMS, and chat), voice calling, video, and user authentication. Twilio's platform is designed to help businesses build customer engagement and communication workflows without managing telecommunications infrastructure directly. The company's product portfolio includes programmable voice and messaging APIs, Twilio Video for real‑time video applications, and Twilio Authy for multi‑factor authentication. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Twilio Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Twilio TWLO) shares have surged to a new all-time high of $254 a share after the cloud communications company delivered a strong Q2 report yesterday evening, highlighted by accelerating organic growth, robust cash generation, and another increase to its full-year outlook. TWLO has soared 30% in Friday's trading session following the results, extending what had already been a strong run for the customer-engagement software provider. The rally reflects growing optimism that Twilio's improved execution, expanding profitability and positioning in communications infrastructure for artificial intelligence applications can sustain its recent momentum. Still, after such a sharp post-earnings move, investors have to decide whether Twilio's improving fundamentals justify chasing the rally or whether the stock's valuation now warrants more caution. Image Source: Zacks Investment Research Twilio reported Q2 revenue of roughly $1.5 billion, increasing 22% from the year-ago period and topping estimates of $1.42 billion by 5%. Organic revenue growth reached 17%, showing a notable acceleration in Twilio’s underlying business. Adjusted earnings came in at $1.47 per share, up more than 23% from $1.19 in the prior-year quarter and beating Q2 EPS expectations of $1.32 by 11%. Profitability also continued to improve. Non-GAAP income from operations increased 29% year over year to $284.6 million, translating into a 19% operating margin compared with 18% a year earlier. Furthermore, GAAP operating income more than doubled to $84.5 million from $37 million in the prior-year period. The combination of faster sales growth and expanding operating profits is particularly encouraging. To that point, Twilio spent the past several years transitioning from a growth-at-all-costs story toward one emphasizing profitable expansion, and the latest quarter provides further evidence that those efforts are paying off. Image Source: Zacks Investment Research Twilio's cash generation was another highlight from the quarter. Net cash provided by operating activities reached $372.4 million, while free cash flow climbed to $352.6 million from $263.5 million in Q2 2025. Free cash flow represented more than 23% of quarterly revenues. That improving cash profile gives Twilio considerably more flexibility to invest in its platform while returning capital to shareholders. The company repurchased $66 million of its common stock during the second quarter and has now completed approximately $1.2 billion of repurchases under its $2 billion authorization, leaving $826 million available as of the end of June. Meanwhile, customer spending trends strengthened. Twilio's Dollar-Based Net Expansion Rate (DBNER) improved to 116% from 108% in the year-ago quarter, suggesting existing customers are expanding their spending at a healthier pace. Perhaps more important than the second-quarter beat was management's increasingly optimistic outlook. For the third quarter, Twilio expects revenues between $1.505 billion and $1.515 billion, representing 16%-16.5% growth. Organic revenue growth is projected at 11%-12%. Management also expects non-GAAP operating income of $285-$295 million and adjusted earnings of $1.42-$1.47 per share. Twilio also substantially increased its full-year expectations for fiscal 2026. Management now projects reported revenue growth of 18%-18.5%, up sharply from its previous forecast of 14%-15%. Organic revenue growth is expected to reach 13%-13.5%, compared with the prior forecast of 9.5%-10.5%. Twilio increased its non-GAAP operating income forecast to $1.135-$1.155 billion from $1.08-$1.1 billion and raised its free cash flow outlook to the same $1.135-$1.155 billion range. Accelerating growth and upward revisions to profitability and cash-flow expectations help explain why investors reacted so enthusiastically to the report, with Twilio’s outlook coming in pleasantly above Wall Street’s forecast. Artificial intelligence represents another potential catalyst for Twilio. The company is positioning its communications infrastructure to connect businesses not only with human customers but increasingly with AI agents. Twilio's platform spans messaging, voice, email and customer data, potentially giving it an important role as businesses deploy AI-powered customer-service and engagement applications. Voice appears particularly promising. Recent industry analysis points to strong growth in Twilio's voice business and increasing traction for AI-powered communications products. The opportunity is significant because conversational AI applications still need communications infrastructure to connect agents with customers through phone calls, messaging, and other channels. Rather than AI simply threatening traditional software providers, Twilio could emerge as one of the infrastructure beneficiaries if AI agents substantially increase the volume of digital interactions between companies and their customers. The biggest concern following Q2 isn't necessarily Twilio's fundamentals. It's the price investors now have to pay for them. The rally pushed Twilio stock well above the current average analyst price target tracked by Zacks, which stands at $218.31, although individual targets range as high as $300. Of course, analyst price targets could be revised higher following Twilio’s better-than-expected Q2 report and raised guidance. Image Source: Zacks Investment Research That said, Twilio's valuation presents a somewhat mixed picture following the rally. TWLO is trading at roughly 69X forward earnings, which is noticeably above its Zacks Internet-Software Industry average of about 31X. That premium suggests investors are paying heavily for Twilio's improving growth and earnings outlook. However, the valuation looks considerably more reasonable from a sales perspective. TWLO is trading at 5X forward sales, which is near the Internet-Software industry's comparable multiple. Image Source: Zacks Investment Research Of course, there are other factors worth watching. Twilio's non-GAAP gross margin was 49% in Q2 compared with 51% a year earlier, despite an 18% increase in non-GAAP gross profit. Growth comparisons could also become tougher going forward, meaning Twilio will need to demonstrate that its current acceleration can persist. After a 30% post-earnings rally, even solid execution may not be enough if investors start demanding another round of outsized beats and guidance increases. Still, Twilio's investment case is substantially stronger when revenue acceleration, operating leverage, free cash flow and AI-related opportunities are considered together. Although the 30% post-earnings surge makes TWLO less attractive from a valuation standpoint, Twilio's improving outlook, strong cash generation, accelerating organic growth and potentially expanding role in AI-driven communications support the longer-term bull case. Investors chasing the stock immediately after such a dramatic move should recognize the possibility of near-term volatility. Nevertheless, Twilio stock is currently sporting a Zacks Rank #2 (Buy) based on what was already a pleasant trend of earnings estimate revisions. For now, investors with a longer-term horizon may still want to consider TWLO after its Q2 breakout, although those concerned about chasing a sharp earnings-driven rally may prefer to build a position gradually or look for a more favorable entry point. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Twilio Inc. (TWLO) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Twilio (TWLO) came out with quarterly earnings of $1.47 per share, beating the Zacks Consensus Estimate of $1.32 per share. This compares to earnings of $1.19 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +11.36%. A quarter ago, it was expected that this company would post earnings of $1.27 per share when it actually produced earnings of $1.5, delivering a surprise of +18.11%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Twilio, which belongs to the Zacks Internet - Software industry, posted revenues of $1.5 billion for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 5.35%. This compares to year-ago revenues of $1.23 billion. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Twilio shares have added about 35.8% since the beginning of the year versus the S&P 500's gain of 12.8%. While Twilio has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Twilio was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $1.37 on $1.46 billion in revenues for the coming quarter and $5.64 on $5.81 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Internet - Software is currently in the top 44% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, Allot Communications (ALLT), has yet to report results for the quarter ended June 2026. The results are expected to be released on August 12. This internet protocol services company is expected to post quarterly earnings of $0.06 per share in its upcoming report, which represents a year-over-year change of +100%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Allot Communications' revenues are expected to be $27.96 million, up 16.3% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Twilio Inc. (TWLO) : Free Stock Analysis Report Allot Ltd. (ALLT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research