Twilio Inc. 2026 Q2 Earnings Call

Please go ahead. Good afternoon, everyone.

Thank you for joining us for Twilio's second quarter 2026 earnings conference call. Joining me today are Khozema Shipchandler, Chief Executive Officer, Aidan Viggiano, Chief Financial Officer, and Thomas Wyatt, Chief Revenue Officer. As a reminder, we will disclose non-GAAP financial measures on this call. Definitions and reconciliations between our GAAP and non-GAAP results can be found in our earnings presentation posted on our IR website at investors.twilio.com. We will also make forward-looking statements on this call, including statements about our future outlook and goals. Such statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described. Many of those risks and uncertainties are described in our SEC filings, including our most recent Form 10-K and our forthcoming Form 10-Q. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made.

We disclaim any obligation to update any forward-looking statements except as required by law. With that, I'll hand it over to Khozema and Aidan, who will discuss our Q2 results. We'll then open the call for Q&A.

Thank you, Rodney. Good afternoon, everyone. Thank you for joining us today. Twilio had an exceptional second quarter. We delivered $1.5 billion in revenue, accelerating organic growth to 17% year-over-year, while non-GAAP gross profit growth also accelerated to 18% year-over-year. We generated $285 million in non-GAAP income from operations and $353 million in free cash flow. Twilio's momentum is strong. We're executing with precision and innovating across the board to power customer conversations in the age of AI. During the quarter, we hosted our annual user conference, SIGNAL, which is always the highlight of my year. I love connecting with customers one on one and hearing firsthand why these brands choose Twilio as their foundational infrastructure.

We are proud to have had brands like AWS, Centerfield, Koval, Deepgram, IBM, Nestlé, PGA of America, Rivian, Sierra, and Stripe take the stage to share how Twilio is driving ROI for their businesses as they build for the next era of customer engagement. This year's SIGNAL was especially memorable because we announced the general availability of Twilio's next generation platform. Our conversations layer, which includes Conversation Memory, Conversation Orchestrator, Conversation Intelligence, Conversation Relay, and Agent Connect, provide the building blocks customers need to deliver context-rich conversations over a consumer's lifetime. As an example, to drive conversion and scale revenue, leading automotive fintech company Car Finance 247 joined our private beta program, a move that quickly evolved into a 7-figure deal to implement the new Twilio conversations layer. Their AI assistant, Carla, has already handled nearly 300,000 customer conversations.

Customers who engage with Carla convert to approved leads 1.6 times faster, delivering a multimillion-dollar annual revenue uplift across their core commission and ancillary offerings. While our new products have only been in the hands of customers since May, these early stories validate that businesses need Twilio's conversational infrastructure that both serves humans and agents as they navigate a hybrid agentic era. The newly redesigned Twilio Console also launched in May, giving customers a single command center to manage all of their Twilio workloads. It has an intuitive UX, frictionless trials to encourage experimentation, AI-guided onboarding, and one central billing experience. This is all in service of making it easier to build with Twilio, and the refreshed console bolsters our acceleration in self-serve and will make multi-product adoption more seamless.

Since the launch, a majority of existing customers have migrated to the new console, and we're seeing a 90% plus uplift in conversions when compared to the old console. We continue to see strength across the business, highlighted by robust messaging growth, even as carriers have raised their fees on our customers. While these pass-through costs carry no direct impact on Twilio's profitability, we do recognize the pressure it creates for our customers, specifically small businesses. Our Twilio platform strategy equips our customers with complete access to a variety of channels, empowering our customers to diversify their engagement strategies maintain cost efficiency, and reliably reach their own customers. Our go-to-market focus on multi-product adoption is working well, and we saw continued strength across our platform, including messaging, voice, and software add-ons during the quarter.

The team signed an 8-figure deal with a leading AI company and other key wins with All Nippon Airways, Atlassian, Eltropy, Kixie, Lirio, Medibank, Olo, OpenEvidence, Orion AI Solutions, Vozzi, and Xplor Technologies. Revenue growth from multi-product customers is accelerating, illustrating that our customers are continuing to use multiple products within the Twilio platform to power personal multi-channel communications. Let me walk you through a few examples. Olo, a digital commerce platform for restaurants, signed a cross-sell deal to expand their utilization of messaging and voice. Olo is leveraging Twilio's communications infrastructure to power real-time order notifications and seamless delivery updates across its restaurant network. We also landed a 7-figure deal with Eltropy, an agentic AI platform for credit unions and community banks, to leverage messaging, RCS, voice, and Branded Calling across its platform.

Eltropy also built its AI voice agent using Conversation Relay to help financial institutions deliver better consumer experiences, accelerate resolutions, reduce operating costs, and create a scalable AI-powered contact center from day one. Another win was with a leading home improvement retailer who signed a seven-figure deal to utilize messaging, voice, and Branded Calling. By consolidating its legacy communication traffic onto Twilio, the company is now able to streamline North American delivery logistics, leveraging trusted voice capabilities and rich RCS two-way interactions to optimize transactional order notifications and appointment scheduling. Another great win from the quarter was with a leading HR and payroll technology platform, which signed a seven-figure deal to leverage Twilio messaging and Verify to scale their unified employee engagement infrastructure.

They're embedding messaging directly into their mobile application to power secure two-way employee communications and batch workforce text alerts while using Verify to deliver seamless two-factor authentication for payroll access. Atlassian, a leading provider of AI-powered collaboration and team productivity software, utilizes Twilio's communications infrastructure to deliver contextual, AI-powered, omni-channel support within its new customer service management app. This partnership helps Atlassian reimagine customer experiences with complete context while scaling global channel coverage via Twilio's Flex SDK and Super Network. That's the power of Twilio. Just as we've abstracted the complexities of global telecom for 18 years, we're now helping our customers abstract the complexities that come with creating omni-channel agentic conversations, and these innovations continue to earn praise from leading industry analysts. During the quarter, Twilio was named a leader by Gartner in the 2026 Magic Quadrant CPaaS Report, scoring the highest in ability to execute.

Additionally, Twilio was also named a leader in the 2026 IDC MarketScape for AI-enabled CDP. In summary, there is tremendous momentum building across our business. From landmark enterprise wins to an eight-figure deal with an AI company, Twilio is empowering the next generation of companies with our world-class infrastructure that's delivering measurable ROI in the AI era. Our next generation conversational platform is live. Our refreshed Console is accelerating adoption, and our customer momentum has never been stronger. We remain focused on strong execution while building the future of customer engagement. With that, I'll turn it over to Aidan.

Thank you, Khozema. Good afternoon, everyone. Twilio had an exceptional Q2, delivering record revenue of $1.5 billion, up 22% year-over-year on a reported basis, and 17% year-over-year on an organic basis, which excludes incremental U.S. carrier pass-through fees. non-GAAP gross profit growth accelerated to 18% year-over-year. We also generated record non-GAAP income from operations of $285 million and record free cash flow of $353 million. Top line performance was driven by strong volumes and solid go-to-market execution, resulting in another quarter of organic revenue growth acceleration. We saw strong customer additions in the quarter, aided by the release of our new Conversations Layer and Twilio Console. Our self-serve channel delivered revenue growth of 30%+, while ISV revenue grew 25%+. We are also seeing continued strength across the product portfolio.

Messaging revenue growth was 28%, driven primarily by strong volumes and aided by growth in WhatsApp and RCS. Incremental carrier fees contributed roughly 10 points to messaging's growth. Voice growth accelerated above 20% year-over-year, driven by a balance of volume growth and software add-ons, including triple-digit growth in Branded Calling and Conversational Intelligence. Finally, total software add-on revenue grew 25%+, led by Verify, which accelerated to 30%+ growth. Our Q2 Dollar-Based Net Expansion Rate was 116%, reflecting the improving growth trends we've seen in our business over the last several quarters. Incremental carrier fees contributed roughly 5 points to DBNE. We delivered record non-GAAP gross profit of $736 million, with growth accelerating to 18% year-over-year, our 5th consecutive quarter of accelerating non-GAAP gross profit growth. This was driven by continued momentum in our higher margin products, in addition to our proactive efforts to deliver meaningful cost efficiencies.