Summary
Twilio closed the third quarter of fiscal 2023 with revenue of $1.03 billion, up 5.2% from a year earlier, and gross profit of $516.3 million, up 11.7%. The company remained unprofitable on a GAAP basis, but losses narrowed sharply. Operating loss narrowed to $108.9 million from an operating loss of $457.0 million a year earlier. Net loss narrowed to $141.7 million from a net loss of $482.3 million. Diluted loss per share narrowed to $0.78 from $2.63. Gross margin was 50.0%, up from 47.0%, and operating margin was negative 10.5%, up from negative 46.5%. On a non-GAAP basis, income from operations was $136.4 million, compared with a non-GAAP loss from operations of $35.1 million. Non-GAAP diluted earnings per share was $0.58, compared with a non-GAAP loss per share of $0.27.
Operationally, Twilio said total organic revenue growth was 8% year over year and Communications organic revenue growth was also 8%. Active Customer Accounts rose to more than 306,000 as of September 30, 2023 from more than 280,000 a year earlier. The Dollar-Based Net Expansion Rate was 101%, compared with 122% a year earlier. Management attributed the lower rate to higher contraction and churn in Data Applications, where the Dollar-Based Net Expansion Rate was 96%. The company divested its ValueFirst business on July 3, 2023, and its results are excluded from the quarter and future periods.
Twilio reorganized into Communications and Data & Applications in February 2023. Communications houses Messaging, Voice and Email. Data & Applications houses Segment, Engage, Flex and Marketing Campaigns. Management reports non-GAAP gross profit by segment. The split is meant to let each unit focus on its own economics while sharing the underlying communications platform and customer base. The structure matters because Communications carries much of the revenue base, while Data & Applications faces higher contraction and churn. The company also announced that Elena Donio will resign as President, Twilio Data Applications, effective December 15, 2023. CEO Jeff Lawson will run the unit until a replacement is appointed.
Cash generation improved. Operating cash flow was $206.4 million in the quarter, up from negative $115.8 million a year earlier. Year to date, operating cash flow was $192.2 million, up from negative $195.9 million. Deferred revenue was $146.0 million as of September 30, 2023, up 7.7% from a year earlier, and remaining performance obligations were $128.8 million, up 5.5%. The company said its deferred revenue and customer deposits liability is not a meaningful indicator of future revenue because few contracts require prepayment. Twilio repurchased $56.0 million of Class A common stock in the quarter, or 0.9 million shares, and had completed over $620 million of repurchases under its $1.0 billion program, representing over 62% of the total authorization. The program expires on December 31, 2024.
For the fourth quarter, Twilio guided revenue to $1,030 million to $1,040 million, revenue growth of 1% to 2%, organic revenue growth of 4% to 5%, non-GAAP income from operations of $115 million to $125 million, and non-GAAP diluted earnings per share of $0.53 to $0.57. For the full fiscal year 2023, the company raised its non-GAAP income from operations guidance to $475 million to $485 million. The fourth-quarter outlook assumes 184 million non-GAAP weighted average diluted shares outstanding. Management pointed to its CustomerAI vision and a foundation for profitable growth. The filing lists several risks, including macroeconomic and geopolitical factors, changes in customer demand and spending, inflation, foreign exchange rate fluctuations, regulatory compliance costs, intense competition, network service provider fees, and the ability to attract and retain customers. Twilio also faces execution risk around its cost-saving initiatives, business reorganization, and the shift to a remote-first operating model. The gap between GAAP and non-GAAP results remains wide, with non-GAAP income from operations positive while GAAP operating loss still reflects large excluded costs.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.03B | $1.04B | -0.4% | $983.0M | +5.2% |
| Gross profit | $516.3M | $505.8M | +2.1% | $462.1M | +11.7% |
| Gross margin | 50.0% | 48.7% | +1.2 pp | 47.0% | +2.9 pp |
| Research & development | $241.7M | $226.9M | +6.5% | $284.7M | -15.1% |
| Sales & marketing | $262.9M | $261.6M | +0.5% | $328.8M | -20.1% |
| General & administrative | $114.1M | $134.9M | -15.4% | $135.3M | -15.7% |
| Total operating expenses | $625.2M | $647.6M | -3.5% | $919.1M | -32.0% |
| Operating income (loss) | -$108.9M | -$141.8M | +23.2% | -$457.0M | +76.2% |
| Operating margin | -10.5% | -13.7% | +3.1 pp | -46.5% | +36.0 pp |
| Net income (loss) | -$141.7M | -$166.2M | +14.7% | -$482.3M | +70.6% |
| Net margin | -13.7% | -16.0% | +2.3 pp | -49.1% | +35.4 pp |
| Diluted EPS | -$0.78 | -$0.91 | +$0.13 | -$2.63 | +$1.85 |
Risks
Macroeconomic uncertainty is constraining customer budgets and causing usage reductions, contract renegotiations and delayed payments. Twilio reported that its Dollar-Based Net Expansion Rate declined to 101% for Q3 2023 from 122% in Q3 2022, and Data & Applications Dollar-Based Net Expansion Rate was 96% due to higher contraction and customer churn. The company also cited Oi SA's bankruptcy filing as exposing it to collection risk on pre-petition receivables.
Twilio reduced its workforce by approximately 11% in September 2022 and by an additional approximately 17% in February 2023 under the February 2023 Plan. The filing warns of unintended employee attrition, damage to corporate culture and morale, loss of institutional knowledge, and reliance on a smaller sales force and self-service model to drive Communications sales. Cumulative restructuring expenses under the February 2023 Plan were $140.3 million in the nine months ended September 30, 2023.
In the second quarter of 2023 Twilio began gradually blocking U.S.-bound Application-to-Person SMS and MMS messages from unregistered 10-digit long code phone numbers, and effective August 31, 2023 it completely blocked any remaining unregistered A2P 10DLC message traffic. This change could reduce volume and revenue in its messaging products.
The reorganization into Twilio Communications and Twilio Data & Applications and the shift to two reportable segments may disrupt service, internal controls and sales execution. The filing also states that if investors or analysts do not understand the revised segment reporting structure, it could negatively affect their ability to understand the business and adversely affect the stock price.
Twilio expects to commit significant resources to developing new products and enhancements incorporating AI and ML. The filing states there is no guarantee that these investments and efforts will result in wider adoption of its products, and new technologies or competitors could render its products less competitive or obsolete.
Twilio has recorded indirect tax reserves of $32.2 million for domestic jurisdictions and $19.2 million for jurisdictions outside the United States as of September 30, 2023. San Francisco City and County assessed the company $38.8 million in taxes, including interest and penalties, which exceeded the $11.5 million previously accrued, and the settlement remains subject to approval.
Multiple major U.S. mobile carriers have introduced A2P SMS fees, and Twilio passes these fees through to customers, which typically increases Communications revenue and cost of revenue but negatively impacts gross margins. The filing states there is no guarantee that Twilio will continue to be able to respond to fee increases without a material negative impact to its business.
Twilio depends on highly skilled personnel, including co-founder and CEO Jeff Lawson, and has experienced high attrition among senior management and key employees. The September 2022 and February 2023 reductions in force may further impact its ability to hire, retain and motivate employees, which could delay or prevent the achievement of business objectives.
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
Communications Active Customer Accounts
Summary, forecast, risks and KPIs are extracted from TWILIO INC's SEC filings for Q3 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.