Twilio Raised Its Full-Year Growth Guide to 18% and Posted Record Revenue of $1.5 Billion. The Stock Rose 25% in a Day.
Key Points
Twilio now expects 2026 revenue to grow 18% to 18.5%, up from its prior outlook of 14% to 15%.
Second-quarter revenue rose 22% year over year to a record $1.50 billion.
Shares jumped about 25% on Friday, closing at $241.28.
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Twilio (NYSE: TWLO) raised its 2026 outlook on Aug. 6. It now expects revenue to grow 18% to 18.5% this year, up from the 14% to 15% it guided just three months ago.
The raise came alongside $1.50 billion of second-quarter revenue, up 22% year over year and the highest quarterly total in Twilio's history -- the previous record was set only one quarter earlier. Shares soared about 25% on Friday, closing at $241.28.
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The acceleration isn't an acquisition story. The gap between reported and organic growth is almost all carrier fees: $71 million from higher A2P charges on business text messages, which Twilio passes through at cost, against just $1.7 million of acquired revenue.
Organic growth, which strips both out, was 17% -- up from 16% in the first quarter, and far above the 9.5% to 10.5% full-year organic outlook management gave a quarter ago. That organic outlook now stands at 13% to 13.5%.
Existing customers are doing much of the work. Twilio's dollar-based net expansion rate reached 116% in the quarter, up from 108% a year ago, meaning existing customers as a group spent 16% more than they did a year earlier. That expansion is probably the best evidence the raise isn't just deal math.
Profitability is keeping up with the growth. Non-GAAP (adjusted) income from operations rose 29% year over year to $285 million, and free cash flow reached $353 million, up from $264 million. But most of the $1.07 billion of GAAP net income came from a one-time, non-cash tax benefit worth $5.91 per share, not from operations.
So, can the growth hold? Twilio's own third-quarter guidance is more modest, calling for 16% to 16.5% reported growth and 11% to 12% organic. The full-year raise leans on the first half's strength rather than promising further acceleration.
And the stock is no longer cheap. After Friday's jump, the whole company is valued at about $36.6 billion -- roughly 32 times the free cash flow its raised outlook calls for this year.
The quarter showed a base business speeding up, and the new guide made it official. At the new price, investors are paying for that speed to continue.
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Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Twilio. The Motley Fool has a disclosure policy.
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