Core Insights - The article emphasizes the importance of conducting personal in-depth research and due diligence before making investment decisions, highlighting the inherent risks involved in trading [3]. Group 1 - The analysis is intended solely for informational purposes and should not be interpreted as professional investment advice [3]. - There is a clear disclaimer regarding the lack of any stock, option, or similar derivative positions in the companies mentioned, indicating a neutral stance [2]. - The article expresses that past performance does not guarantee future results, reinforcing the need for careful consideration by investors [4].

Core Insights - The article discusses the investment potential of a specific company, highlighting its strong market position and growth prospects [1][2]. Group 1: Company Performance - The company has demonstrated significant revenue growth, with a reported increase of 25% year-over-year [1]. - The latest earnings report indicates a net income of $50 million, reflecting a substantial improvement compared to the previous quarter [1]. Group 2: Market Trends - The industry is experiencing a shift towards digital solutions, which is expected to drive further demand for the company's services [1]. - Competitors are also adapting to these trends, which may impact market share dynamics in the near future [1].

Group 1 - The author has been active in the markets for several years, focusing primarily on long/short equities [1] - The author holds a Bachelor of Science Degree in Finance and Accounting, with a minor in History, and has experience managing investment portfolios [1] - The author has completed internships, including one at a large bank and another managing a university endowment [1] Group 2 - There is a reminder for investors to conduct their own due diligence before making any investment decisions [3] - The article expresses the author's own opinions and does not involve any compensation from companies mentioned [2] - Seeking Alpha emphasizes that past performance does not guarantee future results and that views expressed may not reflect the platform's overall stance [4]

Group 1 - The article discusses the investment potential of Twilio (NYSE: TWLO), highlighting that management's forward FY25 guidance appears conservative compared to consensus estimates [1] - The author emphasizes the importance of sustainable, growth-driven companies in maximizing shareholder equity, as demonstrated by the investment strategy of a family office fund led by Amrita [1] - Amrita's background includes experience in high-growth supply-chain start-ups and venture capital, which has contributed to her ability to maximize returns for clients during the pandemic [1] Group 2 - The article mentions that Amrita's newsletter, The Pragmatic Optimist, focuses on portfolio strategy, valuation, and macroeconomics, aiming to make financial literacy accessible [1] - The newsletter has been recognized as a top finance newsletter on popular platforms, indicating its influence and reach within the investment community [1]

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) The unaudited condensed consolidated financial statements present Twilio's financial position as of June 30, 2025, and its results of operations and cash flows for the three and six months ended June 30, 2025 and 2024 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Twilio's total assets were **$9.85 billion**, a slight decrease from **$9.87 billion** at the end of 2024, driven by a decrease in short-term marketable securities offset by an increase in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $969,229 | $421,297 | | Short-term marketable securities | $1,573,371 | $1,963,102 | | Total current assets | $3,531,637 | $3,447,299 | | Goodwill | $5,243,266 | $5,243,266 | | **Total assets** | **$9,848,292** | **$9,865,472** | | **Liabilities & Equity** | | | | Total current liabilities | $720,059 | $820,220 | | Long-term debt, net | $991,429 | $990,587 | | **Total liabilities** | **$1,804,370** | **$1,912,506** | | **Total stockholders' equity** | **$8,043,922** | **$7,952,966** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2025, Twilio reported **$1.23 billion** revenue, a **13.5%** increase year-over-year, achieving a net income of **$22.4 million** compared to a **$31.9 million** net loss in Q2 2024 Q2 2025 vs Q2 2024 Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $1,228,425 | $1,082,502 | 13.5% | | Gross Profit | $602,740 | $555,845 | 8.4% | | Income (Loss) from Operations | $36,989 | $(19,037) | N/A | | Net Income (Loss) | $22,423 | $(31,858) | N/A | | Diluted EPS | $0.14 | $(0.19) | N/A | Six Months Ended June 30 Performance (in thousands, except per share data) | Metric | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $2,400,888 | $2,129,552 | 12.7% | | Gross Profit | $1,184,307 | $1,099,886 | 7.7% | | Income (Loss) from Operations | $60,071 | $(62,541) | N/A | | Net Income (Loss) | $42,440 | $(87,207) | N/A | | Diluted EPS | $0.26 | $(0.50) | N/A | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by operating activities was **$468.1 million**, with cash, cash equivalents, and restricted cash increasing by **$549.3 million** Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $468,126 | $403,466 | | Net cash provided by investing activities | $382,879 | $974,384 | | Net cash used in financing activities | $(301,708) | $(1,261,022) | | **Net increase in cash, cash equivalents and restricted cash** | **$549,297** | **$116,828** | - Share repurchases were a primary use of cash in financing activities, totaling **$323.2 million** in the first six months of 2025, compared to **$1.27 billion** in the same period of 2024[30](index=30&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed disclosure on accounting policies, segment reporting, financial instruments, and other key areas, including a **$1.7 billion** remaining share repurchase authorization - The company has two reportable segments: Twilio Communications and Twilio Segment. Communications generates the vast majority of revenue[56](index=56&type=chunk)[57](index=57&type=chunk) Segment Revenue (Q2 2025 vs Q2 2024, in thousands) | Segment | Q2 2025 Revenue | Q2 2024 Revenue | Change (%) | | :--- | :--- | :--- | :--- | | Twilio Communications | $1,152,955 | $1,007,302 | 14.5% | | Twilio Segment | $75,470 | $75,200 | 0.4% | Segment Non-GAAP Income from Operations (Q2 2025 vs Q2 2024, in thousands) | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Twilio Communications | $280,613 | $249,930 | | Twilio Segment | $6,009 | $(15,815) | - In January 2025, the board authorized a new share repurchase program for up to **$2.0 billion**. As of June 30, 2025, approximately **$1.7 billion** remained available for future repurchases[85](index=85&type=chunk)[86](index=86&type=chunk) Revenue by Geographic Area (in thousands) | Region | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | United States | $786,974 (64%) | $706,451 (65%) | | International | $441,451 (36%) | $376,051 (35%) | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **13%** year-over-year revenue growth in Q2 2025 primarily to increased usage from existing customers in the Communications segment, achieving profitability with a net income of **$22.4 million** [Key Business Metrics](index=28&type=section&id=Key%20Business%20Metrics) Twilio's key business metrics showed positive momentum in Q2 2025, with Active Customer Accounts increasing to **349,000** and the Dollar-Based Net Expansion Rate improving to **108%** Key Business Metrics Comparison | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Active Customer Accounts | 349,000 | 316,000 | | Dollar-Based Net Expansion Rate | 108% | 102% | - Management believes the Active Customer Accounts metric is becoming less informative as an indicator of business growth due to a large number of accounts with low individual spend[120](index=120&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) For Q2 2025, consolidated revenue grew **13%** YoY to **$1.23 billion**, driven by a **14%** increase in the Communications segment, leading to an operating income of **$37.0 million** Revenue by Segment - Q2 Comparison (in thousands) | Segment | Q2 2025 | Q2 2024 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Twilio Communications | $1,152,955 | $1,007,302 | $145,653 | 14% | | Twilio Segment | $75,470 | $75,200 | $270 | 0% | | **Total Revenue** | **$1,228,425** | **$1,082,502** | **$145,923** | **13%** | - The Communications segment's revenue growth was driven by a **109%** Dollar-Based Net Expansion Rate and **$55.2 million** in revenue from new customers[152](index=152&type=chunk) - The Segment segment's flat revenue was due to new customer revenue being offset by churn and contraction from existing customers, reflected in a **95%** Dollar-Based Net Expansion Rate[153](index=153&type=chunk) - Cost of revenue increased **19%** in Q2 2025, primarily due to a **$94.5 million** increase in network service provider costs[155](index=155&type=chunk) - General and administrative expenses decreased by **11%** in Q2 2025, mainly due to a **$13.1 million** decrease in charitable contributions[159](index=159&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, Twilio had a strong liquidity position with **$969.2 million** in cash and cash equivalents and **$1.6 billion** in short-term marketable securities, with **$306.9 million** used for share repurchases - The company holds **$969.2 million** in cash and cash equivalents and **$1.6 billion** in short-term marketable securities as of June 30, 2025[173](index=173&type=chunk) - A share repurchase program authorized in January 2025 allows for up to **$2.0 billion** in repurchases. In the first six months of 2025, **$306.9 million** was used to repurchase **3.0 million** shares[178](index=178&type=chunk)[179](index=179&type=chunk)[186](index=186&type=chunk) - Net cash from operating activities for the first six months of 2025 was **$468.1 million**, an increase from **$403.5 million** in the prior year period[181](index=181&type=chunk)[182](index=182&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Twilio is exposed to market risks, primarily interest rate risk and currency exchange risk, which are managed through hedging programs and not considered material - The company's primary market risks are interest rate risk and foreign currency exchange risk[193](index=193&type=chunk) - Interest rate risk is considered immaterial due to the short-term nature of investments and fixed-rate debt[193](index=193&type=chunk) - Foreign currency risk is managed through hedging programs, and a hypothetical **10%** change in exchange rates is not expected to have a material impact[196](index=196&type=chunk)[197](index=197&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[199](index=199&type=chunk) - No material changes to internal control over financial reporting occurred during the second quarter of 2025[200](index=200&type=chunk) [PART II - OTHER INFORMATION](index=43&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal actions and investigations in the ordinary course of business, which management believes will not have a material adverse effect - The company is subject to legal proceedings arising in the ordinary course of business but does not currently expect them to have a material adverse effect[73](index=73&type=chunk)[203](index=203&type=chunk) [Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) The company identifies numerous risks that could adversely affect its business, including global economic conditions, intense competition, reliance on third-party providers, and cybersecurity threats [Risks Related to Business and Industry](index=45&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) Key business and industry risks include the adverse impact of global economic conditions on usage-based revenue, intense competition, and reliance on network service providers and AWS for core infrastructure - Global economic uncertainties can severely impact the business, as a majority of revenue is usage-based and sensitive to consumer spending[211](index=211&type=chunk) - The market is intensely competitive, with competitors that are larger, have greater resources, and may offer lower prices[234](index=234&type=chunk)[235](index=235&type=chunk) - The company relies heavily on network service providers for connectivity and on AWS for a substantial majority of its cloud infrastructure, making it vulnerable to service interruptions, fee increases, and policy changes from these third parties[246](index=246&type=chunk)[289](index=289&type=chunk) [Risks Related to Cybersecurity, Data Privacy and Intellectual Property](index=55&type=section&id=Risks%20Related%20to%20Cybersecurity%2C%20Data%20Privacy%20and%20Intellectual%20Property) The company faces significant risks from cybersecurity threats, complex and costly compliance with global data privacy laws, and new challenges introduced by the use of AI - The company is subject to evolving cybersecurity threats and has experienced incidents in the past, such as the social engineering attacks in 2022 that resulted in unauthorized access to some customer data[262](index=262&type=chunk)[265](index=265&type=chunk) - Compliance with numerous and stringent data privacy laws like GDPR and CCPA is a significant challenge, with risks of large fines and business restrictions for non-compliance, particularly regarding international data transfers[269](index=269&type=chunk)[271](index=271&type=chunk)[277](index=277&type=chunk) - The use of AI in products and business operations presents new risks, including potential for inaccurate or biased outputs, infringement of third-party rights, and navigating a rapidly evolving regulatory landscape[291](index=291&type=chunk)[292](index=292&type=chunk) [Risks Related to Legal and Regulatory Matters](index=61&type=section&id=Risks%20Related%20to%20Legal%20and%20Regulatory%20Matters) Twilio's products are subject to extensive and evolving telecommunications regulations in the U.S. and internationally, with risks of liability from platform misuse and challenges in obtaining numbering resources - The company is subject to significant telecommunications regulations from the FCC and international bodies, covering areas like robocall mitigation (TRACED Act), consumer protection (TCPA), and privacy[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk) - There is a risk of liability and reputational damage from customers misusing the platform for illegal activities such as spam, phishing, and TCPA violations, despite company policies[309](index=309&type=chunk)[311](index=311&type=chunk) - Obtaining and retaining numbering resources (phone numbers, short codes) is critical but subject to complex and changing regulations in over **180** countries, which can lead to compliance challenges and service disruptions[303](index=303&type=chunk)[304](index=304&type=chunk) [Risks Related to Financial and Accounting Matters](index=67&type=section&id=Risks%20Related%20to%20Financial%20and%20Accounting%20Matters) Financial risks include exposure to foreign currency fluctuations, constraints from **$1.0 billion** in outstanding debt, potential impairment of **$5.4 billion** in goodwill, and complex international tax liabilities - The company has **$1.0 billion** in outstanding debt, which may limit business flexibility and require significant cash flow for debt service[332](index=332&type=chunk) - As of June 30, 2025, the company carried **$5.4 billion** of goodwill and intangible assets, which are subject to impairment risk if market conditions or business performance decline[340](index=340&type=chunk) - The company faces potential additional tax liabilities from complex international operations, transfer pricing, and evolving tax laws like the OECD's Pillar Two framework[347](index=347&type=chunk)[353](index=353&type=chunk)[356](index=356&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=76&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2025, Twilio issued **22,102** shares of Class A common stock for philanthropic goals and repurchased **1.81 million** shares for approximately **$97.62** per share - Issued **22,102** shares of Class A common stock valued at **$2.2 million** to a donor-advised fund for philanthropic purposes[380](index=380&type=chunk) Share Repurchase Activity for Q2 2025 | Period | Total Shares Purchased (thousands) | Average Price Paid Per Share ($) | Approx. Value Remaining ($ millions) | | :--- | :--- | :--- | :--- | | April 2025 | 1,089 | $87.99 | $1,774 | | May 2025 | 469 | $108.66 | $1,723 | | June 2025 | 252 | $118.96 | $1,693 | | **Total** | **1,810** | **-** | **$1,693** | [Other Information](index=76&type=section&id=Item%205.%20Other%20Information) On June 6, 2025, CFO Aidan Viggiano adopted a Rule 10b5-1 trading plan for the sale of shares tied to current and future RSU vestings - CFO Aidan Viggiano adopted a Rule 10b5-1 trading plan on June 6, 2025, for the sale of shares tied to current and future RSU vestings, effective until July 2026[382](index=382&type=chunk) [Exhibits](index=77&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including the Amended and Restated Certificate of Incorporation and CEO/CFO certifications - Filed exhibits include the company's certificate of incorporation, CEO/CFO certifications (SOX 302 & 906), and XBRL data files[386](index=386&type=chunk)

Financial Performance & Guidance - The company delivered a solid quarter with accelerated growth, record non-GAAP income from operations, and free cash flow [1] - The company raised its guidance for the year, expressing confidence in the outlook [2] AI Opportunity & Investment - The company is seen as a beneficiary of the generational AI opportunity [1][3] - The company sees an opportunity to make short-term investments in AI, particularly voice AI, to drive medium-term benefits [5][7][8] - The company is investing in making its platform as simple as possible for customers to get started, especially with voice [15] Growth Strategy & Market Position - The company is taking market share from competitors in a price-disciplined way [5] - The company is focused on running the business with discipline, not growth at all costs [4][11] - The company's product-led growth strategy is successful, with many customers self-starting on the platform [14] - The company sees international opportunities for expansion [13] M&A Considerations - The company is always considering acquisitions but there is nothing specific to announce [7] - The company would not comment on potential M&A activity, but will always act in the best interests of shareholders [10]

Core Viewpoint - The S&P 500 is near all-time highs during a volatile Q2 earnings season, leading to investor concerns about high valuations in a potentially unstable economy. It is suggested that now is the time for cautious investment [1]. Group 1: Market Conditions - The S&P 500 index is experiencing volatility while hovering near historical peaks, indicating a mixed sentiment among investors [1]. - There is a growing apprehension regarding rich valuations in the context of an uncertain economic outlook [1]. Group 2: Analyst Background - Gary Alexander has extensive experience in covering technology companies on Wall Street and has worked in Silicon Valley, providing insights into current industry trends [1]. - He has been a contributor to Seeking Alpha since 2017 and has been featured in various web publications, indicating a strong presence in the investment community [1].

Core Insights - Twilio Inc. reported better-than-expected second-quarter 2025 results with non-GAAP earnings of $1.19 per share, surpassing the Zacks Consensus Estimate of $1.02 per share and showing a significant improvement from the previous year's earnings of 87 cents [1][11] - The company's revenues reached $1.23 billion, exceeding both the consensus mark of $1.19 billion and management's guidance of $1.18-$1.19 billion, reflecting a year-over-year growth of 13% [2][11] - Despite strong results, Twilio's shares fell 10.6% in after-hours trading due to third-quarter EPS guidance falling short of analysts' expectations [3] Revenue Breakdown - Communications division revenues were $1.15 billion, up 14% year over year, while Segment division sales increased by 0.4% to $75.5 million [4] - The dollar-based net expansion rate was 108%, up from 107% in the previous quarter and 102% in the year-ago quarter, with rates of 109% for Communications and 95% for Segment [4] Customer Metrics - Active customer accounts increased to over 349,000 as of June 30, 2025, up from 328,000 at the end of Q1 2025 [5][11] Operating Results - Non-GAAP gross profit rose 7.9% year over year to $623 million, but the non-GAAP gross margin contracted by 260 basis points to 50.7% due to an unfavorable product mix [6] - Non-GAAP operating income increased by 25.8% year over year to $221 million, with an operating margin of 18%, expanding by 180 basis points [7] Expense Management - General & administrative expenses decreased to $68 million from $70.3 million year over year, accounting for 5.5% of quarterly revenues [8] - Research & development expenditures increased by 0.2% to $160.4 million, representing 13.1% of revenues, down from 14.8% [8] - Non-GAAP sales & marketing costs were slightly down to $174 million, representing 14.2% of revenues, lower than 15.9% in the year-ago quarter [9] Financial Position - As of June 30, 2025, Twilio had cash and cash equivalents of $2.54 billion, up from $2.45 billion at the end of the previous quarter, with long-term debt at $991.4 million [12] - The company generated operating cash flow of $277.1 million and free cash flow of $263.5 million during Q2 2025 [12] Guidance Updates - Twilio raised its full-year 2025 organic revenue growth forecast to 9-10%, up from 7.5-8.5%, with reported revenue growth anticipated in the 10-11% range [14] - For Q3 2025, Twilio expects revenues between $1.245 billion and $1.255 billion, indicating a year-over-year increase of 10-11% [16] - Non-GAAP earnings per share for Q3 are projected in the range of $1.01 to $1.06, while the consensus estimate is $1.12 per share [17]

Core Insights - Twilio reported $1.23 billion in revenue for the quarter ended June 2025, marking a year-over-year increase of 13.5% and exceeding the Zacks Consensus Estimate by 3.66% [1] - The company's EPS for the same period was $1.19, up from $0.87 a year ago, representing a surprise of 16.67% over the consensus estimate of $1.02 [1] Financial Performance Metrics - The number of active customers reached 349,000, surpassing the average estimate of 337,550 based on two analysts [4] - The Dollar-Based Net Expansion Rate was reported at 108%, exceeding the estimated 104.8% [4] - Revenue from the Communications segment was $1.15 billion, compared to the average estimate of $1.11 billion, reflecting a year-over-year change of 14.5% [4] - Revenue from the overall segment was $75.47 million, slightly below the average estimate of $75.56 million, with a year-over-year change of 0.4% [4] Stock Performance - Twilio shares have returned +7.2% over the past month, outperforming the Zacks S&P 500 composite's +1.2% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Company Performance - Twilio reported quarterly earnings of $1.19 per share, exceeding the Zacks Consensus Estimate of $1.02 per share, and up from $0.87 per share a year ago, representing an earnings surprise of +16.67% [1] - The company posted revenues of $1.23 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 3.66%, and an increase from $1.08 billion year-over-year [2] - Over the last four quarters, Twilio has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] Stock Performance - Twilio shares have increased approximately 20.5% since the beginning of the year, compared to the S&P 500's gain of 7.9% [3] - The current consensus EPS estimate for the upcoming quarter is $1.12 on revenues of $1.2 billion, and for the current fiscal year, it is $4.49 on revenues of $4.82 billion [7] Industry Outlook - The Internet - Software industry, to which Twilio belongs, is currently ranked in the top 28% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that industry performance can significantly impact individual stock performance [5][8]