Twilio (TWLO -6.01%), a leader in cloud-based communications software, announced its Q2 FY2025 results on August 7, 2025. The company delivered notable beats on both revenue and earnings, with revenue reaching $1.23 billion—3.5% above consensus estimates—and non-GAAP earnings per share of $1.19, outpacing the expected $1.05. The period marked the third consecutive quarter of accelerating revenue growth, improved profitability, and strong cash generation. The quarter’s results reflect both robust performance from the Communications segment and continued emphasis on AI-driven innovation, although gross margin pressures and flat performance in the Segment customer data platform persisted.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $1.19 | $1.05 | $0.87 | 36.8 % |
| Revenue | $1.23 billion | $1.19 billion | $1.08 billion | 13.5 % |
| Non-GAAP Income from Operations | $221 million | $175.3 million | 26.1 % | |
| Free Cash Flow | $263 million | N/A | N/A | |
| Operating Margin | 3.0 % | (1.8 %) | 4.8 pp |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Understanding Twilio’s Business and Growth Priorities
Twilio operates as a software platform that allows businesses to integrate messaging, voice calls, emails, and other communications into their own applications using application programming interfaces (APIs). Its customers include everything from startups to large enterprises who want to reach their users over SMS, voice, and digital channels without building the infrastructure themselves.
The company’s recent priorities focus on scaling its Communications products—like programmable SMS, voice, and email—and deepening its integration of data and artificial intelligence (AI) capabilities. Twilio also concentrates on improving reliability and scalability, expanding customer relationships, and developing its customer data platform (Segment CDP, which centralizes and analyzes customer information). Core success factors for Twilio include product innovation in AI, maintaining platform reliability, expanding within existing customers, and differentiating its offering versus competitors.
Quarter in Review: Financial and Operational Highlights
Twilio’s revenue (GAAP) rose 13% year-over-year, reflecting strong demand for its Communications products. The Communications segment, home to products like SMS messaging and voice APIs, posted a 14% GAAP revenue increase to $1.15 billion. This growth accompanied positive customer trends: active customer accounts climbed to more than 349,000, up by more than 33,000 from the year before.
The company reported record non-GAAP profitability, with non-GAAP income from operations reaching $221 million, a 26% gain from a year ago. Free cash flow also hit a quarterly high at $263 million, rising 33% year over year. Dollar-based net expansion, a measure of how existing customer spend changes over time, improved to 108%, up from 102%. This uptick signals greater upselling and cross-sales to existing users, driven in part by successful adoption of products across messaging, voice, and add-on AI features.
Gross margin (GAAP) fell to 49.1%, down from 51.3% a year ago. The company cited the end of one-time hosting partner credits and a heavier mix of international messaging (which usually yields lower margins) as specific reasons. Non-GAAP gross margin also declined to 50.7% from 53.3%.
While Twilio’s Communications segment fueled growth and profits, the Segment CDP business saw GAAP revenue remain flat at $75.5 million. Despite this, Segment remained profitable on a non-GAAP basis, posting $6 million in income from operations.
Twilio continued returning capital to shareholders, executing $176.7 million in stock buybacks as part of a multi-year, $2 billion repurchase program. The company ended the quarter with $969 million in cash and equivalents, up from $421 million at December 31, 2024. No acquisitions were announced, though management noted an ongoing interest in small "tuck-in" deals rather than major purchases.
Platform innovation remained a central narrative. Twilio invested in new AI and generative AI products, like Conversation Relay (an AI-powered voice agent platform) and Generative Custom Operators, which allow customers to automate and analyze customer conversations using natural language prompts. Management highlighted accelerating interest and adoption from both new startups and established brands, particularly as businesses seek to automate customer engagement with AI-powered voice and text solutions.
Looking Ahead: Guidance and Areas to Watch
Management raised its guidance, now expecting organic revenue to grow 9–10% (up from 7.5–8.5%) for FY2025. Twilio projects Q3 2025 revenue between $1.245 billion and $1.255 billion, with organic revenue growth of 8%–9%. Projected non-GAAP income from operations is $205–$215 million, with non-GAAP earnings per share forecasted at $1.01–$1.06 for Q3 2025. Full-year free cash flow expectations were also increased, now at $875–$900 million.
The company’s outlook reflects confidence in ongoing operational execution but acknowledges macroeconomic uncertainties highlighted by management. Investors should monitor Twilio’s non-GAAP gross margin trend, as continued growth in low-margin messaging products could pressure profitability. Another major focus will be whether the Segment CDP business returns to growth or continues to lag. The company’s performance in deepening customer relationships, improving upsell rates, and capturing opportunity from AI-driven innovation will be key to its ability to drive durable, profitable growth in coming quarters.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
