01—Abstract
Summary
Summary of the 10-Q filed October 30, 2026. Cited figures are marked; the original filing is the authoritative source.
Twilio Inc. reported third-quarter 2026 revenue of $1.56 billiona, up 20% from $1.30 billion in the same period of 2025.
Net income attributable to common stockholders rose to $161.2 millionb from $37.2 million, and diluted earnings per share were $1.00 versus $0.23. Income from operations was $148.6 million, compared with $40.9 million a year earlier. Dollar-Based Net Expansion Rate (DBNE) improved to 114% from 109%.
The filing attributes $53.1 millionc of the quarter's revenue increase to incremental A2P messaging fees introduced by major U.S. carriers, which the company passes through to customers at cost and which create a headwind to gross margin. For the nine months ended September 30, 2026, revenue was $4.47 billion, up 21%, and net income was $1.32 billion, diluted EPS was $8.25. That result includes a $937.1 million income tax benefit from releasing a significant portion of the U.S. deferred tax asset valuation allowance in the second quarter of 2026.
The filing also records a $32.8 milliond impairment on prepaid network services after two network service providers experienced operational and financial challenges. Non-GAAP income from operations was $325.7 million in the quarter, compared with $234.5 million, and free cash flow was $369.6 million, compared with $247.5 million. The balance sheet remained liquid, with $1.06 billion in cash and cash equivalents and $1.83 billion in short-term marketable securities as of September 30, 2026.
The company repurchased $446.7 million of Class A common stock in the nine months, leaving approximately $698.7 million available under its $2.0 billion program that expires December 31, 2027. Total long-term debt, net, was $993.6 million, and the company stated it was in compliance with all covenants under its senior note indentures.
02—Key points
Key Highlights
- Q3 2026 revenue of $1,559.5 million rose 20% year over year; nine-month revenue of $4,465.5 million rose 21%.
- DBNE increased to 114% in Q3 2026 from 109% in Q3 2025; the filing attributes $81.0 million of Q3 revenue growth to customer accounts not captured in DBNE.
- Q2 2026 release of the U.S. valuation allowance produced a $937.1 million income tax benefit in the nine months, lifting nine-month net income to $1,318.5 million; the remaining valuation allowance is $521.1 million.
- Q3 2026 income from operations was $148.6 million versus $40.9 million, and Q3 diluted EPS was $1.00 versus $0.23.
- Non-GAAP income from operations was $325.7 million in Q3 2026 (21% non-GAAP operating margin) versus $234.5 million (18%) a year earlier.
- Free cash flow was $369.6 million in Q3 2026 (24% margin) versus $247.5 million (19%); nine-month net cash from operating activities was $914.8 million.
- The company repurchased $446.7 million of stock in the nine months and has $698.7 million remaining under its $2.0 billion authorization, which expires December 31, 2027.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2026, Twilio kept $0.10.
- Revenue$1.56B100.0%
- Cost of revenue−$799.0M51.2%
- Gross profit$760.5M48.8%
- Operating costs−$611.9M39.2%
- Operating income$148.6M9.5%
- Interest, other & tax$12.5M0.8%
- Net income$161.2M10.3%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2026filed October 30, 2026Financial Statements
Q3 FY2026 against Q3 FY2025
| Line item | Q3 FY2026Q3 FY2025 | Change |
|---|---|---|
| Revenue | $1.56B$1.30B | +19.9% |
| Cost of Revenue | $799.01M$668.33M | +19.6% |
| Gross Profit | $760.53M$632.08M | +20.3% |
| R&D Expenses | $280.37M$262.31M | +6.9% |
| Operating Expenses | $611.90M$591.13M | +3.5% |
| Operating Income | $148.63M$40.95M | +263.0% |
| Net Income | $161.16M$37.25M | +332.7% |
| EPS (Basic) | $1.04$0.24 | +333.3% |
| EPS (Diluted) | $1.00$0.23 | +334.8% |
| Shares Outstanding (Basic) | 154.38M153.12M | +0.8% |
| Shares Outstanding (Diluted) | 161.75M159.21M | +1.6% |
05—Questions
Frequently Asked Questions
What drove the large increase in net income in the first nine months of 2026?
Most of the increase reflects a $937.1 million income tax benefit recognized in the second quarter of 2026 from releasing a significant portion of the U.S. deferred tax asset valuation allowance. Operating results also improved, with income from operations of $340.8 million for the nine months versus $101.0 million a year earlier.
How are A2P messaging fees affecting Twilio's results?
The company passes network service provider fees for A2P messages from major U.S. carriers through to customers at cost, so they add an equal amount to revenue and cost of revenue. The filing states this does not affect gross profit dollars but creates a headwind to gross margin. A2P fees contributed $53.1 million to Q3 2026 revenue and $167.8 million to nine-month revenue.
What was the $32.8 million impairment loss on prepaid assets?
The company determined it would be unable to consume certain network services it had prepaid in prior periods because of operational and financial challenges at two network service providers. The impairment was recorded in the second quarter of 2026 and appears as a separate operating expense line.
How much debt does Twilio have and how is it capitalized?
Long-term debt, net, was $993.6 million as of September 30, 2026, consisting of $500.0 million principal of 3.625% Senior Notes due 2029 and $500.0 million principal of 3.875% Senior Notes due 2031. The company stated it was in compliance with all covenants under the related indentures.
What are Twilio's capital return plans and remaining capacity?
In the nine months ended September 30, 2026, the company repurchased 3.1 million shares for $446.7 million. As of September 30, 2026, approximately $698.7 million remained available under the January 2025 authorization of up to $2.0 billion, which expires December 31, 2027.
06—Continue