Summary
Twilio's third quarter revenue reached $1.134 billion, up 9.7% from a year earlier. Communications accounted for $1.060 billion of that total, also up 10%, while Segment revenue of $73.4 million was flat year over year. Customer counts kept climbing, with more than 320,000 Active Customer Accounts at September 30, 2024 versus more than 306,000 a year earlier. The Dollar-Based Net Expansion Rate was 105%, compared with 101% in the third quarter of 2023. The two units diverge under the surface. Communications net expansion was 106% on strength in existing accounts. Segment's was 91% as churn and contraction cut into subscription spending.
Profitability was the bigger story. GAAP loss from operations of $4.9 million narrowed sharply from the prior-year quarter, and the operating margin of -0.4% improved by 10.1 percentage points. Gross margin of 51.0% rose 1.1 percentage points. Non-GAAP income from operations climbed to $182.4 million from $136.4 million, and non-GAAP operating margin reached 16.1%. Non-GAAP diluted earnings per share came in at $1.02, against $0.58 a year earlier. GAAP results still show red ink: a net loss of $9.7 million, or $0.06 per diluted share, though that loss narrowed from the prior-year quarter. Year to date, revenue of $3.26 billion was up 6.0%, and the net loss of $96.9 million narrowed from the prior-year period.
Segment remains the fixer-upper. Its non-GAAP loss from operations was $15.8 million, narrowed by about $1.9 million, or 11%, from a year earlier, while Communications non-GAAP income from operations rose 21% to $267.8 million. Management flagged two headwinds for the fourth quarter. Moving part of Segment's architecture to a new infrastructure provider will create overlapping vendor expenses that hurt Segment gross margins. The wind-down of the Zipwhip software business will weigh on revenue growth. Both items are expected to clear by the end of 2024. Twilio also introduced a company-wide annual cash bonus program in 2024 that shifts pay away from equity. The program cost $45.8 million in the third quarter and $94.4 million in the first nine months, including $17.9 million in the quarter tied to a higher anticipated payout as the company raised its outlook for full-year performance metrics. The accrued bonus liability was $70.2 million at September 30, 2024.
Cash generation was steady but not higher. Operating cash flow of $204.3 million in the quarter was down 1.0% from a year earlier, although the year-to-date figure of $607.8 million rose 216.2%. Free cash flow, a non-GAAP measure, was $189.1 million compared with $195.2 million in the prior-year quarter. Capital returns continue to absorb most of the cash. Twilio repurchased $633.0 million of stock in the quarter and $1.9 billion in the first nine months, leaving $412.0 million authorized as of September 30, 2024 under programs that expire December 31, 2024. The company said it has completed more than $2.7 billion of aggregate repurchases and aims to finish the remaining authorization before the end of 2024. Deferred revenue of $138.8 million was down 4.9% from a year earlier, while remaining performance obligations of $148.1 million rose 15%.
Guidance points to slower growth but more profit. For the fourth quarter, Twilio guided revenue of $1,150 million to $1,160 million, growth of 7% to 8%, non-GAAP income from operations of $185 million to $195 million, and non-GAAP diluted earnings per share of $0.95 to $1.00. For the full year 2024, the company raised non-GAAP income from operations guidance to $700 million to $710 million from $650 million to $675 million, lifted organic revenue growth guidance to 7.5% to 8% from 6% to 7%, and set free cash flow guidance of $650 million to $675 million. Risks in the filing include macroeconomic uncertainty and volatile consumer spending that hits usage-based revenue, an intensely competitive market, and network service provider fees. One customer, Brazil's Oi SA, is in bankruptcy proceedings. Twilio carries $6.4 million of pre-petition receivables net of $8.8 million in reserves and $10.8 million of post-petition receivables. Any failure by Oi SA to pay could mean more bad debt or lower revenue ahead.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.13B | $1.08B | +4.7% | $1.03B | +9.7% |
| Gross profit | $578.6M | $555.8M | +4.1% | $516.3M | +12.1% |
| Gross margin | 51.0% | 51.4% | -0.3 pp | 50.0% | +1.1 pp |
| Research & development | $260.9M | $243.7M | +7.1% | $241.7M | +8.0% |
| Sales & marketing | $212.6M | $217.6M | -2.3% | $262.9M | -19.1% |
| General & administrative | $106.3M | $114.0M | -6.7% | $114.1M | -6.8% |
| Total operating expenses | $583.5M | $574.9M | +1.5% | $625.2M | -6.7% |
| Operating income (loss) | -$4.9M | -$19.0M | +74.3% | -$108.9M | +95.5% |
| Operating margin | -0.4% | -1.8% | +1.3 pp | -10.5% | +10.1 pp |
| Net income (loss) | -$9.7M | -$31.9M | +69.5% | -$141.7M | +93.1% |
| Net margin | -0.9% | -2.9% | +2.1 pp | -13.7% | +12.9 pp |
| Diluted EPS | -$0.06 | -$0.19 | +$0.13 | -$0.78 | +$0.72 |
Risks
Macroeconomic uncertainty, inflation, geopolitical instability, and potential changes from the 2024 U.S. presidential election may cause customers to delay or reduce spending. Twilio notes that a majority of revenue is usage-based and more immediately impacted by consumer spending, which can make results more volatile.
Enterprise and Segment sales require multiple technical and business approvals, longer sales cycles, and higher costs. In the three months ended September 30, 2024, Segment revenue was flat versus the prior-year quarter and Segment Dollar-Based Net Expansion Rate was 91%, reflecting churn and contraction.
Twilio reduced its workforce by approximately 35% since September 2022 and may not achieve intended benefits; a smaller sales force increases reliance on self-service and may delay Segment sales growth. Restructuring costs were $3.7 million in the three months ended September 30, 2024, up 7% versus the prior-year quarter.
Revenue growth depends on existing customers increasing usage, but most usage-based customers have no long-term commitments and may reduce or cease usage at any time. Twilio's 10 largest Active Customer Accounts generated 10% of revenue in the nine months ended September 30, 2024, and Dollar-Based Net Expansion Rate has stabilized but may decline.
Twilio faces intense competition in Communications and Segment from larger CPaaS, SaaS, CRM, and CDP vendors, some with lower list prices. Pricing pressures and new technologies could reduce revenue, margins, or market acceptance of Twilio products.
The two-segment reporting structure and Segment operational review carry execution risk, and Twilio targets break-even non-GAAP Segment income from operations by Q2 2025 with no guarantee. Changes may also lead to goodwill impairment charges.
The Segment migration to a new infrastructure provider is expected to create overlapping expenses in Q4 2024 and negatively impact Segment gross margins, and the Zipwhip software wind-down is expected to negatively impact Q4 2024 revenue growth. Gross margin was 51.0% in the three months ended September 30, 2024, up 1.1 pp versus the prior-year quarter.
Reliance on network service providers and intermediaries, including A2P SMS fees, can raise costs and disrupt service; passing fees through typically increases Communications revenue and cost of revenue but hurts gross margins. International messaging termination also has lower gross margins.
The company depends on highly skilled personnel and experienced sales employees; it has experienced high senior management attrition and a CEO transition in January 2024. Reductions in force may harm morale, hiring, and retention, delaying business objectives.
Oi SA's Brazilian bankruptcy proceedings and reorganization plan expose Twilio to collection risk. As of September 30, 2024, Twilio had $6.4 million in pre-petition receivables net of $8.8 million in reserves and $10.8 million in post-petition receivables due from Oi SA.
As of December 31, 2023, Twilio had U.S. federal, state, and foreign net operating loss carryforwards of $3.4 billion, $2.6 billion, and $1.0 billion, respectively. Future ownership changes, tax law changes, or tax authority challenges could limit use of these NOLs and increase tax liabilities.
Twilio is investing in CustomerAI and AI/ML products, but new products may not achieve market acceptance and competitors may deliver comparable functionality at lower prices. Shifts in user authentication away from one-time passwords could also reduce revenue.
The new company-wide annual cash bonus program is expected to increase expenses in future periods. Twilio recorded $45.8 million of expense in the three months ended September 30, 2024, including an additional $17.9 million due to higher anticipated payout, and accrued $70.2 million as of September 30, 2024.
Twilio derived 35% of revenue from customer accounts outside the United States in the nine months ended September 30, 2024. International operations carry higher network fees, regulatory compliance costs, and lower messaging gross margins.
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
Summary, forecast, risks and KPIs are extracted from TWILIO INC's SEC filings for Q3 FY2024 (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.