Summary
Twilio closed its fiscal 2025 third quarter with revenue of $1.30 billion, up 14.7% from the prior-year quarter. Organic revenue growth was 13%. GAAP gross profit reached $632.08 million, up 9.2%. GAAP operating income was $40.95 million, a swing to profit from the prior-year quarter. GAAP net income was $37.25 million, also a swing to profit, and GAAP diluted EPS was $0.23, compared with a loss per share in the prior-year quarter. Gross margin was 48.6%, down 2.4 percentage points from the prior-year quarter. Operating margin was 3.1%, up from the prior-year quarter. The company generated $263.56 million of operating cash flow, up 29.0% year over year, and $247.5 million of free cash flow. Deferred revenue was $159.20 million, up 14.7%, while remaining performance obligations were $168.70 million, up 13.9%.
On a non-GAAP basis, income from operations was $234.5 million, up 29% year over year, and non-GAAP operating margin was 18.0%. Non-GAAP diluted EPS was $1.25. Active Customer Accounts exceeded 392,000 as of September 30, 2025, compared with more than 320,000 a year earlier. Dollar-Based Net Expansion Rate was 109%, compared with 105% in the prior-year quarter. The 10 largest Active Customer Accounts produced 9% of total revenue, down from 10%. Usage-based fees accounted for 75% of revenue, up from 72%. New Active Customer Accounts contributed $61.0 million of revenue, and incremental A2P fees added $20.2 million. Twilio ended the quarter with 5,541 employees.
The MD&A notes that a major U.S. carrier raised A2P fees in June 2025. Twilio passes those fees through at cost, so they add equal amounts to revenue and cost of revenue. That dynamic creates a modest headwind to gross margin. International messaging also carries lower gross margins than U.S. messaging. Management pointed to price actions, product mix, cloud and network provider costs, and foreign exchange as factors that can move gross margin.
Twilio repurchased $349.8 million of Class A common stock in the third quarter and $656.7 million in the first nine months of 2025. The board authorized a $2.0 billion repurchase program in January 2025, and about $1.3 billion remained available. The program runs through December 31, 2027. On October 30, 2025, Twilio agreed to acquire Stytch, an identity platform for AI agents, with the deal expected to close in mid-November.
For the fourth quarter of 2025, Twilio guided revenue to $1,310 million to $1,320 million, revenue growth of 9.5% to 10.5%, and organic revenue growth of 8% to 9%. Non-GAAP income from operations is expected at $230 million to $240 million, non-GAAP diluted EPS at $1.17 to $1.22, and non-GAAP weighted average diluted shares at 157 million. For the full fiscal year 2025, the company raised reported revenue growth guidance to 12.4% to 12.6%, organic revenue growth to 11.3% to 11.5%, non-GAAP income from operations to $900 million to $910 million, and free cash flow to $920 million to $930 million.
The filing highlights macroeconomic and political uncertainty, intense competition, cybersecurity breaches, changes in network service provider fees, carrier fee increases, foreign exchange swings, and execution risk around the Stytch acquisition. Twilio also depends on usage-based revenue, which can vary with consumer spending. The company's largest customers remain a concentration consideration, though the top 10 accounts fell to 9% of revenue. The guidance assumes no impact from foreign exchange volatility, and management did not provide a forward-looking GAAP reconciliation for non-GAAP targets.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2025 | Q2 FY2025 | QoQ | Q3 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.30B | $1.23B | +5.9% | $1.13B | +14.7% |
| Gross profit | $632.1M | $602.7M | +4.9% | $578.6M | +9.2% |
| Gross margin | 48.6% | 49.1% | -0.5 pp | 51.0% | -2.4 pp |
| Research & development | $262.3M | $243.5M | +7.7% | $260.9M | +0.5% |
| Sales & marketing | $220.6M | $220.7M | -0.0% | $212.6M | +3.8% |
| General & administrative | $108.2M | $101.5M | +6.6% | $106.3M | +1.7% |
| Total operating expenses | $591.1M | $565.8M | +4.5% | $583.5M | +1.3% |
| Operating income (loss) | $40.9M | $37.0M | +10.7% | -$4.9M | +936.7% |
| Operating margin | 3.1% | 3.0% | +0.1 pp | -0.4% | +3.6 pp |
| Net income (loss) | $37.2M | $22.4M | +66.1% | -$9.7M | +483.0% |
| Net margin | 2.9% | 1.8% | +1.0 pp | -0.9% | +3.7 pp |
| Diluted EPS | $0.23 | $0.14 | +$0.09 | -$0.06 | +$0.29 |
Risks
In June 2025 a major U.S. mobile carrier increased A2P SMS message fees, and the company passes these fees through at cost. This increases revenue and cost of revenue but not gross profit dollars and creates a modest headwind to gross margins going forward; reported gross margin was 48.6% in the quarter ended September 30, 2025, down 2.4 pp from 51.0% in the prior-year quarter.
In the quarter ended September 30, 2025, 75% of revenue was usage-based, compared with 72% in the prior-year quarter. Most usage-based customers have no long-term financial commitments and may reduce or cease usage at any time without penalty, so a lower Dollar-Based Net Expansion Rate would reduce revenue and revenue growth.
Global economic and political uncertainties, including tariffs, trade tensions, elevated interest rates, inflation, and the extended U.S. federal government shutdown, may reduce or delay customer spending. Because a majority of revenue is usage-based, the business may be more immediately and severely impacted than subscription-based models.
The company is subject to increasingly stringent privacy, data protection, and cybersecurity laws globally, including the GDPR, CCPA, and evolving AI rules such as the EU AI Act. Failure to comply or maintain valid cross-border data transfer mechanisms could lead to significant fines, processing bans, and loss of European or multinational customers.
The company is investing significant resources to combine communications products with contextual data and generative and predictive AI, and faces intense competition from larger and lower-priced rivals. If new products fail to achieve market acceptance or keep pace with changing technology, revenue growth and gross profits could be harmed.
Increasing focus on enterprise sales, including through Segment, may require more costly and sophisticated sales efforts, multi-stakeholder approvals, extensive customer education, and protracted pricing negotiations. Enterprise customers may demand price reductions as usage grows, which could pressure gross margin and lengthen sales cycles.
On October 30, 2025, the company entered a definitive agreement to acquire Stytch, Inc., an identity platform for AI agents, expected to close in Q4 2025. Integration may fail to achieve anticipated benefits, divert management attention, disrupt operations, or expose the company to unanticipated liabilities.
As of September 30, 2025, the company carried $5.4 billion of net goodwill and intangible assets. Adverse market conditions or changes in assumptions could result in an impairment charge, as happened with the approximately $285.7 million Segment intangible asset impairment recorded in 2023.
SaaS KPIs
All quarters →Dollar-Based Net Expansion Rate
Non-GAAP Operating Margin
Active Customer Accounts
Free Cash Flow Margin
Summary, forecast, risks and KPIs are extracted from TWILIO INC's SEC filings for Q3 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.