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Twilio Beats on Q2 Earnings, Stock Dips 11% on Dim Q3 Profit Guidance
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Key Takeaways
TWLO's Q2 EPS rose 36.8% Y/Y to $1.19, beating estimates, as revenues grew 13% to $1.23B.
Active customer accounts climbed to over 349K, with dollar-based net expansion rate at 108%.
FY25 organic revenue growth forecast raised to 9-10%, but Q3 EPS guidance fell short of consensus.
Twilio Inc. (TWLO - Free Report) reported better-than-expected second-quarter 2025 results. The company’s second-quarter non-GAAP earnings of $1.19 per share surpassed the Zacks Consensus Estimate of $1.02 per share. Moreover, the bottom line witnessed a robust improvement from the year-ago quarter’s earnings of 87 cents. The strong year-over-year growth in earnings was primarily driven by increased revenues and cost discipline.
Over the last four quarters, Twilio has surpassed earnings estimates three times while missing the same on one occasion, the average surprise being 13.9%.
The cloud-based communications platform-as-a-service provider registered revenues of $1.23 billion, which surpassed the consensus mark of $1.19 billion and came ahead of management’s guidance of $1.18-$1.19 billion. On a year-over-year basis, the top line soared 13%.
Despite reporting strong results, shares of Twilio plunged 10.6% during Thursday’s extended trading session as the EPS guidance for the third quarter fell short of analysts’ expectations.
Segment-wise, revenues from the Communications division came in at $1.15 billion, up 14% year over year. The Segment division’s sales inched up 0.4% year over year to $75.5 million.
Twilio’s dollar-based net expansion rate was 108% in the reported quarter, up from the previous quarter’s 107% and the year-ago quarter’s 102%. The company’s second-quarter dollar-based net expansion rates for the Communications and Segment divisions were 109% and 95%, respectively.
Active customer accounts increased to more than 349,000 as of June 30, 2025, from 328,000 at the end of the first quarter of 2025. As of June 30, 2025, Communications and Segment active customer accounts were more than 342,000 and 7,000, respectively.
Twilio’s Q2 Operating Results
The non-GAAP gross profit increased 7.9% year over year to $623 million. However, the non-GAAP gross margin contracted 260 bps year over year to 50.7%, mainly due to unfavorable product mix. The second-quarter non-GAAP gross margin for the Communications and Segment divisions came in at 49.2% and 74.3%, respectively.
The non-GAAP operating income jumped 25.8% year over year to $221 million. The non-GAAP operating margin of 18% for the second quarter expanded 180 bps on a year-over-year basis, mainly driven by reduced expenses, which more than offset the negative impact from lower gross margin.
General & administrative (G&A) expenses on a non-GAAP basis decreased to $68 million from $70.3 million in the year-ago quarter. G&A expenses accounted for 5.5% of quarterly revenues, down from 6.5% in the year-ago quarter. Research & development (R&D) expenditures on a non-GAAP basis increased 0.2% year over year to $160.4 million. R&D expenses accounted for 13.1% of second-quarter revenues, down from 14.8% in the year-ago quarter.
Non-GAAP sales & marketing costs of $174 million were slightly down from $171.7 million. The same represented 14.2% of second-quarter revenues, lower than 15.9% in the year-ago quarter.
Twilio’s Balance Sheet
The company exited the June quarter with cash and cash equivalents and short-term marketable securities of $2.54 billion, up from $2.45 billion at the end of the previous quarter. As of June 30, 2025, TWLO’s long-term debt was $991.4 million.
During the second quarter, Twilio generated an operating cash flow of $277.1 million and a free cash flow of $263.5 million. During the quarter, it repurchased shares worth $176.7 million.
During the first half of 2025, Twilio generated an operating cash flow of $468.1 million and a free cash flow of $441 million. During the first half of 2025, it repurchased shares worth $323.2 million. As of June 30, it had approximately $1.69 billion remaining under the current $2 billion share repurchase authorization, which will expire on Dec. 31, 2027.
Twilio Raises FY25 Guidance
Buoyed by stronger-than-expected second-quarter results, Twilio raised its guidance for full-year 2025. The company now anticipates 2025 organic revenue growth in the range of 9-10%, up from the previous guidance of 7.5-8.5%. On a reported basis, it anticipates revenue growth in the 10-11% range. The Zacks Consensus Estimate for 2025 revenues is pegged at $4.82 billion, indicating a year-over-year increase of 8.1% on a reported basis.
Non-GAAP income from operations is still projected in the range of $850-$875 million in 2025. Free cash flow for the year is now projected to be in the range of $875-$900 million, up from the previous forecast of $850-$875 million.
Twilio also initiated guidance for the third quarter. For the quarter ending Sept. 30, 2025, the company anticipates revenues between $1.245 billion and $1.255 billion, which indicates a year-over-year increase of 10-11%. The Zacks Consensus Estimate for third-quarter revenues is pegged at $1.2 billion, indicating a year-over-year increase of 6.2% on a reported basis.
Twilio projects non-GAAP income from operations in the range of $205-$215 million for the third quarter. It forecasts non-GAAP earnings per share in the range of $1.01 to $1.06. The consensus mark for third-quarter earnings is pegged at $1.12 per share, indicating a year-over-year increase of 9.8% on a reported basis.
The Zacks Consensus Estimate for Bumble’s 2025 earnings has been revised upwards by a penny to $1.05 per share in the past 30 days, implying a year-over-year increase of 2.2%. Bumble shares have lost 21% year to date.
The Zacks Consensus Estimate for F5’s Fiscal 2025 earnings has been revised upwards to $15.26 per share over the past seven days and suggests a year-over-year increase of 14.1%. F5 shares have gained 26.1% year to date.
The Zacks Consensus Estimate for Reddit’s 2025 earnings has been revised upward to $1.81 per share in the past seven days, calling for a 154.4% year-over-year increase. Reddit shares have risen 29.6% year to date.
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Twilio Beats on Q2 Earnings, Stock Dips 11% on Dim Q3 Profit Guidance
Key Takeaways
Twilio Inc. (TWLO - Free Report) reported better-than-expected second-quarter 2025 results. The company’s second-quarter non-GAAP earnings of $1.19 per share surpassed the Zacks Consensus Estimate of $1.02 per share. Moreover, the bottom line witnessed a robust improvement from the year-ago quarter’s earnings of 87 cents. The strong year-over-year growth in earnings was primarily driven by increased revenues and cost discipline.
Over the last four quarters, Twilio has surpassed earnings estimates three times while missing the same on one occasion, the average surprise being 13.9%.
The cloud-based communications platform-as-a-service provider registered revenues of $1.23 billion, which surpassed the consensus mark of $1.19 billion and came ahead of management’s guidance of $1.18-$1.19 billion. On a year-over-year basis, the top line soared 13%.
Despite reporting strong results, shares of Twilio plunged 10.6% during Thursday’s extended trading session as the EPS guidance for the third quarter fell short of analysts’ expectations.
Twilio Inc. Price, Consensus and EPS Surprise
Twilio Inc. price-consensus-eps-surprise-chart | Twilio Inc. Quote
Twilio’s Q2 Revenues in Detail
Segment-wise, revenues from the Communications division came in at $1.15 billion, up 14% year over year. The Segment division’s sales inched up 0.4% year over year to $75.5 million.
Twilio’s dollar-based net expansion rate was 108% in the reported quarter, up from the previous quarter’s 107% and the year-ago quarter’s 102%. The company’s second-quarter dollar-based net expansion rates for the Communications and Segment divisions were 109% and 95%, respectively.
Active customer accounts increased to more than 349,000 as of June 30, 2025, from 328,000 at the end of the first quarter of 2025. As of June 30, 2025, Communications and Segment active customer accounts were more than 342,000 and 7,000, respectively.
Twilio’s Q2 Operating Results
The non-GAAP gross profit increased 7.9% year over year to $623 million. However, the non-GAAP gross margin contracted 260 bps year over year to 50.7%, mainly due to unfavorable product mix. The second-quarter non-GAAP gross margin for the Communications and Segment divisions came in at 49.2% and 74.3%, respectively.
The non-GAAP operating income jumped 25.8% year over year to $221 million. The non-GAAP operating margin of 18% for the second quarter expanded 180 bps on a year-over-year basis, mainly driven by reduced expenses, which more than offset the negative impact from lower gross margin.
General & administrative (G&A) expenses on a non-GAAP basis decreased to $68 million from $70.3 million in the year-ago quarter. G&A expenses accounted for 5.5% of quarterly revenues, down from 6.5% in the year-ago quarter. Research & development (R&D) expenditures on a non-GAAP basis increased 0.2% year over year to $160.4 million. R&D expenses accounted for 13.1% of second-quarter revenues, down from 14.8% in the year-ago quarter.
Non-GAAP sales & marketing costs of $174 million were slightly down from $171.7 million. The same represented 14.2% of second-quarter revenues, lower than 15.9% in the year-ago quarter.
Twilio’s Balance Sheet
The company exited the June quarter with cash and cash equivalents and short-term marketable securities of $2.54 billion, up from $2.45 billion at the end of the previous quarter. As of June 30, 2025, TWLO’s long-term debt was $991.4 million.
During the second quarter, Twilio generated an operating cash flow of $277.1 million and a free cash flow of $263.5 million. During the quarter, it repurchased shares worth $176.7 million.
During the first half of 2025, Twilio generated an operating cash flow of $468.1 million and a free cash flow of $441 million. During the first half of 2025, it repurchased shares worth $323.2 million. As of June 30, it had approximately $1.69 billion remaining under the current $2 billion share repurchase authorization, which will expire on Dec. 31, 2027.
Twilio Raises FY25 Guidance
Buoyed by stronger-than-expected second-quarter results, Twilio raised its guidance for full-year 2025. The company now anticipates 2025 organic revenue growth in the range of 9-10%, up from the previous guidance of 7.5-8.5%. On a reported basis, it anticipates revenue growth in the 10-11% range. The Zacks Consensus Estimate for 2025 revenues is pegged at $4.82 billion, indicating a year-over-year increase of 8.1% on a reported basis.
Non-GAAP income from operations is still projected in the range of $850-$875 million in 2025. Free cash flow for the year is now projected to be in the range of $875-$900 million, up from the previous forecast of $850-$875 million.
Twilio also initiated guidance for the third quarter. For the quarter ending Sept. 30, 2025, the company anticipates revenues between $1.245 billion and $1.255 billion, which indicates a year-over-year increase of 10-11%. The Zacks Consensus Estimate for third-quarter revenues is pegged at $1.2 billion, indicating a year-over-year increase of 6.2% on a reported basis.
Twilio projects non-GAAP income from operations in the range of $205-$215 million for the third quarter. It forecasts non-GAAP earnings per share in the range of $1.01 to $1.06. The consensus mark for third-quarter earnings is pegged at $1.12 per share, indicating a year-over-year increase of 9.8% on a reported basis.
Twilio’s Zacks Rank and Stocks to Consider
Currently, Twilio carries a Zacks Rank #4 (Sell).
Some better-ranked stocks that investors can consider in the Zacks Internet - Software industry are Bumble (BMBL - Free Report) , F5 (FFIV - Free Report) and Reddit Inc. (RDDT - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Bumble’s 2025 earnings has been revised upwards by a penny to $1.05 per share in the past 30 days, implying a year-over-year increase of 2.2%. Bumble shares have lost 21% year to date.
The Zacks Consensus Estimate for F5’s Fiscal 2025 earnings has been revised upwards to $15.26 per share over the past seven days and suggests a year-over-year increase of 14.1%. F5 shares have gained 26.1% year to date.
The Zacks Consensus Estimate for Reddit’s 2025 earnings has been revised upward to $1.81 per share in the past seven days, calling for a 154.4% year-over-year increase. Reddit shares have risen 29.6% year to date.