Summary
Twilio's second quarter revenue rose 13.5% year over year to $1.23 billion. Gross profit rose 8.4% to $602.74 million, but gross margin was 49.1%, down from the prior-year quarter. Operating income swung to a profit of $36.99 million. Net income swung to a profit of $22.42 million. Diluted EPS swung to a profit of $0.14. GAAP operating margin was 3.0%, up from the prior-year quarter.
Non-GAAP income from operations was $220.5 million, up 26% year over year, and non-GAAP operating margin was 18.0%. Non-GAAP gross margin was 50.7%. Non-GAAP operating expenses were $402.4 million. Non-GAAP net income attributable to common stockholders was $189.4 million. Non-GAAP diluted EPS was $1.19. Free cash flow was $263.5 million. Operating cash flow, a GAAP measure, rose 29.9% to $277.08 million. The company called the non-GAAP operating income and free cash flow records for the quarter. Communications generated $280.6 million in non-GAAP income from operations, up 12%, while Segment generated $6.0 million, up 138%.
Active Customer Accounts grew to more than 349,000 as of June 30, 2025 from more than 316,000 a year earlier. Dollar-Based Net Expansion Rate improved to 108% from 102%. Communications' net expansion rate was 109%, while Segment's was 95% because of churn and contraction. Deferred revenue was $148.00 million, up 6.7%. Remaining performance obligations were $158.80 million, up 4.1%. Usage-based fees represented 74% of revenue, up from 71%. The 10 largest Active Customer Accounts generated 9% of revenue, down from 10%. Revenue from Active Customer Accounts represented over 99% of total revenue. The company said deferred revenue is not a meaningful indicator of future revenue because few contracts require prepayment. Twilio repurchased $176.7 million of stock in the quarter under a $2.0 billion program that expires on December 31, 2027.
Management issued third-quarter guidance. For the quarter ending September 30, 2025, revenue is guided to $1,245-$1,255 million, with reported growth of 10%-11% and organic growth of 8%-9%. Non-GAAP income from operations is guided to $205-$215 million, and non-GAAP diluted EPS to $1.01-$1.06. The non-GAAP diluted EPS guidance assumes no impact from volatility of foreign exchange rates. For fiscal year 2025, Twilio raised its organic revenue target to 9%-10% year over year from 7.5%-8.5% and initiated a reported revenue target of 10%-11%. The company reiterated non-GAAP income from operations of $850-$875 million and raised free cash flow guidance to $875-$900 million from $850-$875 million.
Several risks temper the results. In June 2025, a major U.S. mobile carrier raised A2P messaging fees. Twilio passes those fees through at cost, so they add equal revenue and cost of revenue, but they create a modest headwind to gross margins. Other carriers may follow. Segment remains the softer part of the business, with a 95% net expansion rate and exposure to subscription renewals. Communications leans on usage-based fees, which can be volatile with consumer spending. The company's revenue is primarily usage-based, which can create variability and is more immediately impacted by changes in consumer spending than subscription revenue. Gross margin is also affected by the mix of U.S. and international messaging termination, and international messaging carries lower gross margins. Seasonal trends include increased consumer activity in the fourth quarter. The filings also cite intense competition, macroeconomic uncertainty, and execution risks around cost savings and go-to-market changes. Twilio operates in 180 countries and territories.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2025 | Q1 FY2025 | QoQ | Q2 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.23B | $1.17B | +4.8% | $1.08B | +13.5% |
| Gross profit | $602.7M | $581.6M | +3.6% | $555.8M | +8.4% |
| Gross margin | 49.1% | 49.6% | -0.5 pp | 51.4% | -2.3 pp |
| Research & development | $243.5M | $254.3M | -4.2% | $243.7M | -0.1% |
| Sales & marketing | $220.7M | $212.1M | +4.1% | $217.6M | +1.5% |
| General & administrative | $101.5M | $92.1M | +10.3% | $114.0M | -10.9% |
| Total operating expenses | $565.8M | $558.5M | +1.3% | $574.9M | -1.6% |
| Operating income (loss) | $37.0M | $23.1M | +60.3% | -$19.0M | +294.3% |
| Operating margin | 3.0% | 2.0% | +1.0 pp | -1.8% | +4.8 pp |
| Net income (loss) | $22.4M | $20.0M | +12.0% | -$31.9M | +170.4% |
| Net margin | 1.8% | 1.7% | +0.1 pp | -2.9% | +4.8 pp |
| Diluted EPS | $0.14 | $0.12 | +$0.02 | -$0.19 | +$0.33 |
Risks
A majority of revenue is usage-based, so adverse macroeconomic or political conditions can reduce customer usage, delay contract signings and renewals, and lower revenue growth more immediately than for subscription-based peers. MD&A states revenue is primarily usage-based and can vary with consumer spending and economic conditions.
In June 2025, a major U.S. mobile carrier increased network service provider fees for A2P messages; Twilio passes these through at cost, which does not affect gross profit but will create a modest headwind to gross margins going forward. Other U.S. carriers may follow and such fees may increase over time.
Segment revenue was nearly flat in Q2 FY2025 and the Segment Dollar-Based Net Expansion Rate was 95% due to churn and contraction among existing customers, partially offset by new Segment customer additions. Continued churn or contraction could limit growth in the Segment reportable segment.
Twilio is investing in AI and contextual data products, but faces intense competition and rapidly changing technology. Failure to develop market-accepted enhancements, including AI features, or a shift away from one-time passwords could reduce revenue.
As Twilio focuses more on enterprise sales, including through Segment, it expects higher costs, longer and more complex sales cycles, and protracted pricing negotiations. Enterprise customers may not use products enough to justify acquisition costs or may demand price reductions that hurt gross margin.
Twilio has experienced high attrition among senior management and key employees, and past workforce reductions may cause unintended attrition, lower morale, and loss of institutional knowledge. Inability to attract or retain skilled personnel could delay financial and operational targets.
Twilio reserved $43.6 million on its June 30, 2025 balance sheet for potential indirect tax payments and is in discussions with certain jurisdictions regarding prior-period sales and other indirect taxes. Actual exposure could differ materially from current estimates.
As of June 30, 2025, Twilio carried $5.4 billion of goodwill and intangible assets, and it recorded a $285.7 million intangible asset impairment related to Segment in 2023. Adverse market conditions or changed assumptions could result in further impairment charges.
SaaS KPIs
All quarters →Dollar-Based Net Expansion Rate
Non-GAAP Gross Margin
Non-GAAP Operating Margin
Active Customer Accounts
Free Cash Flow Margin
Communications Dollar-Based Net Expansion Rate
Free Cash Flow
Non-GAAP Income from Operations
Segment Dollar-Based Net Expansion Rate
Organic Revenue Growth
Summary, forecast, risks and KPIs are extracted from TWILIO INC's SEC filings for Q2 FY2025 (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.