Twilio's Q2 Earnings Surpass Expectations, Revenues Rise Y/Y

Twilio Inc. TWLO reported better-than-expected second-quarter 2026 results, wherein both top and bottom lines surpassed the Zacks Consensus Estimate. The company’s second-quarter non-GAAP earnings of $1.47 per share surpassed the Zacks Consensus Estimate by 11.4%.

The bottom line also witnessed a robust improvement from the year-ago quarter’s earnings of $1.19. 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 each of the trailing four quarters, the average surprise being 13.95%.

The cloud-based communications platform-as-a-service provider registered revenues of $1.50 billion, which surpassed the consensus mark by 5.4% and came ahead of management’s guidance of $1.42-$1.43 billion. On a year-over-year basis, the top line soared 22%.

Twilio’s Q2 in Details

Twilio’s dollar-based net expansion rate was 116% in the reported quarter, up from the previous quarter’s level of 114% and the year-ago quarter’s 108%.

Non-GAAP gross profit increased 18% year over year to $735.7 million. Non-GAAP gross margin was 49.1%, down 160 basis points from the prior-year quarter, as $71 million of incremental U.S. carrier pass-through fees pressured the rate. Excluding those incremental fees, management said non-GAAP gross margin would have increased 60 basis points year over year.

Non-GAAP income from operations rose 29% to $284.6 million, while operating margin expanded 100 basis points to 19%. Carrier fees represented an approximately 90-basis-point operating-margin headwind.

Twilio's Cash Generation Remains Robust

Net cash provided by operating activities was $372.4 million in the quarter. Free cash flow increased 34% year over year to $352.6 million, with a free cash flow margin of 24%.

Twilio ended the second quarter with $823.3 million in cash and cash equivalents and $1.83 billion in short-term marketable securities. Long-term debt was $993.2 million. The company repurchased $66 million of shares in the quarter and had $826 million remaining under its authorization.

TWLO Raises Its 2026 Outlook

For 2026, TWLO raised its reported revenue growth outlook to 18-18.5% from 14-15% and organic revenue growth guidance to 13-13.5% from 9.5-10.5%. The company also lifted non-GAAP income from operations and free cash flow guidance to $1.135-$1.155 billion from $1.08-$1.10 billion. The Zacks Consensus Estimate for 2026 revenues is pegged at $5.81 billion, indicating a year-over-year increase of 14.6% on a reported basis.

For the third quarter of 2026, Twilio expects revenues in the range of $1.505-$1.515 billion, suggesting reported growth of 16-16.5% and organic growth of 11-12%. Non-GAAP income from operations is projected between $285 million and $295 million, with non-GAAP earnings of $1.42-$1.47 per share.

The Zacks Consensus Estimate for third-quarter revenues is pegged at $1.46 billion, implying a year-over-year increase of 12.5% on a reported basis. The consensus mark for third-quarter earnings is pegged at $1.37 per share, indicating a year-over-year increase of 9.6% on a reported basis.

Twilio’s Zacks Rank & Other Stocks to Consider

Currently, TWLO carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader Zacks Computer and Technology sector are Lumentum LITE, Applied Materials AMAT and Analog Devices ADI, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Lumentum have surged 127.4% year to date. The Zacks Consensus Estimate for LITE’s fiscal 2026 earnings is pegged at $8.19 per share, up by 5 cents over the past 30 days, indicating an increase of 297.6% year over year.

Shares of Applied Materials have jumped 105.2% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.17 per share, up by 3 cents over the past seven days, indicating a rise of 29.2% year over year.

Analog Devices shares have surged 39.1% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $12.42 per share, up by 10 cents over the past 30 days, indicating an increase of 59.4% year over year.

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