Twilio NYSE: TWLO reported third-quarter revenue growth that exceeded its guidance range, citing broad-based demand across messaging, voice, software add-ons, self-service and independent software vendor customers. The company also raised its full-year outlook for revenue, operating income and free cash flow while offering preliminary 2027 targets above its previous long-term framework.
Chief Executive Officer Khozema Shipchandler said the company is positioned to benefit from early adoption of artificial intelligence-driven communications, particularly voice AI and consumer-facing agents. He said Twilio’s infrastructure, data capabilities and communications channels can help businesses deploy AI tools while maintaining trust, identity verification and integration with existing technology systems.
“We are in the very early stages of an AI super cycle,” Shipchandler said. “Voice and consumer AI have gained early traction, but penetration is still extremely low.”
Third-Quarter Results
Chief Financial Officer Aidan Viggiano said Twilio generated record revenue of $1.56 billion in the third quarter, up 20% from a year earlier on a reported basis and 16% organically, excluding incremental U.S. carrier passthrough fees. Non-GAAP gross profit rose 18% to $768 million.
The company reported record non-GAAP income from operations of $326 million, up 39% year over year, and record free cash flow of $370 million. GAAP income from operations was $149 million, an increase of 263% from the prior-year period.
- Self-service revenue grew more than 30%.
- ISV revenue grew more than 20%.
- Messaging revenue increased 24% on a reported basis, aided by WhatsApp, RCS and carrier fees.
- Voice revenue grew more than 20%, supported by both higher volumes and software add-ons.
- Total software add-on revenue grew more than 25%.
- Support and services revenue increased 30%.
- Dollar-based net expansion rate was 114%, including roughly four percentage points from incremental carrier fees.
Non-GAAP gross margin was 49.2%, down 90 basis points from a year earlier but up 20 basis points sequentially. Viggiano said $53 million in incremental U.S. carrier passthrough fees weighed on the year-over-year margin comparison. Excluding those fees, non-GAAP gross margin would have risen 80 basis points from the prior year.
Twilio repurchased $127 million of shares during the quarter and had about $700 million remaining under its current repurchase authorization. Stock-based compensation represented 9.9% of revenue, down 230 basis points from a year ago.
AI and Voice Strategy
Shipchandler said Twilio’s Conversations product layer, which includes offerings such as Conversation Relay and Conversation Intelligence, is gaining traction as enterprises build AI-enabled customer interactions. The company also launched an identity offering in private beta, designed to allow businesses to validate the identity of the entity represented by an AI agent across applications, channels and technology protocols.
Twilio expects to make the identity product generally available in 2027. Shipchandler said the company has not finalized pricing, though he expects a usage-based model and software-like gross-margin characteristics.
Management emphasized that voice AI remains underpenetrated. Shipchandler said AI accounts for roughly 1% of voice interactions, leaving substantial room for future adoption. He said regulated industries such as financial services, health care and insurance are still experimenting with AI, though those sectors could become significant sources of volume as deployments move into production.
Chief Operating Officer Thomas Wyatt said self-service voice revenue grew more than 50%, calling it a leading indicator for channel adoption. He said many AI-native customers initially adopt programmable voice services, then add messaging, WhatsApp, branded calling and other products as their applications expand.
Wyatt also said voice AI proof-of-concept projects are increasingly moving into production. Twilio cited customer wins and expansions involving a health insurance provider, Chapter, Eltropy, ElevenLabs, Gong, HUGO BOSS, Meera AI, Rivian and Ushur.
The company said its first eight-figure Conversations deal involved a health insurer using Conversation Relay and real-time transcription capabilities. It also highlighted a seven-figure expansion with Ushur, an AI-native platform used in health care, insurance and the public sector, and a seven-figure deal with Chapter to migrate its contact center to Twilio Flex.
Messaging Trends and Margin Considerations
During the question-and-answer session, Viggiano said organic messaging growth moderated to 17% in the third quarter from 18% in the second quarter. He attributed the slowdown primarily to tougher comparisons among ISV customers, noting that the ISV segment had accelerated above 20% growth in the third quarter of 2025.
Messaging remains Twilio’s largest business, accounting for about 60% of revenue, according to management. Viggiano said the category’s relatively lower structural gross margin can influence the company’s overall margin profile even as higher-margin software products expand.
Shipchandler said RCS has been a fast-growing product for Twilio and offers customers stronger branding capabilities and potentially better returns than traditional messaging. He characterized AI-related opportunities in email as early, while Viggiano said email growth remained consistent but below the companywide average.
Outlook Raised for 2026 and 2027
For the fourth quarter, Twilio projected revenue of $1.595 billion to $1.605 billion, representing reported growth of 17% to 17.5% and organic growth of 11% to 12%. The guidance includes an expected $75 million in incremental U.S. carrier fees.
The company expects fourth-quarter non-GAAP income from operations of $300 million to $310 million. Viggiano said fourth-quarter gross-profit growth is expected to be similar to organic revenue growth, reflecting higher hosting costs during the holiday shopping season and the absence of prior benefits from the company’s email cloud migration.
Twilio raised its full-year 2026 organic revenue growth outlook to 15% from its prior range of 13% to 13.5%. It raised its reported revenue growth outlook to 20% from 18% to 18.5%.
- Full-year 2026 non-GAAP income from operations is expected to be $1.19 billion to $1.20 billion.
- Full-year 2026 free cash flow is also expected to be $1.19 billion to $1.20 billion.
- Twilio expects at least 10% organic revenue growth in 2027.
- The company expects at least $1.35 billion in 2027 non-GAAP income from operations and free cash flow.
Twilio plans to provide further detail on its 2027 outlook when it reports fourth-quarter 2026 results. The company also said it will host an Investor Day in San Francisco on April 13 and 14, 2027, alongside its SIGNAL conference.
About Twilio (NYSE:TWLO)
Twilio Inc NYSE: TWLO provides a cloud-based customer engagement platform that enables businesses to communicate with customers through software and application programming interfaces (APIs). Its services support messaging, voice, video, email, authentication, contact centers and other digital interactions across mobile and web applications.
The company's products include programmable communications tools, Twilio SendGrid for email delivery, Twilio Verify for user authentication, Twilio Flex for cloud contact centers, and Twilio Segment for collecting and using customer data.
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