Twilo's Q4 Earnings Surpass Expectations, Revenues Rise Y/Y

Twilio Inc. TWLO reported better-than-expected fourth-quarter 2025 results, wherein both top and bottom lines surpassed the Zacks Consensus Estimate. The company’s fourth-quarter non-GAAP earnings of $1.33 per share surpassed the Zacks Consensus Estimate of $1.24.

The bottom line also witnessed a robust improvement from the year-ago quarter’s earnings of $1.00. The strong year-over-year growth in earnings was primarily driven by increased revenues and cost discipline.

Twilio’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing once, the average surprise being 16.7%.

The cloud-based communications platform-as-a-service provider registered revenues of $1.37 billion, which surpassed the consensus mark of $1.32 billion and came ahead of management’s guidance of $1.31-$1.32 billion. On a year-over-year basis, the top line soared 14%.

Twilio’s dollar-based net expansion rate was 109% in the reported quarter, in line with the previous quarter’s level and up from the year-ago quarter’s 106%. Active customer accounts increased to more than 402,000 as of Dec. 31, 2025, from 392,000 at the end of the third quarter of 2025.

Twilio’s Q4 Operating Results

The non-GAAP gross profit increased 9.9% year over year to $682.2 million. However, the non-GAAP gross margin contracted 210 bps year over year to 49.9%, mainly due to an unfavorable product mix.

The non-GAAP operating income jumped 29.7% year over year to $255.6 million. The non-GAAP operating margin of 18.7% for the fourth quarter expanded 220 bps on a year-over-year basis, mainly driven by reduced expenses, which more than offset the negative impact of a lower gross margin.

General & administrative (G&A) expenses on a non-GAAP basis decreased to $68.2 million from $85.8 million in the year-ago quarter. G&A expenses accounted for 5% of quarterly revenues, down from 7.2% in the year-ago quarter. Research & development (R&D) expenditures on a non-GAAP basis increased to $183.6 million from $167 million in the year-ago quarter. R&D expenses accounted for 13.4% of fourth-quarter revenues, down from 14% in the year-ago quarter.

Non-GAAP sales & marketing costs of $174.8 million were up from $170.9 million. The same represented 12.8% of fourth-quarter revenues, lower than 14.3% in the year-ago quarter.

Twilio’s Balance Sheet

The company exited the September quarter with cash and cash equivalents and short-term marketable securities of $2.47 billion, slightly up from $2.46 billion at the end of the previous quarter. As of Dec. 31, 2025, TWLO’s long-term debt was $992.3 million.

During the fourth quarter, Twilio generated an operating cash flow of $271.6 million and a free cash flow of $256.1 million. During the quarter, it repurchased shares worth $198 million.

In 2025, Twilio generated an operating cash flow of $1.0 billion and a free cash flow of $945.4 million. In 2025, it repurchased shares worth $854.6 million. As of Dec. 31, it had approximately $1.1 billion remaining under the current $2 billion share repurchase authorization, which will expire on Dec. 31, 2027.

Twilio Initiates FY26 Guidance

For 2026, Twilio anticipates organic revenue growth to be in the range of 8-9%. On a reported basis, it expects revenue growth in the 11.5-12.5% range. The Zacks Consensus Estimate for 2025 revenues is pegged at $5.41 billion, indicating a year-over-year increase of 7.8% on a reported basis.

Non-GAAP income from operations is now projected in the range of $1.04-$1.06 billion. Free cash flow for the year is projected to be in the range of $1.04-$1.06 billion.

For the quarter ending March 31, 2026, the company anticipates revenues between $1.31 billion and $1.32 billion, which indicates a year-over-year increase of 9.5-10.5%. The Zacks Consensus Estimate for first-quarter revenues is pegged at $1.27 billion, implying a year-over-year increase of 8.6% on a reported basis.

Twilio projects non-GAAP income from operations in the range of $240-$250 million for the first quarter. It forecasts non-GAAP earnings per share in the band of $1.21-$1.26. The consensus mark for fourth-quarter earnings is pegged at $1.22 per share, indicating a year-over-year increase of 7% on a reported basis.

Twilio’s Zacks Rank & Stocks to Consider

Currently, TWLO carries a Zacks Rank #4 (Sell).

Amphenol APH, Applied Materials AMAT and Analog Devices ADI are some better-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. Amphenol, Applied Materials and Analog Devices carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Amphenol’s earnings for 2026 has been revised upwards by 6.4% to $4.32 per share over the past 30 days and suggests a year-over-year increase of 29.3%. Amphenol shares have jumped 29.9% in the past six months.

The Zacks Consensus Estimate for Applied Materials’ fiscal 2026 earnings is pegged at $9.62 per share, up from the prior estimate of $9.54 per share over the past 30 days, calling for a year-over-year surge of 2.1%. Applied Materials shares have returned 91% in the past six months.

The Zacks Consensus Estimate for Analog Devices’ fiscal 2026 earnings is pegged at $9.97 per share, up from the prior estimate of $9.76 per share over the past 30 days, suggesting year-over-year growth of 27.9%. Analog Devices shares have surged 40.1% in the past six months.

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