01—Abstract
Summary
Summary of the 10-Q filed May 1, 2026. Cited figures are marked; the original filing is the authoritative source.
Twilio Inc. reported first-quarter 2026 revenue of $1.41 billiona, up from $1.17 billion in the same period of 2025, with the filing attributing the increase to higher usage from existing customers (Dollar-Based Net Expansion Rate of 114%, compared with 107%), $70.9 million from customer accounts outside that metric, and $46.1 million from incremental A2P fees introduced by major U.S. carriers.
Income from operations rose to $107.7 millionb from $23.1 million, and net income attributable to common stockholders increased to $90.1 million from $20.0 million, or $0.57 per diluted share versus $0.12. Gross margin was 49% compared with 50% a year earlier, as cost of revenue grew 22% on network service provider costs, including the A2P fees that the company passes through at cost. Cash generation was weaker than earnings.
Net cash provided by operating activities was $153.2 millionc versus $191.0 million, and free cash flow was $132.3 million versus $178.3 million. The filing states that March 2026 included a $141.0 million payment under the 2025 company-wide bonus program, and accrued expenses and other current liabilities declined by $155.8 million over the quarter. Cash and cash equivalents were $542.0 million at March 31, 2026, down from $682.3 million at December 31, 2025, and short-term marketable securities were $1.8 billion.
Capital allocation remained focused on buybacks. The company repurchased 2.1 million Class A shares for $253.4 milliond in the quarter, leaving approximately $892.0 million under the $2.0 billion program that expires on December 31, 2027.
The filing states that there is a reasonable possibility that a significant portion of the valuation allowance on U.S. deferred tax assets could be released in 2026, which would produce a significant income tax benefit, though timing and amount remain subject to operating results. The company also disclosed an IRS notice of intent to audit its 2023 federal return, which is in preliminary stages.
02—Key points
Key Highlights
- Revenue rose 20% year over year to $1,406.9 million, with Dollar-Based Net Expansion Rate of 114% versus 107% in the prior-year quarter.
- Income from operations increased to $107.7 million from $23.1 million; net income attributable to common stockholders was $90.1 million, or $0.57 per diluted share, versus $0.12.
- Non-GAAP operating income was $278.9 million, a 20% non-GAAP operating margin, compared with $213.4 million and 18% a year earlier.
- Operating cash flow fell to $153.2 million from $191.0 million, and free cash flow declined to $132.3 million from $178.3 million, reflecting the $141.0 million 2025 bonus payment made in March 2026.
- Share repurchases totaled $253.4 million for 2.1 million shares in the quarter, with approximately $892.0 million remaining under the authorized program.
- Management believes a significant release of the U.S. deferred tax asset valuation allowance is reasonably possible in 2026, which would create a significant one-time income tax benefit.
- Total debt is $1.0 billion in senior notes (3.625% due 2029 and 3.875% due 2031), and cash, cash equivalents and marketable securities totaled roughly $2.3 billion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2026, Twilio kept $0.06.
- Revenue$1.41B100.0%
- Cost of revenue−$722.7M51.4%
- Gross profit$684.2M48.6%
- Operating costs−$576.6M41.0%
- Operating income$107.7M7.7%
- Interest, other & tax−$17.5M1.2%
- Net income$90.1M6.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed May 1, 2026Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $1.41B$1.17B | +20.0% |
| Cost of Revenue | $722.66M$590.90M | +22.3% |
| Gross Profit | $684.24M$581.57M | +17.7% |
| R&D Expenses | $262.17M$254.29M | +3.1% |
| Operating Expenses | $576.58M$558.49M | +3.2% |
| Operating Income | $107.67M$23.08M | +366.5% |
| Net Income | $90.14M$20.02M | +350.3% |
| EPS (Basic) | $0.59$0.13 | +353.8% |
| EPS (Diluted) | $0.57$0.12 | +375.0% |
| Shares Outstanding (Basic) | 152.42M153.35M | −0.6% |
| Shares Outstanding (Diluted) | 157.76M161.79M | −2.5% |
05—Questions
Frequently Asked Questions
What drove revenue growth in the quarter?
The filing attributes the $234.4 million revenue increase primarily to higher usage by existing customers, reflected in a 114% Dollar-Based Net Expansion Rate, plus $70.9 million from customer accounts not captured in that metric, which are primarily new accounts, and $46.1 million from incremental A2P fees introduced by major U.S. carriers. Usage-based fees made up 75% of revenue, compared with 73% a year earlier.
Did profitability improve, and what affected gross margin?
Income from operations rose to $107.7 million from $23.1 million, and net income was $90.1 million versus $20.0 million. Gross margin was 49% compared with 50%. The filing says A2P fee increases pass through to customers at cost, so they raise revenue and cost of revenue equally and create a headwind to gross margin percentage without changing gross profit dollars. Cost of revenue rose $131.8 million, including a $118.1 million increase in network service provider costs.
Why did free cash flow decline?
Net cash provided by operating activities was $153.2 million versus $191.0 million, and free cash flow was $132.3 million versus $178.3 million. The filing says the March 2026 payment of $141.0 million under the 2025 company-wide bonus program affected first-quarter cash flows, and accrued expenses and other current liabilities decreased $155.8 million. Capitalized software development costs of $16.7 million also reduced free cash flow.
How is the company returning capital to shareholders, and how much authorization remains?
The company repurchased 2.1 million Class A shares for $253.4 million in the quarter under a $2.0 billion program authorized in January 2025 and expiring December 31, 2027. Approximately $892.0 million remained available as of March 31, 2026. Repurchases can be made through open market, private transactions or Rule 10b5-1 plans, and the company has discretion over timing.
What could produce a significant tax benefit, and what IRS matter is pending?
The filing states there is a reasonable possibility that during 2026 sufficient positive evidence may become available to release a significant portion of the valuation allowance against U.S. deferred tax assets, based on recent U.S. net income. Release would result in a significant income tax benefit, though timing and amount depend on operating results. Separately, in February 2026 the IRS notified the company of its intent to audit its federal return for 2023. The audit is in preliminary stages, and management does not expect it to have a material adverse effect.
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