Earnings Call Insights: Twilio (TWLO) Q3 2025
Management View
- CEO Khozema Shipchandler reported “Twilio had a great Q3, reaching $1.3 billion in revenue and $235 million in non-GAAP income from operations, another record for both.” He highlighted broad-based strength across customer segments, noting “revenue growth across products like messaging, voice and software add-ons are a testament to the growing trust in the Twilio platform.”
- Shipchandler emphasized that both ISV and self-serve customers “continued to be excellent growth drivers with both growing revenue more than 20% year-over-year.” He also stated that innovation bets on “conversational AI and branded communications are also paying off.”
- Notable customer wins included “a nine-figure renewal spanning multiple products with a leading cloud provider, the largest deal in our company’s history,” as well as Genspark AI, GoGoGrandparent, Inhabit, and Paychex. He also announced the acquisition of Stytch, “an identity platform for AI agents that’s built for developers,” describing it as a “small tech and talent tuck-in that will augment our ability to enable amazing digital interactions.”
- CFO Aidan Viggiano stated, “Twilio had a record-breaking third quarter. We generated record revenue of $1.3 billion, up 15% year-over-year on a reported basis and 13% year-over-year on an organic basis. We also generated record non-GAAP income from operations of $235 million. Free cash flow was $248 million.”
- Viggiano added, “Our Q3 dollar-based net expansion rate was 109%, reflecting the improving growth trends we’ve seen in our business over the last several quarters. We delivered non-GAAP gross profit of $652 million, up 9% year-over-year.”
Outlook
- Viggiano provided Q4 revenue guidance of “$1.31 billion to $1.32 billion, representing 9.5% to 10.5% reported growth and 8% to 9% organic growth.”
- Full year 2025 organic revenue growth guidance was raised to “11.3% to 11.5%, up from 9% to 10% previously,” and reported revenue growth guidance to “12.4% to 12.6%, up from 10% to 11% previously.”
- Viggiano also raised the full year non-GAAP income from operations range to “$900 million to $910 million, up from $850 million to $875 million previously,” and full year free cash flow guidance to “$920 million to $930 million, up from $875 million to $900 million previously.”
Financial Results
- Twilio reported “record revenue of $1.3 billion, up 15% year-over-year on a reported basis and 13% year-over-year on an organic basis,” and “record non-GAAP income from operations of $235 million.”
- Free cash flow was $248 million, and share repurchases totaled $350 million in the quarter, bringing year-to-date repurchases to $657 million.
- Messaging revenue grew in the high teens for the second consecutive quarter, while voice revenue growth accelerated to the mid-teens, its fastest rate in over three years. Revenue from the top 10 largest voice AI start-up customers increased more than 10x year-over-year.
- Software add-on revenue growth accelerated, led by Verify, which grew more than 25% year-over-year. Non-GAAP gross profit was $652 million with a non-GAAP gross margin of 50.1%.
Q&A
- James Fish, Piper Sandler: Asked about the Stytch acquisition and its impact. CEO Shipchandler explained Stytch “helps us do is to expand our capabilities to ensure that there’s trust between businesses and consumers,” and called the financial impact “immaterial.” Fish also asked about net customer additions and price increase impact. Viggiano said the quarter saw a “big quarter for us” in net adds, mainly from ending free tiers for APIs, and noted “we haven’t seen churn associated with [the price increase].”
- Sitikantha Panigrahi, Mizuho: Asked about voice AI adoption trends. Viggiano reiterated “voice grew mid-teens, which is our fastest growth rate in over three years,” and the top 10 voice AI start-ups “were up 10x.”
- Aleksandr Zukin, Wolfe Research: Inquired about sequential customer adds and gross margin. Viggiano clarified net adds were “largely e-mail,” and gross margins were flat adjusting for carrier fees. Wyatt added “40% growth was in voice in particular.”
- Taylor McGinnis, UBS: Asked about Q4 guidance and holiday season. Viggiano said there were no major surprises, the performance was “pretty broad-based.” Regarding the holiday season, she noted “a very strong holiday season… does create a little bit more of a challenging comparison for us this year.”
- Elizabeth Elliott, Morgan Stanley: Sought details on adoption of conversational AI products beyond start-ups. Wyatt described “solid traction of our enterprise and ISV customers with multiproduct growth,” highlighting Inhabit as a key example. Viggiano said dollar-based net expansion was “mostly expansion,” not price-related.
Sentiment Analysis
- Analysts maintained a positive to slightly positive tone, highlighting strong growth, voice AI momentum, and customer additions. Questions were focused on growth sustainability and new product traction, with little skepticism or pressing on negative issues.
- Management’s tone was confident and upbeat throughout both prepared remarks and Q&A, repeatedly using language such as “record-breaking,” “encouraging traction,” and “excited about the trends.” The tone remained similar to the previous quarter but with greater emphasis on accelerating growth and raised outlook.
Quarter-over-Quarter Comparison
- The current quarter featured raised full-year revenue, income, and free cash flow guidance, compared to the previous quarter’s more conservative guidance and focus on cost discipline.
- Strategic focus shifted further toward high-margin products, voice AI, and ISVs, with specific large deal wins and product launches highlighted in the current quarter.
- Management’s confidence increased, particularly about cross-sell traction, AI-driven product adoption, and the durability of growth, as shown by more assertive language and raised targets. Analyst tone was consistently positive across both quarters, but Q3 saw more questions regarding the scaling of new product areas and sustainability of recent growth.
Risks and Concerns
- Management acknowledged carrier pass-through fees as a headwind, with Viggiano citing $20 million in Q3 and anticipating $22 million in Q4 from incremental U.S. carrier fees.
- In response to questions about future carrier fee increases, Viggiano said, “there could be a day when… AT&T and T-Mobile follow the Verizon action. And that would present an additional pressure to… our gross margins.”
- No material churn was observed from recent price increases, and contraction and churn remained stable.
Final Takeaway
Twilio’s third quarter showcased record revenue and profitability, driven by broad-based growth across customer segments, particularly in high-margin products, voice AI, and ISV channels. The company raised its full-year guidance for reported and organic revenue growth, income from operations, and free cash flow. Management highlighted accelerating adoption of AI-powered solutions and bundled offerings, with large new deals and continued strength in self-serve and ISV channels. While carrier fee increases remain a watch point, Twilio’s operational rigor, expanding product portfolio, and robust customer engagement position the company to close 2025 with strong momentum and growth potential.