Twilio Inc.TWLONYSE
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Operator: Good day, and thank you for standing by. Welcome to the Twilio Inc. Fourth Quarter 2025 Earnings Call. At this time, all participants, please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question-and-answer session. To ask a question, please press 11 on your telephone, and wait for your name to be announced. To withdraw your question, please press 11 again. I would now like to hand the conference over to your speaker today, Rodney Nelson, Vice President, Investor Relations. Thank you, operator. Good afternoon, everyone, and thank you for joining us for Twilio Inc.’s
Rodney Nelson: Fourth Quarter 2025 Earnings Conference Call. Joining me today are Khozema Shipchandler, Chief Executive Officer, Aidan Viggiano, Chief Financial Officer, and Thomas Wyatt, Chief Revenue Officer. As a reminder, we will disclose non-GAAP financial measures on this call. Definitions and reconciliations between our GAAP and non-GAAP results can be found in our earnings presentation posted on our IR website at investors.twilio.com. We will also make forward-looking statements on this call, including statements about our future outlook and goals. Such statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described. Many of those risks and uncertainties are described in our SEC filings, including our most recent Form 10-Q and our forthcoming Form 10-Ks. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We disclaim any obligation to update any forward-looking statements except as required by law. With that, I will hand it over to Khozema and Aidan, who will discuss our Q4 results, and we will then open up the call for Q&A. Thank you, Rodney. Good afternoon, everyone, and thank you for joining us today. Twilio Inc. had a great Q4, as we reached record heights with $1,400,000,000 in revenue, $256,000,000 of non-GAAP income from operations, $256,000,000 in free cash flow. For the full year, we generated $5,100,000,000 in revenue, $924,000,000 of non-GAAP income from operations, and $945,000,000 of free cash flow. Our strong fourth quarter capped off what I believe is one of the most balanced and successful years of execution in our company's history. Throughout 2025, we have operated with a level of discipline, rigor, and focus that has fundamentally transformed our financial profile and innovation velocity. Reflecting on 2025, Twilio Inc. stood out with accelerating revenue growth, expanding operating margins, and by delivering significant growth in free cash flow.
Khozema Shipchandler: And
Khozema Shipchandler: we did this all while continuing to increase our innovation velocity. Even more validating is what we are hearing from our customers, that we are moving beyond being a provider of communications channels and data toward becoming a foundational infrastructure layer in the age of AI. Revenue from our voice channel continues to accelerate, aided in part by Voice AI, which we believe is just the beginning as these use cases will evolve to be more conversational and cross-channel, an area where Twilio Inc. is uniquely differentiated. Our go-to-market motion is firing on all cylinders. In Q4, we saw particular strength in self-serve as revenue grew 28% year over year, led by accelerating voice revenue growth. ISVs were also a bright spot, with revenue growing 26% year over year. In Q4, the number of large deals closed of $500,000 or more increased 36% year over year. With this solid foundation, 2026 is set up to be a great year. We are focused on delivering the essential infrastructure that powers experiences across communications driven by contextual data and evolving automation like Voice AI to help customers build personalized, lifelong relationships with their own customers. During the quarter, our go-to-market team delivered several notable wins, including a nine-figure renewal with a leading marketing automation platform, the largest deal in Twilio Inc.’s history. Other customer wins included Agnes AI, Creditas, Elise AI, GenSpark, Grubhub, Lofty, Nestlé, Pneuma, PolyAI, Ramp, RetailAI, Sierra, and others who are turning to Twilio Inc. as their infrastructure partner to help drive outcomes and scale their businesses. We also signed a strategic partnership with an existing customer, AEG, a leading global sports and live entertainment company. AEG will use the Twilio Inc. platform to better understand fan behavior and power real-time personalized communications before, during, and after live events at select venues and for sports teams owned by the organization. In Q4, we saw healthy signs that reinforced our shift from selling features and products to selling solutions, as our multiproduct customer count grew 26% year over year, and our software add-on revenue grew over 20% year over year. Agent productivity is a great example, as it lets customers take advantage of a bundled offering that spans multiple Twilio Inc. products. One customer, Exelab, an Italian systems integrator, signed a cross-sell agreement for its client, DentalPro, to adopt our agent productivity solution powered by Flex, messaging, and voice. Together, they built a virtual agent for customer care and inbound and outbound booking management. In the first two months, clinics using Conversation Relay for AI agents reported a meaningful uplift in service levels with the virtual agent handling a significant share of booking confirmations.
Khozema Shipchandler: And finally,
Khozema Shipchandler: during Cyber Week, Twilio Inc. hit record highs. Twilio Inc. sent 6,990,000,000 messages, a 34.5% year-over-year increase, handled 1,070,000,000 calls, up 58% year over year, and processed 75,100,000,000 emails, a 14.6% increase year over year. Importantly, this week was a powerful reminder of the trust our customers place in us. As the foundational infrastructure that handles their critical workloads, we help them strengthen the relationships they have with their own customers and earn their trust. On the innovation front, 2025 was a breakout year for voice. Voice year-over-year revenue growth accelerated throughout the year, with customers adopting products like branded calling, Conversation Relay, and conversational intelligence. For example, Sierra, a leading company in the customer experience AI space, signed a new deal to continue leveraging Twilio Inc.’s voice functionality to power their platform. Additionally, they will use voice software products like conferencing to support additional use cases like multiparty calling or taking payment over the phone. While still early days, during Q4, Twilio Inc.’s branded calling revenue grew roughly 6x year over year. RCS continued to gain traction as volume grew roughly 5x quarter over quarter. Ramp, a leading financial operations company, signed a deal to leverage RCS as a branded messaging experience to power account notifications and two-way capabilities, such as adding a purchase reason or sending a receipt. Our innovation strategy and execution continued to be validated by industry analysts. Throughout the year, we were recognized as a leader in major evaluations by Gartner, IDC, and Omnia, and ended the year by being named the company to beat in CPaaS AI by Gartner. They noted Twilio Inc.’s combination of omnichannel communications, contextual data, AI frameworks, developer base, and technology partnerships makes it the company to beat in CPaaS AI. And we are just getting started. A lot of our innovation roadmap is about capturing what is important in AI today and in the future. We are providing customers with the foundational infrastructure layer that embeds persistence,
Khozema Shipchandler: memory,
Operator: context,
Khozema Shipchandler: and the ability to spin up an agent no matter what its capabilities are, all on the Twilio Inc. platform. Several of these products launched into private beta earlier this month, and we look forward to sharing more at SIGNAL in May.
Khozema Shipchandler: In summary,
Khozema Shipchandler: 2025 was a terrific year. We made tremendous progress against our goals, exceeded our targets for the year, and are well positioned to sustain this momentum into 2026 with our robust innovation roadmap. We remain focused on our vision of creating amazing experiences for brands, and are furiously building new and exciting capabilities that capitalize on all that AI has to offer. These innovations will allow Twilio Inc. to deliver memory-driven orchestration and agentic interactions that inspire engagement and trust. This is why Twilio Inc. is an essential infrastructure layer for every company's tech stack, and our ongoing investments in our platform capabilities will continue to position us to be the foundational layer customers rely on to win in the AI era. I will now turn the call over to Aidan.
Aidan Viggiano: Thank you, Khozema, and good afternoon, everyone. Twilio Inc. finished the year strong with a record-breaking fourth quarter. We generated record revenue of $1,400,000,000, up 14% year over year on a reported basis and 12% year over year on an organic basis. We also generated record non-GAAP income from operations of $256,000,000. Free cash flow was $256,000,000 as well. We came into 2025 with a focus on execution, and we delivered across the board. For the full year, we generated revenue of $5,100,000,000, representing 14% reported growth and 13% organic growth. We also delivered strong profitability with non-GAAP income from operations increasing 29% year over year to $924,000,000. Free cash flow was up 44% year over year to $945,000,000. And finally, we generated $158,000,000 in GAAP income, marking our first full year of GAAP profitability. We are continuing to drive top-line performance through solid execution across our go-to-market initiatives while delivering product innovations that are seeing encouraging uptake. Voice finished the year strong as revenue growth accelerated to the high teens in Q4, its best growth rate since 2022. This was aided by strong growth from Voice AI customers as Voice AI revenue growth accelerated above 60% year over year. Messaging revenue growth was also solid, driven in part by strong volumes during Cyber Week and the holiday season. Software add-on revenue growth exceeded 20% year over year in the quarter, led by Verify, which grew more than 25% for the second consecutive quarter. Finally, from a sales channel perspective, we saw continued strength with both self-service and ISV customers, with revenue from each channel growing 25% plus in the quarter. For the full year, self-serve revenue grew 21%, ISV revenue grew 24%, and software add-on revenue grew 21%, led by Verify and voice add-ons. By product for the year, growth was led by messaging at 18% and voice at 13%. Email grew 7%, Segment 2%, while other revenue grew 8%, led by user identity and authentication offerings such as Verify. Our Q4 dollar-based net expansion rate was 109%, reflecting the improving growth trends we have seen in our business over the last several quarters. We delivered non-GAAP gross profit of $682,000,000 for the quarter, with growth accelerating to 10% year over year. This represented a non-GAAP gross margin of 49.9%, down 200 basis points year over year and 20 basis points quarter over quarter. We incurred carrier pass-through fees of $23,000,000 associated with increased Verizon A2P fees, which primarily drove the sequential decline in gross margin. For the full year, non-GAAP gross profit was $2,600,000,000, up 8% year over year, and non-GAAP gross margin was 50.5%. Q4 non-GAAP income from operations came in ahead of expectations at a record $256,000,000, up 30% year over year, driven by strong revenue growth and continued cost discipline. Non-GAAP operating margin was 18.7%, up 220 basis points year over year and 70 basis points quarter over quarter. The sequential increase was driven by improved gross profit growth and ongoing cost discipline. In addition, we generated $57,000,000 in GAAP income from operations. For the full year, non-GAAP income from operations was $924,000,000, up 29% year over year. Non-GAAP operating margin was 18.2%, up 220 basis points year over year. This margin expansion reflects our sustained financial discipline evidenced by a 1% year-over-year decline in non-GAAP operating expenses. Q4 stock-based compensation as a percentage of revenue was 11.3%, down 180 basis points year over year and down 90 basis points quarter over quarter. For the full year, stock-based compensation as a percentage of revenue was 11.8%, down 200 basis points year over year and down 10 percentage points since 2021 when we initiated our effort to reduce stock-based compensation. In addition, our net burn rate was just 1.5% in 2025, well below the 3% target we set out at our 2025 Investor Day. Our ending share count was 152,000,000, down slightly year over year and down 18% since we initiated our share repurchase efforts in 2023. We generated free cash flow of $256,000,000 in the quarter. Additionally, we completed $198,000,000 in share repurchases in Q4. For the full year, we completed $855,000,000 in share repurchases, representing 90% of 2025 free cash flow, well above the 50% target established at our 2025 Investor Day. Turning to guidance, for Q1, we are initiating a revenue target of $1,335,000,000 to $1,345,000,000, representing 14% to 15% reported growth and 10% to 11% organic growth. This includes an assumed $44,000,000 in incremental pass-through revenue from U.S. carrier fees, a $21,000,000 increase from Q4, driven by increased T-Mobile fees that took effect in January. As a reminder, our organic revenue excludes the contribution from incremental increases to U.S. carrier fees. Moving to the full year, we are encouraged by the broad-based trends we have seen throughout 2025 and into 2026, though we are continuing to plan prudently given our usage-based revenue model. For the full year, we expect reported revenue growth of 11.5% to 12.5% and organic revenue growth of 8% to 9%, above our 2025 Investor Day framework as we continue to orient the business to double-digit organic revenue growth. In addition, we expect full-year non-GAAP gross profit dollar growth to be similar to our organic revenue growth rate. Since 2025, all major U.S. carriers have announced A2P fee increases, including AT&T, whose rate increases will go into effect on April 1. Our full-year revenue guidance assumes approximately $190,000,000 in incremental pass-through revenue from these fees. The year-over-year impact from these fees will be slightly higher in 2026 due to the timing of Verizon's increase in June. While the pass-through fees have no impact on our ability to generate gross profit, income from operations, or free cash flow dollars, they do impact our margin rates. For modeling purposes, we would expect the incremental fees to reduce our full-year 2026 non-GAAP gross margin by roughly 170 basis points, all else equal. Turning to our profit outlook, for Q1, we expect non-GAAP income from operations of $240,000,000 to $250,000,000. We are initiating our full-year 2026 non-GAAP income from operations range of $1,040,000,000 to $1,060,000,000, reflecting our continued focus on cost discipline and operating leverage across the business. Consistent with 2025, free cash flow in Q1 will be impacted by a $140,000,000 payment related to our company-wide cash bonus program that we implemented in 2024 as part of our efforts to reduce stock-based compensation. This will limit free cash flow generation in the first quarter to roughly $100,000,000 as planned. That said, we continue to expect to generate strong quarterly free cash flow over the balance of the year, and for the full year 2026, we expect free cash flow in the range of $1,000,000,000 to $1,040,000,000. We are confident in our outlook for 2026 and have made substantial progress against the financial framework established last January. Our cost savings and efficiency initiatives are tracking ahead of plan, and our 2027 outlook looks strong. While our 2027 non-GAAP operating margin target did not account for the recent fee increases initiated by all major U.S. carriers, we are on track to meet or exceed the financial framework we provided last year. Given these incremental fees are passed through at cost, they are a headwind to our margin rate, but it is important to note that they have no impact on our ability to generate profit dollars. As an alternative, we are providing a 2027 non-GAAP operating income target of at least $1,230,000,000, which is unaffected by carrier fees and aligns with the high end of our Investor Day framework. We will provide complete full-year 2027 guidance during our Q4 2026 earnings call next year. I am proud of the execution we delivered in 2025, resulting in accelerating organic revenue growth and strong profitability. I am excited by our opportunity to be the foundational infrastructure layer that powers seamless, intelligent interactions for our customers. I am confident that our go-to-market execution and product innovation will help us drive durable, profitable organic growth in 2026 and beyond. And with that, we will now open it up for questions.
Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone, and wait for your name to be announced. To withdraw your question, please press 11 again. One moment for questions. Our first question comes from Alex Zukin with Wolfe Research. You may proceed. Hey, everyone. Thanks for taking the question, and really congrats on a solid end to the year.
Alex Zukin: Maybe just the first one for me is, can you break out what drove some of the voice strength in Q4? How much were Voice AI-driven use cases versus traditional voice, and maybe the outlook for 2026 on that front.
Thomas Wyatt: Hey, Alex. This is Thomas here. We saw a broad adoption of voice across all of our different customer cohorts. There was definitely really good strength in our self-service channel. Some of that is the Voice AI startups, some of that is just the existing self-service customers. We also saw a lot of interest and momentum in the ISV community as well. We talked about the growth we are seeing in the ISV business
Thomas Wyatt: in the mid-twenties, and that is a lot of voice adding, accelerating to that as the ISV community builds more Voice AI agents into their core platforms. We are also seeing it in the direct enterprise space as well, where there are a lot of use cases specifically around customer care and sales automation, with voice being a big part of internal AI assistants that are being built there. It has been pretty broad. Whether it is on the infrastructure or on the voice add-ons software, we have seen great penetration there as well.
Alex Zukin: Perfect. And then, Aidan, maybe just a follow-up for you. First, really
Mark Ronald Murphy: appreciate a lot more detail, a lot of the detail that you put into the guidance, both for the gross profit commentary in the letter, and the operating income dollar amount that you provided for 2027. But maybe frame it for us a little bit. If you look at the Q1 guide organically, it is actually a little bit more aggressive than this time last year. Maybe what gives you the visibility there? And then contrast that to the full year and the level of conservatism that you are providing. And then finally, apologize for the three-parter. The gross profit dollar growth commentary for fiscal 2026 similar to revenue growth? Just maybe a finer point on that.
Aidan Viggiano: Yes. I will start with Q1. We feel really good about our guidance coming into Q1. The 10% to 11%, as you noted, is higher than where we have been. It is our highest quarterly guidance in over three years. It really speaks to the broad-based strength that we are talking about here. We look at it by product, with both voice and messaging growing in the high teens in the quarter. You look at it by sales channel: ISVs and self-serve both growing very strongly above 25%. You look at our multiproduct adoption, and it is really accelerating. We feel really good about how the sales team is executing. We feel really good about our product innovation. We have seen these trends consistently over several quarters, so we have the confidence coming into the quarter to guide at 10% to 11%. Now when you think about the year, we are guiding 8% to 9% organically. As you know, Alex, our revenues are primarily usage-based, and with that comes a certain level of prudent planning. But as we said, we feel really good about the guidance for Q1. Our full-year guidance is 100 basis points higher than our initial 2025 organic revenue growth, and again, we are encouraged by the broad-based trends. I would just say we are seeing a lot of opportunity, our teams are executing well, and we feel optimistic about the setup for the year. As it relates to the 2026 gross profit growth, we did say we expect it to be similar to the organic growth. If you look at the trends over 2025, you started to see the gross profit growth accelerate over the year, and importantly, you saw the gap between gross profit growth and organic growth narrow as we moved throughout the year. That is driven by a lot of proactive action that we have taken. Now as we head into 2026, there are a couple of factors at play. First, and most exciting, is the accelerated growth for many of our higher-margin products. I just talked about a lot of them, but voice in particular, and a lot of the software add-ons that Thomas just talked about—Verify, Lookup, SMS pumping protection—we are getting a lot of traction on these products. We are seeing that really take hold. In addition to that, as we have mentioned over the past few quarters, we are taking a more critical eye towards supply chain costs. That has resulted in certain cost optimizations on the carrier side in the form of more direct connections or more optimization across our carrier supply chain. We are also leveraging our balance sheet to secure discounts in some cases, so we are starting to see some of those things materialize. The last thing I will talk about is on the hosting cost side. As we talked about in 2025, we completed a migration for our email business. They went from on-prem to the cloud. We experienced a double bubble of cost in 2025. That does not repeat in 2026, so that is now behind us. It is really all of those things that gave us the confidence to say that we expect gross profits to grow in line with organic revenue.
Operator: Thank you.
Operator: Our next question comes from Taylor McGinnis with UBS. You may proceed.
Aidan Viggiano: Yes. Hi. Thanks so much for taking my questions. Aidan, first one, if you were to adjust for all the incremental A2P fees, can you offer us what the operating income margin guide would have been relative to the 8.5% reported number? And as a second part to this question, when we look at the Q1 operating margin guide, it actually looks pretty solid relative to the full year. So can you comment, are you anticipating any uptick in expenses or investments as you move throughout the year, and anything that might have been different or new relative to when you first gave this at the analyst day? Yes. Great. So I am not sure I connected the dots on the 8.5% that you mentioned, Taylor, but let me just talk about how fees impact our guides for 2026. I called it out in the prepared remarks, but we expect about $190,000,000 in incremental pass-through fees passing through our revenue. That is year over year. Remember, Verizon went into effect in June, and then AT&T and T-Mobile are coming into effect in 2026. That is roughly a 170-basis-point headwind on gross margin. On operating margin, the equivalent is about 60 to 70 basis points. The important thing is we are seeing leverage in the business from our cost savings and our efficiency initiatives. It is just masked by the impact of these carrier fees on a margin basis. Though, again, as we have said many times, they have no impact on our ability to generate gross profit dollars or income from operations or free cash flow. On your next question on the operating expenditures for Q1, we do have a little bit of front-loading of some expenses. First, we have a full quarter of our Stitch acquisition in Q1, and then we are making some product investments. We are making them really around the platform as well as some systems to support our efforts to cross-sell and to move more towards solution selling. We expect the pace to moderate as we move throughout the year, but a little heavier in Q1. Perfect. Thanks. And then, Khozema, one for you. If we look at the messaging growth, excluding A2P fees, I think the growth in the quarter was around 14% despite some of the tougher compares that you are coming against. Maybe talk through what is driving the strength of that business as you then look into 2026. Are you thinking about the durability of double-digit growth potentially?
Khozema Shipchandler: Yes, Taylor, I would not point to anything specific as it relates to any one of our products, actually. Most of our products are performing pretty well. I think we are seeing broad-based strength across the business. We parse it by channel. We parse it by industry. We look at it by use case, and across the board, we are seeing a lot of strength across a number of different products, which includes messaging. We gave the guidance in terms of the year, and Aidan commented on the fact that for Q1, which obviously encompasses messaging given that that is our largest product, Q1 is the highest it has been for us in three years in terms of the guide, and we stepped up the full-year guide 100 basis points relative to last year. Hopefully, you can take from some more commentary that we feel pretty good about the outlook for 2026.
Aidan Viggiano: Thank you so much.
Operator: Thank you.
Operator: Our next question comes from Mark Murphy with JPMorgan. You may proceed.
Khozema Shipchandler: Thank you so much. I will add my congrats.
Khozema Shipchandler: A lot of us are probably starting to feel the presence of RCS more tangibly in the last several months when we look at our own SMS text inboxes. I see them from Verizon and United Airlines and banks and hospitals. I think you mentioned a 5x sequential increase, which is hard to fathom. Could you just explain that? What is driving it, the shape of that adoption curve? And then remind us, any real economics to Twilio Inc.? We are hearing about
Operator: 70% plus open rates on the messages, and then presumably some of them are going to be rich messages. I am just wondering what you are seeing there.
Khozema Shipchandler: Yes. I will answer a couple of your questions, and I will take a step back and give you our views on it generally. In terms of the 5x, it is important to characterize that as off of a relatively smaller base. Yes, it is growing incredibly quickly. Yes, we are very excited about the prospect of what RCS can do for customers, but it is growing off of a relatively small base. That said, given that kind of momentum, we are very excited about where it goes going forward. In terms of what is driving the shape of the adoption curve, it is sort of embedded in your question in a way. These rich experiences really are great for many of our customers. I think that
Khozema Shipchandler: you will start to see more of it shift towards increasingly marketing-oriented use cases where RCS is particularly strong.
Khozema Shipchandler: You have not really seen that breakout just yet. The open rates are very high for all the reasons that I just alluded to a second ago. What is really interesting right now is you have two corners of it that can be really interesting. For a small business that probably will not get real estate on someone’s phone, it is an awesome way for you to be able to engage your customer,
Khozema Shipchandler: and it is a lot different and differentiated relative to just standard
Khozema Shipchandler: messaging. That is an awesome use case. You will start to see that from a lot
Khozema Shipchandler: of small businesses,
Khozema Shipchandler: which will include a lot of startups. On the flip side, it is also an excellent use case for
Khozema Shipchandler: things that perhaps a certain cohort of the population
Khozema Shipchandler: will have real estate on their phone but infrequent users will not.
Khozema Shipchandler: Things like providing a ticket—you referenced United a moment ago—
Khozema Shipchandler: that is a great vehicle to offer the capability to send someone information in a rich way that is better than conventional SMS. We are very excited about where it is today and the growth that we have experienced recently. Given the nature of it, we have said many times we are optimistic about it, and we are gaining optimism as we go.
Operator: Thank you. That is a great answer, Khozema.
Mark Ronald Murphy: The other question for you and maybe Aidan is we look back at the last year or two, it actually did not feel like a rising tide for the space that you operate in, because several of your competitors just have not grown at all in a while. When you reflect back on that, where do you think the Achilles’ heels have been for your peers who are struggling in this kind of environment, and the ways that you have outflanked them, does that feel like it is going to be structurally durable here this year, then into 2027 where you are giving really strong operating income guidance? I mean, I cannot speak for those guys. They do not, frankly, pay a lot
Khozema Shipchandler: of attention to them. With respect to Twilio Inc., it is differentiated technology. We have always had
Khozema Shipchandler: a phenomenal developer experience. We work really hard to cultivate that. Many of our customers that start as developers grow into some of the largest enterprise customers in the world.
Khozema Shipchandler: Thomas alluded to the growth that we have seen in ISVs. Aidan did too.
Khozema Shipchandler: You have two ends of the spectrum that are experiencing really rapid growth, and that is almost entirely a technology story.
Khozema Shipchandler: Customers would not buy the higher-priced product, which we are in almost all cases, unless they were getting superior ROI. Credit to our R&D team, they are constantly innovating whether it is in the channels or in terms of some of this add-on technology,
Khozema Shipchandler: and in many of the exciting things, which I am not going to get into today, we are going to talk about at SIGNAL in a few months. That level of velocity in terms of innovation and being able to continuously offer new and improved features and products to our customers,
Khozema Shipchandler: that is what sets this company apart.
Mark Ronald Murphy: And then I think our ability to leverage data on top of that, which adds a level of context I think is missing not just from maybe our classic competitive set, but really from any company
Khozema Shipchandler: trying to provide this kind of essential infrastructure and then being able to
Mark Ronald Murphy: going forward, build your own AI agents on top of our platform, be able to integrate
Mark Ronald Murphy: into anybody agnostic of who the players are, that is pretty differentiated. We feel good about our business. I cannot speak to the others, but I think we are
Khozema Shipchandler: doing a pretty good job right now.
Thomas Wyatt: One more thing I would like to add to that, Khozema. What we are seeing is a lot of the point product competitors just do not have the multichannel capabilities that we have. What we have seen is our ability to add, whether it is an existing messaging customer, add another channel, whether voice or email or something, and then adding AI add-ons on top of it has been pretty compelling. One of the things in particular in the enterprise we are seeing is our large enterprise customers, the companies that spend at least $500,000 with us, they are up 36% year over year. This is a matter of winning market share based on having a platform play, and I think it is playing out.
Operator: Thank you.
Operator: Our next question comes from Samad Samana with Jefferies.
Mark Ronald Murphy: Hi, good evening, and it is great to see the strong quarter. I wanted to maybe go back to the Voice AI side just as I think about enterprise versus serving as infrastructure inside of
Khozema Shipchandler: next-gen companies. Where are you seeing stronger growth
Mark Ronald Murphy: today? And as you think about 2026, which of those do you think is the earlier opportunity that will ramp? And I have a follow-up question as well. Thank you so much.
Khozema Shipchandler: Samad, can I just parse your question and make sure that we have it? You are asking
Khozema Shipchandler: whether we see more growth from pure-play Voice AI companies or whether we see it on the enterprise side. Is that right?
Mark Ronald Murphy: Correct. Large enterprises directly leveraging it more or more growth there versus the Sierras and Polys of the world.
Mark Ronald Murphy: And how are you thinking about that trend line maybe through 2026? Yes. We are not going to guide it based on specific cohorts of the customer segment at that level of detail, Samad. What I will say is
Khozema Shipchandler: we are seeing it on both sides, but ultimately it will be the enterprise that ends up carrying the day here. Yes, we are seeing incredible velocity with the Voice AI side of it. You have literally hundreds of Voice AI companies. We have partnerships with a lot of these guys. We count most of them as our customers. They are definitely helping influence the growth characteristics that we are seeing in the voice channel. But as Thomas said earlier, the voice business is growing great anyway,
Mark Ronald Murphy: and that tends to be the icing on top.
Khozema Shipchandler: The reality of it is the big spenders are on the enterprise side, and as Thomas again alluded to, in a lot of these sales use cases and support use cases, you are seeing a lot of adoption there. You have a lot of early adopters and a lot of heavy experimenters. The heavy experiments, based on the ROI that we are delivering for customers right now, are going to start to translate into more durable volume,
Khozema Shipchandler: and then if you layer on top of that what Thomas said in answer to the last question, our ability to offer this multichannel orchestration, because customers are telling us directly, based on their own consumers' usage patterns,
Mark Ronald Murphy: they want the ability to go in and out of session. They want to be able to do it async and sync, and having multichannel capabilities is really important based on the lifestyles of the customers that we deal with, based on connectivity issues,
Khozema Shipchandler: based on the complexity of the workloads. My bet would be enterprise is what drives it and carries the day ultimately, but
Khozema Shipchandler: not at the expense of what we are seeing in Voice AI. Thomas, anything different? The only thing I would add to that is the other cohort that is
Thomas Wyatt: really leaning into voice is the larger, more established ISV community. It is not necessarily AI natives, but the larger players that are software players embedding voice capabilities as part of their core platform, and they are a big consumer of our voice business as well.
Operator: Thank you.
Operator: Our next question comes from Sitikantha Panigrahi with Mizuho. You may proceed.
Mark Ronald Murphy: Great. Thanks for taking my question, and congrats on a great quarter.
Operator: I just want to extend Samad's question and also your comment about
Mark Ronald Murphy: Twilio Inc. becoming this AI infrastructure layer. It is not just the Voice AI. Is there a way to quantify
Aleksandr J. Zukin: in terms of revenue contribution coming from all the AI-related use cases, not just Voice AI? Maybe even the messaging side—are you seeing where agentic AI adoption or a customer trying to use? And what is kind of a jumps on you have backed into, next couple years, like, when you guide in 2027? When do you think this agentic AI tech software—you know, you will see both your messaging and voice adoption?
Thomas Wyatt: Yes. Thanks for the question. The way we think about it really is Twilio Inc. is the platform where AI agents can get infrastructure services, whether it is the ability to communicate across any channel, the ability to create customer memory or understanding and personalization from the data substrate that we have largely powered by our CDP and Segment capabilities, and the ability to validate somebody and make sure that the person is who they say they are with our identification and identity and security products. Really think about Twilio Inc. as a platform where you come as a critical ingredient to build the next-generation agents. That being said, each of our channels does have AI capabilities embedded on top of it. We talk a little bit about voice—voice orchestration, Conversation Relay as an example. In the area of account security, we do a lot of AI in the way we do fraud detection and identity verification. I will give you an example of some of that. In the course around personalization, we use a lot of AI to be able to determine anonymous people and make them known people based on synthesizing data and applying AI to it. Really, it is more of a platform play for us than any individual channel.
Mark Ronald Murphy: I would just add one thing to what Thomas said. What you are seeing today is
Khozema Shipchandler: a tremendous amount of investment and excitement in the Voice AI space. To underscore part of what he said, we view this as ultimately multichannel orchestration. Conversation Relay, the product that we launched a little while ago, is also experiencing really great growth, again off of a relatively small base, but we are very excited about it. The promise of that product is to be able to handle these very complex workloads across multiple channels without ever losing the customer, and, in fact, not just
Khozema Shipchandler: not losing them, but engaging them better than one of our customers ever has before. That is the promise going forward. What is going to happen most likely is that a lot of the activity that you are seeing in voice is going to end up transitioning or also start happening in some of the other channels. Again, as Thomas rightly pointed out, it is across the platform. The point is not to focus on any one channel, but rather meet the customer where they are, serve as the control plane across whether it is an agent-to-agent interaction, a human-to-agent interaction, or a human-to-human interaction. We want to make sure that we are the infrastructure that allows for all of it to happen in the most seamless way possible.
Operator: Thank you.
Operator: Our next question comes from Ryan MacWilliams with Wells Fargo. You may proceed.
Khozema Shipchandler: Hey, thanks for the question. Khozema, good to see Twilio Inc. Verify growth, and
Thomas Wyatt: look, I am going to try to take a big, deep breath before
Khozema Shipchandler: asking this. I know how kind of crazy this sounds, but
Operator: let us just say that there is an increase in
Khozema Shipchandler: spam communications traffic due to AI agents, and there are a lot of legal reasons why that would be difficult to occur, but in that kind of environment,
Operator: how do you think this would help Twilio Inc. Verify and maybe RCS, as
Khozema Shipchandler: things would be important and would help
Operator: you know, authorize the appropriate messages that people actually want.
Khozema Shipchandler: You said spam, right? That was the nut of your question? Yes. Yes. Yes.
Mark Ronald Murphy: Yes. I think this is actually a place where Twilio Inc. is ideally positioned,
Khozema Shipchandler: and the whole notion of being branded is key here. We have done a lot of work around branded calling, for example,
Khozema Shipchandler: to make sure that
Mark Ronald Murphy: not only are you getting a number or you are getting called from a number that you recognize that is specifically identified, but it is also
Khozema Shipchandler: logoed so that you really understand what is
Khozema Shipchandler: happening on the other side of that interaction. Very difficult to replicate otherwise. There is a technology lift that you get there, and the data validates that that is a
Mark Ronald Murphy: great solution.
Khozema Shipchandler: The pickup rates on those kind of calls are much more significant. You get a twofer. One is that
Khozema Shipchandler: you get better authentication and identity. Two is that you get better pickup rates because the other side is not
Khozema Shipchandler: just looking at some random number. They are getting a known identified number on the other side. With this large technology that we have, and I think you will start to see it more broadly adopted, you will have the exact same thing end up happening over SMS. That again reinforces what we are trying to accomplish. The products that you referenced like Verify, certainly, RCS already has branding in the nature of the product. You will start to see pickups in those products because the channels only work if you know that everything is authenticated,
Mark Ronald Murphy: especially in an agent-to-agent interaction. That is one where we have to make
Khozema Shipchandler: sure that we know who the originator is and who the receiver is, so that we are conducting a proper transaction.
Khozema Shipchandler: By the way, that is also one of the reasons that we picked up this identity company a quarter or so ago. We think they can be really important to
Mark Ronald Murphy: validating and reconciling these different kinds of interactions, especially agent to agent,
Khozema Shipchandler: and we think all of that is ultimately an uplift for every one of our products.
Operator: Thank you. Our next question comes from Nick Altmann with BTIG. Awesome.
Khozema Shipchandler: For taking the question. It is great to hear there is another quarter of acceleration in voice and the continued traction with Voice AI. But, Khozema and Thomas, I know it is early, but what
Khozema Shipchandler: can you share with investors, whether it is how use cases are scaling in production, longer-term commitments from customers around voice and Voice AI, or just
Khozema Shipchandler: anything else that can help get us
Operator: kind of more comfortable with the durability
Khozema Shipchandler: over the next couple years in the voice side of the business? Thanks.
Thomas Wyatt: Yes. Hey, Nick, it is Thomas. A couple of thoughts. The first thing I would say is the voice growth and strength has been broad-based. It is not just the startups. It is the enterprise. It is the ISVs, and it has been a global phenomenon for us as well. That is part of it. We are also seeing it in the context of not just the self-service channel, which is usually where most customers onboard into Twilio Inc., but also our direct sales team and the way they go after new logos and new business. Voice has been a big driver of that team's success this past quarter. In fact, it was the best new business quarter we have had in years across the globe. Fundamentally, voice is having its renaissance. It is a key part of the next-generation user experience of AI-powered applications and agents. We feel it is pretty durable, and we are doing everything we can to accelerate our product capabilities and our go-to-market partnerships to scale it even faster. Thank you.
Operator: Our next question comes from Jamie Reynolds with Morgan Stanley. You may proceed.
Khozema Shipchandler: This is Jamie on
Thomas Wyatt: for Elizabeth Porter. Just a question from our side. There is a really impressive list
William Verity Power: of customer wins that you flagged. Just trying to get a better sense: are you getting better at that upfront portion of the selling motion as opposed to landing and expanding with more functionality later?
Thomas Wyatt: Yes. The way to think about it is we have two different ways of acquiring customers. The first way is the self-service channel, which is largely product-led growth. It is marketing, more efficient marketing, using AI to help us make onboarding and activating customers more seamless than ever. There are a lot of product capabilities that we have implemented in the last year that reduce the friction of customers getting started with Twilio Inc. Then there is the direct sales team that is focused primarily on going after named new accounts and logos that we want to take in. Generally, they are larger ISVs or enterprise-type customers. That business has been really strong for us in the last six months. That motion is largely about the AEs hunting these logos. They get customers started on the Twilio Inc. capabilities, and then once the customers are starting to see some value, we shift that logo over to strategic AEs that will help grow that account over time. This motion has been working for us for some time, and we are just continuing to fuel it.
Operator: Thank you. Our next question comes from James Fish with Piper Sandler. You may proceed. Hey, everyone. Thanks for the question. Just quickly, are
William Verity Power: you planning any change in comp plans for 2026? Is there going to be an idea to drive more cross-sell to drive that multiproduct adoption and incentivizing maybe the ISVs through their customer base to adopt more of your API? Thanks, everyone.
Thomas Wyatt: Yes. Great question, Jim. We did make some changes in our comp plan in 2026 to drive more cross-sell and upsell incentives into the sales plan. Again, just to remind people, we did bring the total global sales team together this past year in 2026, and then we created a specialist function as well to support the global sales team with our more advanced technologies. The combination is that the AEs are very incented to land a customer and then show them the value of the platform and get expansions through that. In Q4, we had a 26% growth in new product customer count, and this is the beginning of a journey that we are on, but we are feeling pretty good about the multiproduct customer count acceleration.
Operator: Thank you. Our next question comes from Joshua Reilly with Needham. You may proceed.
Mark Ronald Murphy: Yes. Thanks for taking my question. As you look at the strength in the international messaging business, can you speak to the margin dynamics you are seeing around these deals? Customers may be adding more higher-margin
Khozema Shipchandler: add-on products now than they would have a few years ago. With these deals, does that offset the inherent lower gross margin on international messaging? And can this accelerate further in the next couple of years? Thank you.
Aidan Viggiano: Yes. From an international messaging perspective, I will just say we focus on unit economics, and that has always been our approach. We continue to do the same. We have seen a lot of success in international messaging over the course of 2025—very strong growth. In terms of multiproduct adoption, in general, we are seeing it pretty broad-based, with our international messaging customers and others. That tends to mix us up on margins, as you know, but I will let Thomas talk about some of the upsells and other things that he is noting in the market.
Thomas Wyatt: Yes. The other thing that we are seeing is that SI partners—system integrators—have been really helpful for us to scale internationally in bringing some of these multiproduct capabilities to the international markets and helping our customers have success with more integrations with other systems that they use. The combination of the platform itself plus the partnerships is helping us accelerate in international markets.
Operator: Thank you.
Operator: Our next question comes from Will Power with Baird. You may proceed.
William Verity Power: Maybe first, just a quick follow-up. Nice to see the improving trends in
James Derrick Wood: gross profit growth. I know, Aidan, you laid out some of the visibility drivers that help with the 2026 guidance. Anything else you would call out on the Q4 improvement? Is it all those same factors or anything else to note? Then my other question, just to come back to the voice strength. I know it is still early, and I guess in the software add-on bucket, but anything you could share on the trends with Conversation Relay and conversation intelligence would be great. Thanks.
Aidan Viggiano: Yes. I will start with gross margins, Will. It is more of the same, really. When you look at Q4, on a reported basis we were down 200 basis points year over year. That was driven by two things. About 80 basis points was the fees. We had them in Q4 of this year. They did not exist in Q4 of last year. They were increased after Q4 of last year. That was about an 80-basis-point headwind. The remainder was really messaging mix. We provide some information in our presentation, but messaging as a percentage of revenue is up about 200 basis points year over year. As you know, that is our lowest margin product, and as that business grows faster than the average, it mixes us down in gross margin. Again, we really look at it from a unit economic perspective, and we take on business that we think hurdles a certain rate. Those are the two dynamics that we saw in the quarter: messaging mix and the U.S. carrier fee increase.
Operator: Thank you. And then
Aidan Viggiano: I will hand it to Thomas or Khozema to talk about the voice question.
Thomas Wyatt: In terms of voice, there are three components. The voice infrastructure connectivity layer has been very strong across all the key use cases, whether it is marketing, customer care, etc. Then there are the software applications that sit on top, more of the AI or orchestration: conversational insights, conferencing, recording, transfer—all of those features are growing very fast on top of the existing voice infrastructure, including Conversation Relay. This is the beginning. It is early on this voice acceleration, but we feel good about where we are at.
Operator: Thank you. Our next question comes from Jack Snider with KeyBanc Capital Markets. You may proceed.
William Verity Power: Hey. Thanks for taking the question. This is Jack on for Jackson Ader. I was wondering if you could talk about the biggest levers for the NRR acceleration
Khozema Shipchandler: year over year, and then also if these levers are going to continue into 2026? As a follow-up question, on multiproduct customers, are you thinking about the pipeline of single-product customers adopting the incremental one or two throughout 2026 driving that growth higher?
Aidan Viggiano: On the DBNR side, we saw it at 109% this quarter, roughly flat quarter over quarter. It was a couple of things. In terms of where we have seen the acceleration over the course of the year, it ties back to what Thomas has been saying about multiproduct adoption. It is really expansion where we are seeing the acceleration, and it is pretty broad-based. We see it across our ISVs as well as our other direct enterprise customers. In particular, I would say voice and messaging tend to be the drivers of where we are seeing it. Given our guide of 10% to 11% for the quarter in Q1 and 8% to 9% for the year, yes, we would expect that level of strength to continue.
Thomas Wyatt: I will comment on the multiproduct customers. There are two different ways that we see the scaling. The first is the self-service channel itself, and we have some really awesome new product capabilities that are coming to market shortly that are going to make it even easier for customers to take advantage of more products on the Twilio Inc. platform. The lion's share of the customers that are single product are actually self-service customers. Our goal is to get them using more channels and more software on top of that. When it comes to the direct selling motion, going back to the earlier question around compensation plans and account planning and how we are doing that, the global AEs this year are really focused on helping customers see the value of multiple channels and multiple services across the Twilio Inc. platform, and their compensation is tied to that as well. What we find is that customers see a lot more ROI with Twilio Inc. when they use two, three, and four channels. Their spend goes up, and their ROI goes up significantly. We know if we can get them to that second and third channel, they are going to have a lot of benefits. Our goal is to use the specialist organization combined with the new comp plan to help our AEs be even more effective in doing that this year than ever before.
Operator: Thank you. Our last question comes from Koji Akita with
Operator: Bank of America.
Mark Ronald Murphy: I wanted to go back to an earlier question about the gross profit tracking to organic revenue growth. I totally get that in reference to the guidance, but how should we think about it
Khozema Shipchandler: if there is upside to organic revenue? It sounds like it should at least flow directly to gross profit, and then it sounds like there are a few ways that gross profit could grow even faster than organic revenue.
Operator: And so
Mark Ronald Murphy: is that the right way to think about this? And if that is not the case, then why would it be that way?
Aidan Viggiano: I would say for the year, we said it should grow too, and that is the guidance that we have given. A big factor in how to think about it is product mix. We have seen some of our higher-margin products really accelerate, voice being the big one over the back half of the year. We saw voice tick up quite a bit. That is very helpful in terms of expanding gross margins and also getting gross profit to grow more in line with organic revenue growth. But messaging is still a very big part of our business. It is almost 58% of our revenue. That could be a factor in how much higher gross profit could grow relative to revenue for 2026. For now, we are saying we expect it to be similar to, which is better than what we have been tracking.
Operator: Thank you.
Operator: This concludes the conference. Thank you for your participation. You may now disconnect.