Summary
Twilio's fourth quarter delivered growth on the top line and larger losses below it. Revenue for the quarter ended December 31, 2023 rose 5.0% to $1.08 billion from $1.02 billion in the prior-year quarter. Gross profit climbed 10.4% to $531.17 million, and gross margin of 49.4% improved 2.4 percentage points from 47.0%. The operating line went the other way. The operating loss widened 65.5% to $361.73 million from $218.57 million, which pushed the operating margin down to -33.6% from -21.3%. Net loss widened 59.3% to $365.41 million from $229.42 million.
The full year looked better than the quarter. Fiscal 2023 revenue of $4.15 billion rose 8.6% from $3.83 billion, and gross profit of $2.04 billion rose 12.7%. Full-year gross margin was 49.2%, up from 47.4%. The full-year operating loss narrowed 27.3% to $876.54 million from $1.21 billion, and the net loss narrowed 19.2% to $1.02 billion from $1.26 billion. Diluted loss per share for the fiscal year was $5.54, an improvement from $6.86. Cash generation swung hard in the right direction: operating cash flow was $222.54 million in the fourth quarter versus negative $58.46 million a year earlier, and $414.75 million for the full year versus negative $254.37 million.
Customer metrics show a business still adding accounts but extracting less from them. Twilio finished 2023 with 305,000 Active Customer Accounts, up from 290,000 at the end of 2022, and the full-year Dollar-Based Net Expansion Rate slipped to 103% from 121% a year earlier. Communications, the larger of the two units, grew its revenue 9% and ended the year with over 297,000 Communications Active Customer Accounts. Segment revenue rose 7% and the unit ended with over 8,000 Segment Active Customer Accounts, though its Dollar-Based Net Expansion Rate was 97% after higher contraction and churn. Deferred revenue ended the quarter at $144.50 million, up 3.9% from $139.10 million, while remaining performance obligations of $144.00 million fell 6.8% from $154.50 million.
Leadership changed on January 8, 2024, when Twilio named Khozema Shipchandler chief executive, replacing co-founder Jeff Lawson, and appointed Jeff Epstein as board chair. The company also said it expected fourth quarter 2023 revenue, fourth quarter 2023 non-GAAP income from operations and full year 2023 non-GAAP income from operations to exceed the top end of the guidance ranges it issued on November 8, 2023, and it scheduled the full results for February 14, 2024. The 10-K reports full-year non-GAAP income from operations of $533.0 million, a non-GAAP operating margin of 13%, and non-GAAP gross margin of 53%. Communications produced $841.99 million in non-GAAP income from operations for the year, up 164%, while Segment recorded a non-GAAP loss from operations of $72.43 million, 144% wider.
Cost cutting and write-downs shaped the year. Twilio booked $165.7 million in restructuring costs during 2023, covering the February 2023 plan that removed about 17% of the workforce and a December 2023 plan that cuts roughly another 5%. It also recorded a $285.7 million impairment against Segment's developed technology and customer relationship intangible assets. Management named two 2024 headwinds. Winding down the video product and the software component of Zipwhip should drag on revenue growth, and moving part of Segment's architecture to a new infrastructure provider should weigh on Segment gross margins while vendor expenses overlap. Twilio ended 2023 with $655.9 million in cash and cash equivalents and $3.4 billion in short-term marketable securities. It repurchased $672.1 million of stock, or 11.3 million shares, during the year, leaving about $327.9 million available under an authorization that expires December 31, 2024.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2023 | Q3 FY2023 | QoQ | Q4 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.08B | $1.03B | +4.1% | $1.02B | +5.0% |
| Gross profit | $531.2M | $516.3M | +2.9% | $481.1M | +10.4% |
| Gross margin | 49.4% | 50.0% | -0.6 pp | 47.0% | +2.4 pp |
| Research & development | $235.6M | $241.7M | -2.5% | $274.1M | -14.0% |
| Sales & marketing | $238.6M | $262.9M | -9.2% | $296.3M | -19.5% |
| General & administrative | $107.0M | $114.1M | -6.2% | $125.1M | -14.5% |
| Total operating expenses | $892.9M | $625.2M | +42.8% | $699.7M | +27.6% |
| Operating income (loss) | -$361.7M | -$108.9M | -232.2% | -$218.6M | -65.5% |
| Operating margin | -33.6% | -10.5% | -23.1 pp | -21.3% | -12.3 pp |
| Net income (loss) | -$365.4M | -$141.7M | -157.9% | -$229.4M | -59.3% |
| Net margin | -34.0% | -13.7% | -20.3 pp | -22.4% | -11.6 pp |
| Diluted EPS | -$1.99 | -$0.78 | -$1.21 | -$1.25 | -$0.74 |
Risks
Macroeconomic uncertainty has caused some Communications customers to reduce or terminate usage and Segment customers to renegotiate contracts, lengthening sales cycles. The company notes that a majority of revenue is usage-based and may be more immediately and severely impacted by adverse macroeconomic conditions than SaaS subscription revenue.
Dollar-Based Net Expansion Rate declined to 103% for the year ended December 31, 2023 from 121% for the year ended December 31, 2022, and the Segment Dollar-Based Net Expansion Rate was 97% for 2023 due to higher contraction and customer churn. The filing warns this metric may continue to decline if customers are not satisfied or due to macroeconomic conditions.
Twilio reduced its workforce by approximately 5% in December 2023 after reductions of approximately 11% in September 2022 and approximately 17% in February 2023. The filing warns the restructuring may not achieve intended benefits and could cause employee attrition, culture damage, and reliance on self-service to drive Communications sales.
The company reorganized into Communications and Segment segments and is conducting an operational review of Segment expected to complete in March 2024. The filing warns these changes may disrupt operations, fail to realize anticipated benefits, or result in goodwill impairment.
In Q4 2023, Twilio recorded a $285.7 million aggregate impairment loss related to Segment developed technology and customer relationship intangible assets after identifying a change in Segment performance. The filing notes future changes to segment reporting could result in additional impairment charges.
In January 2024, co-founder Jeff Lawson resigned as CEO and Khozema Shipchandler was appointed CEO. The filing cites risks of strategy or culture changes and expenses related to the transition, and notes high attrition among senior management and key employees.
Twilio expects to commit significant resources to developing new products and enhancements incorporating AI and ML, with no guarantee of wider adoption. The company is migrating part of Segment's architecture to a new infrastructure provider in 2024 to scale AI-driven products, which is expected to negatively impact Segment gross margins until migration completes.
The filing states Twilio has experienced longer sales cycles when engaging with customers in industries hurt by macroeconomic conditions and that enterprise sales require multiple approvals, extensive education, and protracted pricing negotiations. The company is relying more on self-service capabilities after reducing its sales force.
Gross margin is impacted by network service provider fees, including A2P SMS fees, and hosting fees. The company warns that passing through increased fees raises revenue and cost of revenue but typically does not impact gross profit dollars and has a negative impact on gross margins.
Twilio is winding down its video product and the software component of its Zipwhip business in 2024, which it expects will negatively impact revenue growth rates in 2024. The company also expects the Segment infrastructure migration to create overlapping expenses for much of 2024.
Twilio's 10 largest Active Customer Accounts generated an aggregate of 10% of total revenue for the year ended December 31, 2023, down from 12% for the year ended December 31, 2022. The filing also cites exposure from Oi SA's February 2023 bankruptcy proceedings, including collection risk on pre-petition receivables.
Twilio reserved $18.0 million for domestic jurisdictions and $22.2 million for jurisdictions outside the United States on its December 31, 2023 balance sheet for indirect tax exposure. Changes in tax laws, including Pillar Two and Section 174 capitalization, may increase its effective tax rate and cash tax liability.
Twilio repurchased $672.1 million in aggregate value, or 11.3 million shares, under its $1.0 billion share repurchase program in the year ended December 31, 2023, leaving approximately $327.9 million available. The filing warns the program may not enhance long-term stockholder value and reduces cash available for working capital and strategic opportunities.
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
Segment Dollar-Based Net Expansion Rate
Communications Active Customer Accounts
Summary, forecast, risks and KPIs are extracted from TWILIO INC's SEC filings for Q4 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.