Twilio (TWLO) Q2 2026 earnings summary

Executive summary

• Q2 2026 revenue reached $1.5 billion, up 22% year-over-year, with 17% organic growth, driven by increased usage, new product launches, and higher A2P messaging fees passed through from U.S. carriers.

• Non-GAAP gross profit was $736 million, up 18% year-over-year, with a non-GAAP gross margin of 49.1%.

• Non-GAAP income from operations was $285 million, and free cash flow reached $353 million, both showing strong year-over-year growth.

• Dollar-Based Net Expansion Rate improved to 116%, reflecting strong customer growth and retention.

• Net income for Q2 2026 was $1.07 billion, primarily due to a $944 million deferred tax asset valuation allowance release.

Financial highlights

• Messaging revenue grew 28% year-over-year, with incremental carrier fees contributing about 10 points.

• Voice revenue growth exceeded 20% year-over-year, with triple-digit growth in Branded Calling and Conversational Intelligence.

• Software add-on revenue grew 25%+, led by Verify at 30%+ growth.

• Non-GAAP gross margin was 49.1%, down 160 bps year-over-year due to $71 million in incremental U.S. carrier pass-through fees.

• Free cash flow margin reached 24% in Q2 2026.

Outlook and guidance

• Q3 2026 revenue guidance: $1.505–$1.515 billion (16–16.5% reported growth, 11–12% organic growth).

• Full-year 2026 revenue growth guidance raised to 18–18.5% (reported) and 13–13.5% (organic).

• Full-year non-GAAP income from operations and free cash flow guidance raised to $1.135–$1.155 billion.

• Incremental carrier fees expected to reduce full-year non-GAAP gross margin by ~210 bps.

• Q3 2026 non-GAAP EPS guidance: $1.42–$1.47.