Twilio raises 2026 outlook but guides 11% to 12% fourth-quarter organic growth

Twilio describes itself as the infrastructure for customer engagement. A big part of its business is delivering companies' text messages to their customers' phones, and it says millions of developers and hundreds of thousands of businesses in 180 countries use it.¹ About 75% of revenue comes from usage fees, so sales rise and fall with how much customers send, and most of those customers have no long-term spending commitment. Its main rivals are other cloud communications sellers, and it runs most of its computing on Amazon Web Services.²

In recent quarters, major American mobile carriers raised the fees they charge for business text messages, and Twilio passes those fees to its customers at cost. The fees lift revenue without lifting profit, and Twilio says they weigh on its margins. In the third quarter they added $53.1 million of revenue.¹ That is why Twilio also reports organic revenue, which strips out those fee increases and revenue from newly bought businesses. Organic growth is the cleaner read on demand.²

Twilio had $5.07 billion of revenue in 2025 and $924.0 million of adjusted operating income. Growth sped up in 2026: second-quarter revenue rose 22% to $1,499.1 million. Twilio raised its full-year outlook in April and again in August, lifting the adjusted operating income range from $1.04 billion to $1.06 billion up to $1.135 billion to $1.155 billion.

S&P Dow Jones Indices announced that Twilio would move up from its midcap index into the S&P 500 index.¹ That release is dated October 1, 2026.² The stock closed at $243.79 on September 18 and reached $301.24 on October 5, the highest close in our price file, then slid to $253.73 by October 28. Our file only starts in mid-September, so we cannot confirm the stock's full one-year range.³

Insiders have been selling. In August, funds managed by Sachem Head, whose partner Andrew Stafman sits on Twilio's board, sold 500,000 shares at $247.08 and kept 120,000.¹ Chief executive Khozema Shipchandler sold 13,898 shares at the end of September to cover taxes on stock that vested, and 14,442 more in early October, also from vested stock. Twilio itself bought back stock in April at an average of $133.18 a share.²

Third-quarter revenue was $1,559.5 million, against the $1.505 billion to $1.515 billion range Twilio set in August, so it landed $44.5 million above the top. Organic growth was 16%, against a guide of 11% to 12%.¹ This has become a pattern. Second-quarter revenue of $1,499.1 million beat the top of its $1.420 billion to $1.430 billion range by $69.1 million. Fourth-quarter 2025 revenue, about $1.37 billion by our math from the annual and quarterly reports, beat its $1,310 million to $1,320 million range by $45.9 million.²

Adjusted operating income was $325.7 million, up 39%, and $30.7 million above the top of the August guide. That measure leaves out stock pay, amortization of bought intangible assets and some deal and one-time costs.¹ Under standard accounting rules, operating income was $148.6 million. Most of the $177.1 million gap is $153.9 million of stock pay, a real cost to holders because it is paid in shares, though it fell to 9.9% of revenue from 12.2% a year earlier.²

Net income was $161.2 million, or $1.00 a diluted share against $0.23 a year earlier. It got help from a $22.0 million tax benefit, since pre-tax income was $139.1 million. It also absorbed a $25.5 million share of losses at Syniverse, a messaging company in which Twilio bought a 44.6% stake.¹ Net income so far this year is inflated by a $937.1 million non-cash tax benefit, booked when Twilio released a reserve against its American tax assets after three years of profits at home. It brought in no cash.²

Cash flow is the strongest part of the report. Operating cash flow was $389.2 million, and free cash flow, which subtracts capitalized software and equipment purchases, was $369.6 million. Free cash flow equaled 24% of revenue, against 19% a year earlier.¹ Free cash flow so far this year was $854.6 million. The raised full-year range therefore implies about $335 million to $345 million in the fourth quarter.²

For the fourth quarter, Twilio guided revenue to $1.595 billion to $1.605 billion. That is 17% to 17.5% reported growth but only 11% to 12% organic growth, 4 to 5 percentage points below the third quarter's 16%.¹ It expects adjusted operating income of $300 million to $310 million, which is $15.7 million to $25.7 million less than the third quarter delivered. It also expects gross profit to grow at about the organic rate.²

The full-year outlook rose across the board. Reported growth went to 20% from 18% to 18.5%, and organic growth to 15% from 13% to 13.5%. Adjusted operating income and free cash flow each went to $1.19 billion to $1.20 billion, from $1.135 billion to $1.155 billion.¹ Adding revenue so far this year to the quarterly range gives full-year revenue of about $6.06 billion to $6.07 billion. These are Twilio's own targets, not results.²

The release does not say why organic growth should slow so much. Twilio held a question-and-answer call that evening, but we found no transcript of it.¹ Its quarterly report says the fourth quarter usually gets a lift from more consumer activity, which makes the softer guide stand out. There are two readings. Either Twilio keeps setting a low bar it then clears, as it did after August, or a real slowdown is coming that the third quarter's 16% did not show.²

Existing customers kept spending more. The net expansion rate, which compares what a group of existing customer accounts spends now with a year earlier, was 114%, roughly 14% more spending. That is up from 109% a year ago but down from 116% in the second quarter.¹ Twilio says the rate falls when customers cut usage or when it lowers prices.²

The balance sheet carries the story easily. At the quarter's end, Twilio held $1.06 billion of cash and $1.83 billion of short-term securities, $2.89 billion in all, against $993.6 million of long-term debt. That leaves about $1.90 billion of net cash.¹ The debt is two $500 million notes at fixed rates: 3.625% due 2029 and 3.875% due 2031, costing about $37.5 million a year in interest. Third-quarter operating income under standard rules covered a quarter's interest about 16 times, and Twilio said in its June quarterly report that it met all covenants on the notes.² Gross debt equals about 0.8 times this year's adjusted operating income guide. Twilio also had $1.5 billion of purchase commitments running up to five years, and it says its cash will cover its needs, buybacks included, for the next 12 months and beyond.³

Buybacks are not shrinking the share count. Diluted shares averaged 161.7 million in the quarter, 2.5 million more than the 159.2 million a year earlier, and the fourth-quarter guide assumes 163 million.¹ Adding 153.6 million shares outstanding on July 24, 2026, about 0.77 million options and 12.17 million unvested stock units, the fully diluted count is about 166.5 million. The $1.0 billion of notes ranks ahead of those shares if anything goes wrong.² Twilio spent $127.2 million on buybacks in the third quarter and $448.3 million so far this year, roughly the same as the $432.3 million of stock pay over the same stretch. About $700 million of its buyback authority remains, and the program expires on December 31, 2027.³

Each flow of money has two sides. On buybacks, holders give up cash that could build the business, and in return the company spends about as much as the stock pay it hands employees, yet the diluted share count still rose by 2.5 million over the year. On carrier fees, customers pay more and Twilio books more revenue, but the money goes on to the carriers, and the adjusted gross margin slipped to 49% from 50%.

The stock fell 4.7%, from $253.73 at the October 28 close to $241.90 at the October 29 close, after trading near $239.31 at the open. Over the same span SPY, a fund that tracks the S&P 500, moved from $772.28 to $769.505, so most of the drop was Twilio's own.¹ The results call was set for that evening, after the close, so our prices do not reflect the results yet.² At $241.90 and 153.6 million shares, Twilio is worth about $37.1 billion. Net of its cash, that is about 29.4 times this year's adjusted operating income guide on the 153.6 million shares outstanding, or about 31 times on the 161.7 million diluted shares, and the free cash flow outlook is about 3.2% of market value.³ The price sits about 20% below the October 5 high in our file and below the $247.08 Sachem Head's funds got in August, but far above the $133.18 Twilio paid in April.⁴

The bull case is a company that guides low: Twilio set the same 11% to 12% organic guide before this quarter's 16%.¹ Profit is growing faster than sales: the adjusted operating margin reached 21% against 18%, free cash flow hit 24% of revenue, and Twilio has about $1.90 billion of net cash.²

The bear case, strongest point first. If the guide is honest, organic growth falls from 16% to 11% to 12% while adjusted operating income dips, and a stock valued at that high a multiple of its operating income guide has little room for that.¹ Next, about 75% of revenue is usage-based, most of those customers have no long-term spending commitment, and the net expansion rate slipped back to 114% from 116% in the second quarter, the same level as the first quarter. Microsoft is also moving its Entra ID sign-in service toward passkeys as the default, and Twilio warns that fewer one-time passwords could hurt its revenue.² Finally, diluted shares are guided up to 163 million from 161.7 million, and Sachem Head's funds sold 500,000 of their 620,000 shares in August.³

Twilio's goals for 2026 are 20% reported growth, 15% organic growth, and $1.19 billion to $1.20 billion of both adjusted operating income and free cash flow. They are management targets, not results.¹ Other dates to watch: a new employee stock purchase offering starts November 16, 2026; Entra ID customers who want to keep text or voice codes must pick an outside provider before February 2027; and the buyback authority ends December 31, 2027.² The real test is the fourth-quarter report. If full-year 2026 revenue comes in at or below about $6.07 billion, the top of the implied range, the 11% to 12% guide was a real slowdown; a small beat would still leave fourth-quarter organic growth near 12%, and only a beat on the scale of this year's $44.5 million to $69.1 million would show the guide was a cautious bar.³

The release gives no reason for the drop from 16% to 11% to 12%, and we found no transcript of the October 29 call where management may have explained it.

Our prices end at the October 29 close, before the results call, so the market's first verdict on the numbers is not yet measured here.

We found no 2026 analyst forecasts in our sources, so we cannot say whether the beat or the guide came in above or below outside estimates.

The release gives $127.2 million spent on buybacks in the quarter but not how many shares that bought or at what price; the third-quarter quarterly report should show it.

We found no figure, in Twilio's filings or the Telesign release, for how much Twilio revenue comes from sign-in codes or from Microsoft's Entra ID customers.

Our price file starts in mid-September 2026, so the stock's high and low over the past year cannot be confirmed here.