Summary
Twilio closed fiscal 2025 with double-digit revenue growth and a sharp improvement in operating profitability. Fourth-quarter revenue rose 14.3% to $1.37 billion. Full-year revenue rose 13.7% to $5.07 billion. Organic revenue growth was 12% for the quarter and 13% for the full year. Active Customer Accounts reached more than 402,000 as of December 31, 2025, up from more than 325,000 a year earlier. The Dollar-Based Net Expansion Rate was 109% for the fourth quarter, up from 106%, and 108% for the full year, up from 104%. Those customer metrics suggest that existing accounts spent more even as the company added many new accounts.
Profitability was mixed. Fourth-quarter gross profit rose 10.4% to $662.35 million, but gross margin fell 1.7 percentage points to 48.5%. Full-year gross profit rose 8.8% to $2.48 billion, while full-year gross margin fell 2.2 percentage points to 48.9%. Operating income improved to $56.78 million in the quarter, up 313.7%. Full-year operating income was $157.80 million, a swing to a profit from a loss. Operating margin rose 3.0 percentage points to 4.2% in the quarter and 4.3 percentage points to 3.1% for the full year. Net income did not follow the operating trend. The fourth-quarter net loss widened to $45.85 million. For the full year, net income was $33.83 million, a swing to a profit from a loss. Full-year diluted EPS was $0.21, a swing to a profit from a loss per share.
Cash generation remained a strong point. Fourth-quarter operating cash flow rose 150.4% to $271.56 million. Full-year operating cash flow rose 40.1% to $1.00 billion. Free cash flow, a non-GAAP measure, was $256.1 million in the quarter and $945.4 million for the full year. Deferred revenue was $158.70 million, up 1.9%. Remaining performance obligations were $175.20 million, down 3.9%. Management noted that most revenue is usage-based, which can be more variable and more exposed to consumer spending changes than subscription revenue.
Guidance points to slower organic growth in the near term. For the first quarter of 2026, Twilio guided revenue to $1.335 billion to $1.345 billion, or reported growth of 14% to 15% and organic growth of 10% to 11%. The company guided first-quarter non-GAAP income from operations to $240 million to $250 million and non-GAAP diluted EPS to $1.21 to $1.26. For full-year 2026, Twilio guided reported revenue growth of 11.5% to 12.5% and organic revenue growth of 8% to 9%. It also guided full-year non-GAAP income from operations and free cash flow to $1.04 billion to $1.06 billion. The setup implies a deceleration in organic growth as the company laps prior carrier fee benefits and faces new fee increases.
Several risks stand out. A major U.S. carrier raised network service provider fees for A2P messages in June 2025, and other major carriers followed with increases effective in January and April 2026. Twilio passes these fees through at cost, so they create equal revenue and cost of revenue and do not affect gross profit, but management said they will be a modest headwind to gross margins. Gross margin already declined 1.7 percentage points in the fourth quarter and 2.2 percentage points for the full year. The company also flagged an accrued bonus liability that will be paid in March 2026 and will affect first-quarter cash flows. It noted a reasonable possibility of releasing a significant portion of its U.S. deferred tax asset valuation allowance within the next twelve months, which could produce a large income tax benefit. The company ended the year with 5,587 employees.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2025 | Q3 FY2025 | QoQ | Q4 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.37B | $1.30B | +5.0% | $1.19B | +14.3% |
| Gross profit | $662.4M | $632.1M | +4.8% | $599.7M | +10.4% |
| Gross margin | 48.5% | 48.6% | -0.1 pp | 50.2% | -1.7 pp |
| Research & development | $260.1M | $262.3M | -0.9% | $252.6M | +3.0% |
| Sales & marketing | $219.8M | $220.6M | -0.4% | $216.7M | +1.4% |
| General & administrative | $108.9M | $108.2M | +0.6% | $116.8M | -6.8% |
| Total operating expenses | $605.6M | $591.1M | +2.4% | $586.0M | +3.3% |
| Operating income (loss) | $56.8M | $40.9M | +38.7% | $13.7M | +313.7% |
| Operating margin | 4.2% | 3.1% | +1.0 pp | 1.1% | +3.0 pp |
| Net income (loss) | -$45.9M | $37.2M | -223.1% | -$12.5M | -267.7% |
| Net margin | -3.4% | 2.9% | -6.2 pp | -1.0% | -2.3 pp |
| Diluted EPS | -$0.29 | $0.23 | -$0.52 | -$0.08 | -$0.21 |
Risks
The majority of revenue is usage-based, which the filing says is more immediately impacted by consumer sentiment and macroeconomic conditions. Adverse conditions could decrease or delay customer spending, reduce usage, lower renewal rates and lengthen sales cycles.
A2P messaging fee increases by major U.S. carriers, starting June 2025 with further increases effective January and April 2026, are passed through at cost. They do not impact gross profit but create a modest headwind to gross margins, and gross margin was down 1.7 pp in FY2025 Q4 and down 2.2 pp FY2025 YTD.
Most usage-based customers do not have long-term contractual financial commitments and may reduce or cease usage at any time without penalty. Dollar-Based Net Expansion Rate could decline if customers are dissatisfied, reduce budgets or face macroeconomic pressure.
Recent reductions in sales force and greater reliance on self-service capabilities and AI automation may not drive adoption or efficiency as expected, potentially reducing sales productivity and negatively impacting growth rate.
The market is intensely competitive and rapidly evolving, and competitors may use AI or lower pricing. The company is investing in combining communications with contextual data and AI without guarantee of market acceptance or gross margin benefit.
Increasing focus on enterprise sales, including Segment and AI-enhanced products, may require more costly sales efforts, lengthy pricing and contract negotiations, multiple decision makers and longer sales cycles. Enterprise customers may also demand price reductions as usage grows.
36% of FY2025 revenue came from customer accounts outside the United States. International messaging has lower gross margin, and international network service provider fees generally exceed domestic rates, adversely affecting gross margin.
Increasing global privacy, data residency and AI regulations, including GDPR fines up to 4% of worldwide revenue and the EU AI Act, impose compliance costs and may limit use of personal data for AI products or restrict cross-border data transfers.
The company carried $5.4 billion of goodwill and intangible assets and $301.6 million related to its equity method investment as of December 31, 2025. It recorded an $80.6 million impairment of its equity method investment in FY2025, and adverse changes could lead to further impairment charges.
The OBBB Act and OECD Pillar Two global minimum tax could increase the effective tax rate and compliance complexity. The timing and amount of a potential valuation allowance release are uncertain and could change based on actual operating results.
SaaS KPIs
All quarters →Dollar-Based Net Expansion Rate
Non-GAAP Gross Margin
Non-GAAP Operating Margin
Active Customer Accounts
Free Cash Flow Margin
Free Cash Flow
Non-GAAP Income from Operations
Organic Revenue Growth
Summary, forecast, risks and KPIs are extracted from TWILIO INC's SEC filings for Q4 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.