Twilio Beat Estimates and Raised the Year, but Shares Fell on a Slower Fourth Quarter

Twilio topped third-quarter estimates on Thursday, but its shares fell as slower growth guidance overshadowed the beat.

Twilio reported third-quarter 2026 results on Thursday, Oct. 29, 2026, for the three months ended Sept. 30.

Its shares trade on the New York Stock Exchange under the ticker TWLO.

Revenue was $1.56 billion in the quarter, up 20% from a year earlier.

Organic revenue growth, growth excluding acquisitions and certain carrier fees, was 16%.

Non-GAAP earnings per share, the company's adjusted measure, were $1.65. That was up from $1.25 a year earlier.

Analysts had expected $1.47 per share on revenue of $1.515 billion, according to estimates reported by Investor's Business Daily.

On the statutory basis, GAAP net income was $161 million. GAAP diluted earnings per share were $1.00, up from $0.23 a year earlier.

Non-GAAP net income was $267 million, on the company's adjusted basis.

GAAP income from operations was $149 million, up 263%. Non-GAAP income from operations was $326 million, up 39%.

Shares tumbled over 12% to $210.98 in extended trading on Thursday, Investor's Business Daily reported.

Heading into the report, shares had advanced 70% in 2026. They had hit a high of $308.40 on Oct. 6.

The quarter itself was strong on profit and cash

GAAP gross profit was $761 million, up 20%. Non-GAAP gross profit was $768 million, up 18%.

Operating cash flow was $389.2 million, and free cash flow was $369.6 million. Both rose from a year earlier.

"Q3 was a great quarter for Twilio, driven by disciplined execution and broad-based strength across our product portfolio," Chief Executive Khozema Shipchandler said in the release.

The fourth quarter is where the story turns

For the fourth quarter, Twilio guided revenue to $1.595 billion to $1.605 billion. That range implies reported growth of 17% to 17.5%.

The same guide implies organic growth of only 11% to 12%. That is down from 16% in the third quarter.

Investor's Business Daily put the midpoint at $1.60 billion, versus estimates of $1.583 billion. The midpoint therefore sat above consensus, even as the stock fell.

Twilio also guided fourth-quarter non-GAAP diluted earnings per share to $1.48 to $1.53. Investor's Business Daily put analyst consensus at $1.49 per share, according to FactSet.

Fourth-quarter non-GAAP income from operations was guided to $300 million to $310 million. That is below the third quarter's $326 million, even as revenue rises.

The full year still moved higher

For the full year, Twilio raised its reported revenue growth outlook to 20%. The prior outlook was 18% to 18.5%.

It raised its organic growth outlook to 15%, from 13% to 13.5% previously.

Non-GAAP income from operations guidance rose to $1.19 billion to $1.20 billion. The prior range was $1.135 billion to $1.155 billion.

Free cash flow guidance rose to the same $1.19 billion to $1.20 billion range. It had also been $1.135 billion to $1.155 billion.

The expansion rate eased from the prior quarter

The dollar-based net expansion rate, how much existing customers expand spending, was 114% in the quarter. That compared with 109% a year earlier, the release said.

The rate was down from 116% in the previous quarter, StockStory reported. StockStory calls the same measure its net revenue retention rate.

Twilio ended the quarter with 5,625 employees.

Buybacks continued through the quarter

Twilio repurchased $127.2 million of stock in the third quarter. About $1.3 billion of repurchases were complete by Sept. 30.

About $700 million remained under the $2.0 billion program. The program runs through Dec. 31, 2027.

What remains unknown

What remains unknown is why organic growth steps down in the fourth quarter. The release gives the guide without explaining the slowdown.

Also unknown is whether the expansion rate stabilizes after easing to 114%.

What to watch includes fourth-quarter results against the $1.595 billion to $1.605 billion guide. Investors will also watch whether full-year growth lands at the raised 20% outlook.