0001447669-26-000049
SEC filingTwilio's Q1 2026 revenue grew 20% YoY to $1.41B, driven by usage-based fees and A2P pass-through, with GAAP net income of $90.1M.
Twilio's Q1 2026 revenue reached $1.41B, a 20% increase from $1.17B in Q1 2025. The growth was driven by increased usage from existing customers (DBNE of 114% vs. 107% a year ago) and $70.9M from new customer accounts. Additionally, $46.1M of the revenue increase came from incremental A2P messaging fees imposed by major U.S. carriers, which are passed through to customers at cost. Usage-based fees accounted for 75% of revenue, up from 73% in the prior year.
Gross profit rose 18% to $684.2M, but gross margin contracted to 49% from 50%, primarily due to the dilutive effect of A2P pass-through fees (which increase revenue and cost equally). Operating income surged to $107.7M (8% margin) from $23.1M (2% margin), reflecting operating leverage as total operating expenses grew only 3% while revenue grew 20%. Net income attributable to common stockholders was $90.1M ($0.59 basic EPS) versus $20.0M ($0.13 basic EPS) in the prior year.
The MD&A does not provide segment-level revenue or profit breakdowns. However, the narrative highlights that usage-based products (Messaging, Voice) remain the primary revenue driver, while subscription-based products (Email, Segment) contributed 25% of revenue. International messaging carries lower gross margins than U.S. messaging, and the mix shift toward international could pressure overall margins. The company is investing in AI and platform integration to drive cross-sell and higher-margin product adoption.
Management's outlook emphasizes durable, profitable growth through product innovation, AI integration, and cost optimization. Key strategic priorities include expanding ISV/reseller partnerships, improving self-service capabilities, and international expansion. The company expects continued headwinds from A2P fee increases but notes these are neutral to gross profit. A potential release of the U.S. deferred tax asset valuation allowance could generate a significant income tax benefit in 2026. The $2.0B share repurchase program (authorized through Dec 2027) had $892M remaining as of March 31, 2026. No specific revenue or earnings guidance was provided for future periods.
As of March 31, 2026, Twilio reported cash and cash equivalents of $0.5B and short-term marketable securities of $1.8B, totaling $2.3B in highly liquid assets. This positions the company with substantial financial flexibility. Total assets were $9.6B, dominated by goodwill of $5.3B. Total debt stood at $1.0B (net of discounts and issuance costs), comprising $500M principal of 2029 Senior Notes and $500M of 2031 Senior Notes. Stockholders' equity was $7.8B, with an accumulated deficit of $8.5B.
Twilio has $273.2M in non-cancelable purchase commitments as of March 31, 2026, primarily for cloud infrastructure, network service providers, and other vendors, with remaining terms up to five years. Operating lease liabilities totaled $75.4M (current $32.1M and noncurrent $43.3M). The company also has $21.8M accrued for domestic non-income-based taxes and $21.0M for international taxes. No material litigation contingencies were accrued.
Twilio's board authorized a $2.0B share repurchase program in January 2025, with $892.0M remaining as of March 31, 2026. During Q1 2026, the company repurchased 2.1M shares for $253.4M. No dividends were declared. Capital expenditures (including capitalized software) totaled $20.9M (1.5% of revenue), primarily for capitalized internal-use software development costs of $23.3M (cash outflow of $16.7M) and property and equipment purchases. Long-term debt remained stable at $0.99B, and the company is in compliance with all covenants.
Twilio operates as a single operating and reportable segment. Geographic revenue breakdown (based on customer location) for Q1 2026: United States $898.9M (64%), International $508.0M (36%). The company did not disclose segment-level operating income or margins, as the CODM (CEO) uses consolidated net income as the profitability measure.
Operating cash flow of $153.2 million exceeded net income of $90.1 million, yielding a cash flow from operations (CFO) to net income ratio of 1.7x, indicating solid earnings quality. The main non-cash add-backs were stock-based compensation ($136.5 million), depreciation and amortization ($34.2 million), and share of losses from equity method investment ($27.2 million).
CFO fell 19.8% year-over-year from $191.0 million in Q1 2025. The decrease was driven by a large working capital outflow: accounts receivable increased $74.9 million (vs. a $8.5 million inflow in the prior year), and accrued expenses and other current liabilities decreased $155.8 million (vs. a $94.3 million decrease previously). These swings were partially offset by a $75.4 million decrease in prepaid expenses.
Capex consisted of $4.2 million in purchases of long-lived assets and $16.7 million in capitalized software development costs, totaling $20.9 million (13.6% of CFO). This is a moderate capex intensity, though up from $12.7 million in Q1 2025.
Share repurchases of $253.0 million far exceeded CFO of $153.2 million, implying free cash flow (CFO minus capex) of $132.3 million was insufficient to cover buybacks. No dividends were paid. The company funded the gap via its cash balance, which declined by $140.6 million during the quarter.