Summary
Twilio reported second quarter fiscal 2023 revenue of $1.04 billion, up 10% from the prior-year quarter. Gross profit was $505.8 million, up 13.6%. The company posted a GAAP loss from operations of $141.8 million, a 55% improvement from the prior-year quarter, and a GAAP net loss that narrowed to $166.2 million. GAAP diluted loss per share narrowed to $0.91. Gross margin was 48.7%, up from the prior-year quarter, and operating margin improved to negative 13.7% from the prior-year quarter.
For the first six months of fiscal 2023, revenue was $2.04 billion, up 12.4% from the prior-year period. Gross profit was $996.4 million, up 14.5%. The year-to-date GAAP loss from operations was $405.9 million, a narrower loss than the prior-year period. The year-to-date GAAP net loss was $508.3 million, also narrower. GAAP diluted loss per share was $2.75, narrower than the prior-year period.
The non-GAAP picture was profitable. Non-GAAP income from operations was $120.1 million, compared with a non-GAAP loss from operations of $7.3 million in the second quarter of 2022. Non-GAAP diluted earnings per share was $0.54, compared with a non-GAAP loss per share of $0.11 in the prior-year quarter. Non-GAAP gross margin was 52%, up from 51%. The difference between GAAP and non-GAAP results is still wide, with stock-based compensation, amortization of acquired intangibles, restructuring costs, and impairment charges accounting for most of the gap.
Operational metrics were mixed. Active Customer Accounts rose to more than 304,000 as of June 30, 2023, from more than 275,000 a year earlier. The Dollar-Based Net Expansion Rate was 103% for the second quarter, down from 123% in the prior-year quarter. Communications Dollar-Based Net Expansion Rate was 103%, while Data Applications was 99%. Communications revenue grew 10% and Data Applications revenue grew 12%. Employee headcount was 6,428 as of June 30, 2023. The company also completed the divestiture of its IoT business in June 2023 and sold its ValueFirst business in July 2023, moves that will affect future comparisons.
Cash flow turned positive in the quarter. Operating cash flow was $83.65 million, an improvement from the prior-year quarter. For the first six months of fiscal 2023, operating cash flow was negative $14.22 million, an improvement from the prior-year period. Deferred revenue was $139.40 million, up 1.2% from the prior-year quarter. Remaining performance obligations were $123.40 million, down 12.4%. Twilio continued its share repurchase program and has completed 50% of its $1.0 billion authorization.
Guidance points to slower top-line growth. For the third quarter of fiscal 2023, Twilio guided revenue of $980 million to $990 million, with year-over-year growth of 0% to 1% and organic growth of 3% to 4%. The company guided third quarter non-GAAP income from operations of $75 million to $85 million and non-GAAP diluted earnings per share of $0.33 to $0.37 on 183 million non-GAAP weighted average diluted shares. For the full fiscal year 2023, Twilio raised its non-GAAP income from operations guidance to $350 million to $400 million.
Risks include macroeconomic and geopolitical conditions, foreign exchange volatility, inflation, labor market constraints, customer demand and spending, competition, regulatory compliance, network service provider fees, and the company's ability to execute its cost-saving initiatives and operating model changes. The decline in the Dollar-Based Net Expansion Rate to 103% and the Data Applications rate of 99% suggest that expansion from existing customers has softened, even as the customer base grows.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.04B | $1.01B | +3.1% | $943.4M | +10.0% |
| Gross profit | $505.8M | $490.7M | +3.1% | $445.3M | +13.6% |
| Gross margin | 48.7% | 48.8% | -0.0 pp | 47.2% | +1.5 pp |
| Research & development | $226.9M | $238.6M | -4.9% | $279.6M | -18.9% |
| Sales & marketing | $261.6M | $259.9M | +0.7% | $335.0M | -21.9% |
| General & administrative | $134.9M | $112.6M | +19.8% | $142.6M | -5.5% |
| Total operating expenses | $647.6M | $754.8M | -14.2% | $757.2M | -14.5% |
| Operating income (loss) | -$141.8M | -$264.1M | +46.3% | -$311.9M | +54.5% |
| Operating margin | -13.7% | -26.2% | +12.6 pp | -33.1% | +19.4 pp |
| Net income (loss) | -$166.2M | -$342.1M | +51.4% | -$322.8M | +48.5% |
| Net margin | -16.0% | -34.0% | +18.0 pp | -34.2% | +18.2 pp |
| Diluted EPS | -$0.91 | -$1.84 | +$0.93 | -$1.77 | +$0.86 |
Risks
Global macroeconomic uncertainty, inflation, banking sector volatility and recession risk have constrained customer budgets, causing delayed sales cycles, reduced usage, lower renewal rates and payment delays. Twilio also cited the February 2023 bankruptcy reorganization of customer Oi SA, which exposed it to collection and revenue risk.
Enterprise and regulated customer sales are complex and require multiple approvals, extended pricing negotiations and higher support costs. MD&A reported total revenue growth of 10% for Q2 2023, down from 41% in the prior-year quarter, as customers delayed or reduced spending.
A majority of revenue is usage-based and most customers lack long-term commitments, so they can reduce or cease usage without penalty. Dollar-Based Net Expansion Rate was 103% for Q2 2023 versus 123% in the prior-year quarter, and the Data & Applications rate was 99%, indicating contraction among that cohort.
Twilio cut about 11% of its workforce in September 2022 and another 17% in February 2023, and reorganized into Communications and Data & Applications segments. The filing warns of unintended attrition, lower morale, loss of institutional knowledge, reduced sales coverage, reliance on self-service, cross-selling failures and possible future goodwill impairment.
Twilio began blocking U.S.-bound A2P SMS and MMS messages from unregistered 10DLC phone numbers on July 5, 2023, with complete blocking after August 31, 2023. The company said this could reduce volume and revenue in its messaging products.
Twilio relies on network service providers whose fees may change daily or weekly and has absorbed or passed through new A2P SMS carrier fees. Passing fees through increases Communications revenue and cost of revenue but negatively impacts gross margins.
The 10 largest Active Customer Accounts generated 11% of total revenue in Q2 2023, compared with 12% in the prior-year quarter. Loss of or reduced spending by large customers could harm results.
Twilio faces intense competition for skilled personnel and has experienced high senior management attrition. The workforce reductions and actual or perceived decline in equity value may make it harder to hire, retain and motivate employees.
Twilio reserved $31.8 million for domestic tax exposures and $20.5 million for non-U.S. jurisdictions as of June 30, 2023. San Francisco assessed $38.8 million including interest and penalties, exceeding the $11.5 million accrued; Twilio paid the full amount and is litigating the assessment.
Twilio repurchased $495.0 million, or 8.3 million shares, under its $1.0 billion share repurchase program in the six months ended June 30, 2023, leaving about $505.0 million available. The program may fail to enhance long-term stockholder value and reduces cash available for other uses.
SaaS KPIs
All quarters →Dollar-Based Net Expansion Rate
Non-GAAP Gross Margin
Non-GAAP Operating Margin
Active Customer Accounts
Communications Dollar-Based Net Expansion Rate
Non-GAAP Income from Operations
Communications Active Customer Accounts
Summary, forecast, risks and KPIs are extracted from TWILIO INC's SEC filings for Q2 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.