TWILIO INC
For the period ended Jun 30, 2026. Filed Aug 7, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 7, 2026
TWLO$202.02+0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-01.
0001447669-26-000049
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-07.
0001447669-26-000092
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 101 previous paragraphs and 117 current paragraphs.
71 unchanged; 19 reworded; 23 added; 11 removed; 0 previous and 4 current paragraphs rearranged.
Tables are not compared: 14 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
We envision a world in which every digital interaction is amazing. The Twilio platform combines our communications channels and software solutions with contextual data and AI-powered orchestration, enabling businesses to deliver amazing customer engagement across the entire customer journey. Our platform provides a trusted, simple, and smart infrastructure foundation that customers can build on.
Current report
In the second quarter of 2026, we determined that we would be unable to consume certain network services that we prepaid in previous periods due to operational and financial challenges experienced by two network service providers. This determination resulted in a $32.8 million impairment loss on prepaid assets that impacted our operating expenses and income from operations for the three and six months ended June 30, 2026. This impairment loss has no impact on our free cash flow and will not impact our results of operations in future periods.
Current report
We regularly assess the need for a valuation allowance on our deferred tax assets. As of June 30, 2026, based on our analysis of both positive and negative evidence, including the amount of pre-tax book income in the U.S. in recent periods and our expectation of future profits in the U.S., we concluded that it is more likely than not that the majority of our U.S. deferred tax assets are realizable. As a result, we released a significant portion of our valuation allowance on the net deferred tax assets in the U.S., resulting in the recognition of deferred tax assets and income tax benefit of $944.1 million during the three and six months ended June 30, 2026. For further detail refer to Note 14 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Current report
Impairment Loss on Prepaid Assets. Impairment loss on prepaid assets consists of certain losses related to network services we prepaid in prior periods that we will be unable to consume due to operational and financial challenges experienced by two network service providers.
Current report
In the three months ended June 30, 2026, research and development expenses increased by $29.8 million, or 12%, compared to the same period last year. The increase was primarily attributable to a $13.8 million increase in hosting fees to support development and staging of our products and a $10.3 million increase in total personnel costs.
Current report
In the three months ended June 30, 2026, general and administrative expenses increased by $16.9 million, or 17%, compared to the same period last year. The increase was primarily attributable to an $8.0 million increase in the provision for doubtful accounts, a $4.0 million increase in personnel costs, and a $2.1 million increase in professional services fees.
Current report
In the three months ended June 30, 2026, impairment loss on prepaid assets increased by $32.8 million compared to the same period last year. The impairment relates to certain prepaid network services that we determined we would be unable to consume due to operational and financial challenges experienced by two network service providers. No such impairment occurred in the prior year period.
Current report
Other Expenses, net
Current report
In the three months ended June 30, 2026, other expenses, net, increased by $5.6 million, or 166%, compared to the same period last year. Fluctuations in the various other expense, net, categories were not significant either individually or in the aggregate.
Current report
In the three months ended June 30, 2026, benefit from (provision for) income taxes increased by $1.0 billion compared to the same period last year. The increase was primarily attributable to the release of our valuation allowance on certain of our U.S. federal and state deferred tax assets in the three months ended June 30, 2026, which generated a $944.1 million income tax benefit. For further detail refer to Note 14 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Current report
Comparison of the Six Months Ended June 30, 2026 and 2025
Current report
Revenue
Current report
In the six months ended June 30, 2026, research and development expenses increased by $37.7 million, or 8%, compared to the same period last year. The increase was primarily attributable to a $22.6 million increase in hosting fees to support development and staging of our products and a $12.5 million increase in total personnel costs.
Current report
In the six months ended June 30, 2026, general and administrative expenses increased by $27.4 million, or 14%, compared to the same period last year. The increase was primarily attributable to an $11.1 million increase in total personnel costs, a $7.1 million increase in the provision for doubtful accounts and a $4.6 million increase in professional services fees.
Current report
In the six months ended June 30, 2026, impairment loss on prepaid assets increased by $32.8 million compared to the same period last year. The impairment relates to certain prepaid network services that we determined we would be unable to consume due to operational and financial challenges experienced by two network service providers. No such impairment occurred in the prior year period.
Current report
In the six months ended June 30, 2026, benefit from (provision for) income taxes increased by $1.0 billion compared to the same period last year. The increase was primarily attributable to the release of our valuation allowance on certain of our U.S. federal and state deferred tax assets in the six months ended June 30, 2026, which generated a $944.1 million income tax benefit. For further detail refer to Note 14 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Current report
Income Taxes
Current report
We account for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as net operating losses and tax credit carry-forwards. Deferred tax amounts are determined by using the enacted tax rates expected to be in effect when the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance reduces the deferred tax assets to the amount that is more likely than not to be realized.
Current report
We recognize the effect of uncertain income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is more than 50% likely to be realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
Current report
We regularly assess the need for a valuation allowance on our deferred tax assets. In making that assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of all available evidence, whether it is more-likely-than-not that some or all of our deferred tax assets will be realized. The determination of the realizability of deferred tax assets requires significant judgment and relies on management's estimates of future taxable income.
Current report
As of June 30, 2026, we demonstrated sustained profitability in the U.S. over a cumulative period of three years based on the U.S. pre-tax book income adjusted for permanent book-tax differences, and we expect to continue to sustain this profitability position in the U.S. for the annual period ended December 31, 2026. This evidence is objective and verifiable and represents strong positive evidence that carries significant weight.
Current report
Based on our analysis of all available positive and negative evidence, including the objective and verifiable positive evidence as described above, and anticipated future earnings, we concluded that it is more likely than not that the majority of our U.S. deferred tax assets are realizable. As a result of this change in estimate, we released a significant portion of the valuation allowance on our U.S. deferred tax assets in the current quarter. For further detail refer to Note 14 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Current report
Our judgment regarding the need for a valuation allowance may reasonably change in future reporting periods due to many factors, including changes in expectations of future profitability in the U.S. and changes in tax laws or regulations. We will continue to maintain a valuation allowance against deferred tax assets where we believe that it is more likely than not that they will not be realized.
Removed paragraphs (11)
Previous report
We envision a world in which every digital interaction is amazing. By combining our leading communications capabilities with rich contextual data and AI, we provide the infrastructure for businesses of all sizes to revolutionize how they engage with their customers by delivering seamless, trusted, and personalized customer experiences at scale.
Previous report
In March 2026, we paid $141.0 million under our 2025 company-wide bonus program to eligible employees for amounts previously accrued. As previously disclosed, these payments impacted our cash flows in the first quarter of 2026.
Previous report
Given our recent history of generating net income in the U.S., we believe that there is a reasonable possibility that during 2026 sufficient positive evidence may become available to allow us to determine that a significant portion of the valuation allowance recorded against our U.S. deferred tax assets should be released. This would result in a significant income tax benefit for the period when we release the valuation allowance in the U.S. However, the exact timing and amount of the valuation allowance release are subject to change based on our actual operating results.
Previous report
Beginning in the first quarter of 2026, we have discontinued disclosure of Active Customer Accounts as a key metric. As a result, we are revising the definition of DBNE to remove references to Active Customer Accounts and Zipwhip accounts and instead refer to “customer accounts.” The methodology for identifying these customer accounts is unchanged from the methodology most recently used to identify Active Customer Accounts and this definitional update has no impact on our methodology for calculating DBNE or our historical or future DBNE.
Previous report
Cost of Revenue and Gross Profit
Previous report
Operating Expenses
Previous report
Provision for Income Taxes
Previous report
Cost of Revenue and Gross Profit
Previous report
Operating Expenses
Previous report
In the three months ended March 31, 2026, research and development expenses increased by $7.9 million, or 3%, compared to the same period last year. Fluctuations in the various research and development expense categories were not significant either individually or in the aggregate.
Previous report
In the three months ended March 31, 2026, general and administrative expenses increased by $10.5 million, or 11%, compared to the same period last year. Fluctuations in the various general and administrative expense categories were not significant either individually or in the aggregate.
Reworded paragraphs (19)
Previous wording
Most of our usage-based customers gain access to our platform through a self-service process, which requires an upfront prepayment via credit card that is drawn down as they use our products. Pricing is generally based on a publicly available, self-serve pricing matrix that generally allows customers to receive tiered discounts as their usage of our products increases. Many of our larger usage-based customers enter into contractual arrangements with us for a period of at least 12 months. These contracts may include negotiated terms and typically include minimum revenue commitments of varying durations. Usage-based customers subject to such contracts are typically invoiced monthly in arrears for products used. In the three months ended March 31, 2026 and 2025, we generated 75% and 73% of our revenue, respectively, from usage-based fees.
Current wording
Most of our usage-based customers gain access to our platform through a self-service process, which requires an upfront prepayment via credit card that is drawn down as they use our products. Pricing is generally based on a publicly available, self-serve pricing matrix that generally allows customers to receive tiered discounts as their usage of our products increases. Many of our larger usage-based customers enter into contractual arrangements with us for a period of at least 12 months. These contracts may include negotiated terms and typically include minimum revenue commitments of varying durations. Usage-based customers subject to such contracts are typically invoiced monthly in arrears for products used. In the three months ended June 30, 2026 and 2025, we generated 75% and 74% of our revenue, respectively, from usage-based fees.
Previous wording
Subscription-based fees are earned in accordance with subscription pricing terms. For our subscription-based products, customers generally enter into negotiated contracts, which are typically one to three years in duration. Subscription customers are generally invoiced in advance at the start of the contract term. In the three months ended March 31, 2026 and 2025, we generated 25% and 27% of our revenue, respectively, from non-usage‑based fees.
Current wording
Subscription-based fees are earned in accordance with subscription pricing terms. For our subscription-based products, customers generally enter into negotiated contracts, which are typically one to three years in duration. Subscription customers are generally invoiced in advance at the start of the contract term. In the three months ended June 30, 2026 and 2025, we generated 25% and 26% of our revenue, respectively, from non-usage‑based fees.
Previous wording
We are focusing our research and development investment in the highest impact product areas for our future. We are investing strategically in alignment with our focus on bringing communications, data and AI together into a single platform that enables fast, relevant and personalized interactions.
Current wording
We are focusing our research and development investment in the highest impact product areas for our future. We are investing strategically in alignment with our focus on combining communications, memory, and AI orchestration with identity, governance and observability to enable businesses to deliver continuous, personal and secure conversations.
Previous wording
Our provision for income taxes consists primarily of federal, state and foreign income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business. From time to time, we may recognize tax benefits arising from various matters, including newly enacted legislations. Benefits from income taxes may fully or partially offset the provision for income taxes within a reporting period.
Current wording
Our benefit from (provision for) income taxes consists primarily of the tax benefit from the release of a significant portion of our U.S. valuation allowance; and also, federal, state and foreign income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business. From time to time, we may recognize tax benefits arising from various matters, including newly enacted legislations. Benefits from income taxes may fully or partially offset the provision for income taxes within a reporting period.
Previous wording
The primary difference between our effective tax rate and the federal statutory rate relates to the valuation allowance the Company established on the federal, state and certain foreign net operating losses and credits.
Current wording
In 2026, the primary difference between our effective tax rate and federal statutory rate relates to the tax benefit recognized from the U.S. valuation allowance released during the second quarter of 2026. In prior periods, the primary difference between our effective tax rate and the federal statutory rate related to the valuation allowance we established on the federal, state and certain foreign deferred tax assets.
Previous wording
In the three months ended March 31, 2026, revenue increased by $234.4 million, or 20%, compared to the same period last year. This increase was primarily attributable to the increased usage of our products by our existing customers, as reflected in our DBNE of 114%, as well as an increase of $70.9 million in revenue derived from customer accounts not captured in our DBNE calculation, which are primarily new customer accounts. The increase also reflects $46.1 million in revenue related to the incremental A2P fees recently introduced by major U.S. carriers.
Current wording
In the three months ended June 30, 2026, revenue increased by $270.7 million, or 22%, compared to the same period last year. This increase was primarily attributable to the increased usage of our products by our existing customers, as reflected in our DBNE of 116%, as well as an increase of $75.7 million in revenue derived from customer accounts not captured in our DBNE calculation, which are primarily new customer accounts. The increase also reflects $71.1 million in revenue related to the incremental A2P fees recently introduced by major U.S. carriers.
Previous wording
In the three months ended March 31, 2026, cost of revenue increased by $131.8 million, or 22%, compared to the same period last year. The increase was primarily attributable to a $118.1 million increase in network service provider costs, net of the impact of hedging instruments, which includes a $46.1 million increase due to the incremental A2P fees recently introduced by major U.S. carriers.
Current wording
In the three months ended June 30, 2026, cost of revenue increased by $147.5 million, or 24%, compared to the same period last year. The increase was primarily attributable to a $138.8 million increase in network service provider costs, net of the impact of hedging instruments, which includes a $71.1 million increase due to the incremental A2P fees recently introduced by major U.S. carriers.
Previous wording
In the three months ended March 31, 2026, gross profit increased by $102.7 million, or 18%, compared to the same period last year. This increase was attributable to the factors impacting our revenue and cost of revenue, as described above.
Current wording
In the three months ended June 30, 2026, gross profit increased by $123.1 million, or 20%, compared to the same period last year. This increase was attributable to the factors impacting our revenue and cost of revenue, as described above.
Previous wording
In the three months ended March 31, 2026, sales and marketing expenses decreased by $0.2 million, or nearly flat, compared to the same period last year. Fluctuations in the various sales and marketing expense categories were not significant either individually or in the aggregate.
Current wording
In the three months ended June 30, 2026, sales and marketing expenses decreased by $3.9 million, or 2%, compared to the same period last year. Fluctuations in the various sales and marketing expense categories were not significant either individually or in the aggregate.
Previous wording
In the three months ended March 31, 2026, other (expenses) income, net, decreased by $8.9 million, or 255%, compared to the same period last year. The decrease was primarily attributable to a $7.8 million increase in our share of losses from our equity method investment.
Current wording
In the six months ended June 30, 2026, other (expenses) income, net, decreased by $14.6 million compared to the same period last year. The decrease is primarily attributable to a $7.7 million decrease in other income, net, primarily driven by unrealized losses from fluctuations in foreign currency exchange rates and a $6.9 million increase in our share of losses from our equity method investment.
Previous wording
As of March 31, 2026, we had cash and cash equivalents of $542.0 million and short-term marketable securities of $1.8 billion. Cash equivalents consist of money market funds, commercial paper and U.S. treasury bills. Short-term marketable securities consist primarily of U.S. treasury securities, high credit quality corporate debt securities and commercial paper. The cash and cash equivalents and short-term marketable securities are held for working capital purposes.
Current wording
As of June 30, 2026, we had cash and cash equivalents of $823.3 million and short-term marketable securities of $1.8 billion. Cash equivalents consist of money market funds, commercial paper and U.S. treasury bills. Short-term marketable securities consist primarily of U.S. treasury securities, high credit quality corporate debt securities and commercial paper. The cash and cash equivalents and short-term marketable securities are held for working capital purposes.
Previous wording
In the three months ended March 31, 2026, we repurchased $253.4 million in aggregate value, or 2.1 million shares of our Class A common stock. As of March 31, 2026, approximately $892.0 million of the amount authorized in January 2025 for share repurchases remained available for future repurchases.
Current wording
In the three and six months ended June 30, 2026, we repurchased $66.0 million in aggregate value, or 0.5 million shares, and $319.4 million in aggregate value, or 2.6 million shares, respectively, of our Class A common stock. As of June 30, 2026, approximately $826.0 million of the amount authorized in January 2025 for share repurchases remained available for future repurchases.
Previous wording
In the three months ended March 31, 2026, cash provided by operating activities consisted primarily of our net income of $90.1 million adjusted for non-cash items, including $136.5 million of stock-based compensation expense, $34.2 million of depreciation and amortization expense, $27.2 million of our share of losses from an equity method investment, $17.1 million of amortization of deferred commissions, $4.7 million of non-cash reduction in our operating right-of-use asset, and $160.2 million of cumulative changes in operating assets and liabilities. With respect to changes in operating assets and liabilities, accounts payable and other current liabilities decreased $149.3 million primarily driven by the payment of the 2025 company-wide bonus in the three months ended March 31, 2026. Operating lease liabilities decreased $9.1 million due to payments made against our operating lease obligations.
Current wording
In the six months ended June 30, 2026, cash provided by operating activities consisted primarily of our net income of $1.2 billion adjusted for non-cash items, including $944.1 million of tax benefit related to release of our U.S. valuation allowance, $278.4 million of stock-based compensation expense, $63.7 million of depreciation and amortization expense, $51.6 million of our share of losses from an equity method investment, $33.6 million of amortization of deferred commissions, $9.5 million of non-cash reduction in our operating right-of-use asset, and $175.0 million of cumulative changes in operating assets and liabilities. With respect to changes in operating assets and liabilities, accounts payable and other current liabilities decreased $67.3 million primarily driven by the payment of the 2025 company-wide bonus in the six months ended June 30, 2026. Operating lease liabilities decreased $17.8 million due to payments made against our operating lease obligations.
Previous wording
In the three months ended March 31, 2025, cash provided by operating activities consisted primarily of our net income of $20.0 million adjusted for non-cash items, including $139.3 million of stock-based compensation expense, $49.6 million of depreciation and amortization expense, $19.5 million of our share of losses from an equity method investment, $19.3 million of amortization of deferred commissions, $5.2 million of non-cash reduction in our operating right-of-use asset, and $65.7 million of cumulative changes in operating assets and liabilities. With respect to changes in operating assets and liabilities, accounts receivable and prepaid expenses decreased $42.0 million primarily due to timing of cash receipts and prepayments of certain operating expenses. Accounts payable and other current liabilities decreased $86.4 million primarily driven by the payment of the 2024 company-wide bonus in the three months ended March 31, 2025. Operating lease liabilities decreased $10.3 million due to payments made against our operating lease obligations.
Current wording
In the six months ended June 30, 2025, cash provided by operating activities consisted primarily of our net income of $42.4 million adjusted for non-cash items, including $288.5 million of stock-based compensation expense, $99.4 million of depreciation and amortization expense, $44.7 million of our share of losses from an equity method investment, $38.4 million of amortization of deferred commissions, $10.5 million of non-cash reduction in our operating right-of-use asset, and $59.8 million of cumulative changes in operating assets and liabilities. With respect to changes in operating assets and liabilities, accounts receivable and prepaid expenses decreased $81.6 million primarily due to timing of cash receipts and prepayments of certain operating expenses. Accounts payable and other current liabilities decreased $64.4 million primarily driven by the payment of the 2024 company-wide bonus in the six months ended June 30, 2025. Other long-term assets increased $51.4 million primarily due to an increase in long-term prepayments to support our business. Operating lease liabilities decreased $18.7 million due to payments made against our operating lease obligations.
Previous wording
In the three months ended March 31, 2026, cash used in investing activities was $41.2 million, primarily consisting of $19.6 million of purchases of marketable securities and other investments, net of proceeds from sales and maturities of marketable securities and other investments, $16.7 million related to capitalized software development costs, and $4.2 million related to purchases of long-lived assets.
Current wording
In the six months ended June 30, 2026, cash used in investing activities was $94.4 million, primarily consisting of $53.2 million of purchases of marketable securities and other investments, net of proceeds from sales and maturities of marketable securities and other investments, $33.4 million related to capitalized software development costs, and $7.2 million related to purchases of long-lived assets.
Previous wording
In the three months ended March 31, 2025, cash used in investing activities was $19.1 million consisting of $11.6 million related to capitalized software development costs, $6.4 million of purchases of marketable securities and other investments, net of proceeds from sales and maturities of marketable securities, and $1.2 million related to purchases of long-lived assets.
Current wording
In the six months ended June 30, 2025, cash provided by investing activities was $382.9 million, primarily consisting of $409.2 million of maturities and sales of marketable securities, net of purchases, partially offset by $24.2 million related to capitalized software development costs, and $2.2 million related to purchases of long-lived assets.
Previous wording
In the three months ended March 31, 2026, cash used in financing activities was $252.6 million primarily consisting of $253.0 million of cash paid to repurchase 2.1 million shares of our Class A common stock, including related costs.
Current wording
In the six months ended June 30, 2026, cash used in financing activities was $290.4 million primarily consisting of $323.0 million of cash paid to repurchase 0.5 million shares of our Class A common stock, including related costs, partially offset by $32.8 million in proceeds from exercises of stock options and shares of Class A common stock issued under the Company’s ESPP.
Previous wording
In the three months ended March 31, 2025, cash used in financing activities was $125.8 million primarily consisting of $126.3 million of cash paid to repurchase 1.2 million shares of our Class A common stock, including related costs.
Current wording
In the six months ended June 30, 2025, cash used in financing activities was $301.7 million primarily consisting of $323.2 million of cash paid to repurchase 3.0 million shares of our Class A common stock, including related costs, partially offset by $25.9 million in proceeds from exercises of stock options and shares of Class A common stock issued under the Company’s ESPP.
Previous wording
There have been no changes to our critical accounting policies as described in our Annual Report on Form 10-K filed with the SEC on February 24, 2026.
Current wording
There have been no other changes to our critical accounting policies and estimates as described in our Annual Report on Form 10-K filed with the SEC on February 24, 2026.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
In the six months ended June 30, 2026, revenue increased by $505.1 million, or 21%, compared to the same period last year. This increase was primarily attributable to the increased usage of our products by our existing customers, as reflected in our DBNE of 115%, as well as an increase of $146.6 million in revenue derived from customer accounts not captured in our DBNE calculation, which are primarily new customer accounts. The increase also reflects $117.1 million in revenue related to the incremental A2P fees recently introduced by major U.S. carriers.
Current report — wording carried from elsewhere
In the six months ended June 30, 2026, cost of revenue increased by $279.3 million, or 23%, compared to the same period last year. This increase was primarily attributable to a $257.0 million increase in network service providers’ costs, net of the impact of hedging instruments, which includes a $117.1 million increase due to the incremental A2P fees recently introduced by major U.S. carriers.
Current report — wording carried from elsewhere
In the six months ended June 30, 2026, gross profit increased by $225.8 million, or 19%, compared to the same period last year. The increase was attributable to the factors impacting our revenue and cost of revenue, as described above.
Current report — wording carried from elsewhere
In the six months ended June 30, 2026, sales and marketing expenses decreased by $4.2 million, or 1%, compared to the same period last year. Fluctuations in the various sales and marketing expense categories were not significant either individually or in the aggregate.