Twilio (NYSE: TWLO) reported revenue of $1.56 billion for the third quarter of 2026, which ended September 30, up 20% from a year earlier and $44.5 million above the top of its own forecast. It also forecast that organic revenue growth would slow to 11% to 12% in the fourth quarter, from 16% in the third. Organic revenue leaves out acquisitions and recent increases in the fees U.S. mobile carriers charge for business text messages, which Twilio passes on to customers at cost.
The shares fell 14.3% to $207.08 immediately after the results, StockStory reported, and were down 18% in extended trading in CNBC's list of after-hours movers, last updated at 5:19 p.m. ET. Investor's Business Daily reported that results topped consensus estimates but guidance "underwhelmed and signaled slowing organic growth."
What beat the forecast
Revenue, organic growth, non-GAAP operating income and non-GAAP earnings per share all came in above the ranges Twilio gave on August 6. Organic revenue grew 16%, against 11% to 12% forecast. Non-GAAP operating income rose 39% to $325.7 million, against $285 million to $295 million, and non-GAAP diluted earnings per share were $1.65, against $1.42 to $1.47. StockStory, citing S&P's consensus, put analysts' expectations at $1.51 billion of revenue and $1.47 of non-GAAP earnings per share.
On a GAAP basis, operating expenses rose 3.5% against revenue growth of 20%, and operating income more than tripled to $148.6 million. The non-GAAP operating margin widened to 20.9% from 18.0%, while the non-GAAP gross margin slipped to 49.2% from 50.1%. Because Twilio passes the carrier fees on at cost, they "do not impact our gross profit, but they create a headwind to our gross margins," it said in its quarterly report in August. Free cash flow, a non-GAAP measure, rose 49% to $369.6 million. Twilio bought back $127.2 million of its shares in the quarter and had about $700 million left of a $2.0 billion authorization that runs to the end of 2027.
The dollar-based net expansion rate, which divides this quarter's revenue from last year's customer accounts by what the same accounts brought in a year earlier, was 114%, up from 109% a year earlier but down from 116% in the second quarter. Twilio stopped reporting its count of active customer accounts this year; the last figure, for December 31, 2025, was more than 402,000.
Third quarter | 2026 | 2025 | Change |
|---|---|---|---|
Revenue ($M) | 1,560 | 1,300 | +20% |
Organic growth | 16% | 13% | +3 points |
Non-GAAP gross margin | 49.2% | 50.1% | -0.9 points |
GAAP operating income ($M) | 149 | 41 | +263% |
Non-GAAP operating income ($M) | 326 | 235 | +39% |
Non-GAAP operating margin | 20.9% | 18.0% | +2.9 points |
GAAP diluted EPS | $1.00 | $0.23 | +$0.77 |
Non-GAAP diluted EPS | $1.65 | $1.25 | +32% |
Free cash flow ($M) | 370 | 248 | +49% |
Net expansion rate | 114% | 109% | +5 points |
Source: Twilio's third-quarter results releases for 2026 and 2025. Margins to one decimal and the changes in EPS and free cash flow are SaasBuzz calculations from the reported figures.
The forecast against the old one
Twilio raised its 2026 forecast for the third time this year. It now expects reported revenue growth of 20%, against 18% to 18.5% in August, 14% to 15% in April and 11.5% to 12.5% when it first gave the forecast in February. Organic growth is now forecast at 15%, against 13% to 13.5% in August and 8% to 9% in February. Non-GAAP operating income and free cash flow are each forecast at $1.19 billion to $1.20 billion, $50 million more at the midpoint than in August.
The fourth-quarter range of $1.595 billion to $1.605 billion implies full-year revenue of $6.06 billion to $6.07 billion, growth of 19.6% to 19.8%, by SaasBuzz's arithmetic. Taking out the first half and the third-quarter forecast, August's full-year midpoint left about $1.58 billion for the fourth quarter; the new midpoint is $1.60 billion. Of the roughly $74 million added to the year at the midpoint, about $50 million is the third quarter's beat over the midpoint of its forecast and about $24 million a higher fourth quarter.
The fourth-quarter revenue midpoint is above the $1.58 billion analysts expected, by the S&P consensus StockStory published, and the midpoint of the non-GAAP EPS range of $1.48 to $1.53 is above StockStory's $1.48. CNBC, using LSEG's consensus of $1.49, reported that the bottom of that range fell short. Non-GAAP operating income of $300 million to $310 million would be below the third quarter's $325.7 million: at the midpoints, the operating margin would be 19.1%, against 20.9% in the third quarter and 18.7% a year earlier.
Why a beat met a falling share price
The outlets that gave a reason pointed at the outlook, not the quarter. CNBC tied the fall to the bottom of the EPS range. In a note for The Motley Fool, David Kretzmann wrote that "the outlook calls for both growth and operating profit to step down at year-end, and the release doesn't say why." A day earlier, ServiceNow's shares fell 18% after hours when it, too, topped its own forecast but projected slower growth in contracted revenue.
Twilio's own figures show three changes. Organic growth is forecast to slow by 4.5 points at the midpoint, to 11.5% from 16%. Non-GAAP operating income is forecast to fall by about $21 million from the third quarter, at the midpoint. And the third-quarter beat was narrower than the two before it: revenue came in $49.5 million, or 3.3%, above the midpoint of Twilio's forecast, against 5.0% in the first quarter and 5.2% in the second, the smallest margin of the seven quarters SaasBuzz compared, level with the first quarter of 2025. StockStory's report also said net revenue retention declined; Twilio's own net expansion rate was 114%, down from 116% in the second quarter.
The counterweight is Twilio's record against its own organic forecasts. Each of its last five quarterly forecasts included an organic growth range, and each time organic growth came in 3.5 to 6.5 points above the midpoint. The fourth-quarter range is the same 11% to 12% that Twilio gave for the third quarter in August, and the third quarter came in at 16%.
Quarter | Organic forecast | Organic actual | Net expansion |
|---|---|---|---|
Q3 2025 | 8% to 9% | 13% | 109% |
Q4 2025 | 8% to 9% | 12% | 109% |
Q1 2026 | 10% to 11% | 16% | 114% |
Q2 2026 | 10% to 11% | 17% | 116% |
Q3 2026 | 11% to 12% | 16% | 114% |
Source: Twilio's quarterly results releases. Each forecast was given with the previous quarter's results.
The release gives no reason for the slower fourth-quarter forecast. Its one comment on demand came from Khozema Shipchandler, Twilio's CEO, who pointed to consumer AI.
Consumer AI has accelerated AI development, and its adoption demands fast, reliable infrastructure built for AI speed.Khozema Shipchandler, CEO of Twilio, in the company's third-quarter results release
Twilio scheduled a question-and-answer call with analysts for 5 p.m. ET. By 5:45 p.m. ET, SaasBuzz had found no transcript or report of what executives said there about the forecast.
What Twilio says about AI companies as customers
Twilio now calls itself "the infrastructure for customer engagement in the AI era," the line its releases have used since August. In April it was still "the customer engagement platform that drives real-time, personalized experiences for today's leading brands."
Its third-quarter results presentation, distributed through Publicnow and posted on MarketScreener, lists AI companies among the quarter's customer wins. ElevenLabs, the AI audio company, signed a cross-sell deal to add WhatsApp and Personalized Support. Gong signed a seven-figure deal to keep using Twilio Voice and other add-ons for Gong Engage, its sales engagement product. Ushur, which sells AI agents for health care, insurance and the public sector, signed a seven-figure expansion and is adding voice AI through Conversation Relay, the Twilio service the presentation describes customers using to build voice AI agents. Meera AI added voice and Twilio's Conversations Layer to its messaging, and Eltropy, an AI platform for credit unions and community banks, has invested in the Conversations Layer.
The only eight-figure deal in the presentation that involved AI came from an unnamed health insurer, which is using Conversation Relay to build a voice AI agent. Neither the release nor the presentation says how much of Twilio's revenue comes from AI companies.
