TWILIO INC 10-Q

Item 1. Financial Statements TWILIO INC. Condensed Consolidated Balance Sheets (Unaudited) As of March 31, As of December 31, 2025 2024 (In thousands) ASSETS Current assets: Cash and cash equivalents $ 467,094 $ 421,297 Short-term marketable securities 1,980,983 1,963,102 Accounts receivable, net 577,624 588,540 Prepaid expenses and other current assets 442,155 474,360 Total current assets 3,467,856 3,447,299 Property and equipment, net 183,613 191,042 Operating right-of-use assets 48,914 53,405 Equity method investment 464,580 485,835 Intangible assets, net 211,315 238,503 Goodwill 5,243,266 5,243,266 Other long-term assets 195,171 206,122 Total assets $ 9,814,715 $ 9,865,472 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 107,707 $ 100,169 Accrued expenses and other current liabilities 432,300 530,686 Deferred revenue and customer deposits 154,047 155,680 Operating lease liability, current 31,886 33,685 Total current liabilities 725,940 820,220 Operating lease liability, noncurrent 78,048 85,875 Long-term debt, net 991,006 990,587 Other long-term liabilities 15,430 15,824 Total liabilities 1,810,424 1,912,506 Commitments and contingencies (Note 11) Stockholders’ equity: Preferred stock — — Class A common stock 153 153 Additional paid-in capital 15,625,545 15,476,124 Accumulated other comprehensive income (loss) 10,358 ( 1,301 ) Accumulated deficit ( 7,631,765 ) ( 7,522,010 ) Total stockholders’ equity 8,004,291 7,952,966 Total liabilities and stockholders’ equity $ 9,814,715 $ 9,865,472 See accompanying notes to condensed consolidated financial statements. 3 Table of Contents TWILIO INC. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, 2025 2024 (In thousands, except share and per share amounts) Revenue $ 1,172,463 $ 1,047,050 Cost of revenue 590,896 503,009 Gross profit 581,567 544,041 Operating expenses: Research and development 254,295 260,457 Sales and marketing 212,113 214,503 General and administrative 92,077 112,585 Total operating expenses 558,485 587,545 Income (loss) from operations 23,082 ( 43,504 ) Other income (expenses), net: Share of losses from equity method investment ( 19,471 ) ( 29,575 ) Other income, net 22,973 27,918 Total other income (expenses), net 3,502 ( 1,657 ) Income (loss) before provision for income taxes 26,584 ( 45,161 ) Provision for income taxes ( 6,567 ) ( 10,188 ) Net income (loss) attributable to common stockholders $ 20,017 $ ( 55,349 ) Net income (loss) per share attributable to common stockholders: Basic $ 0.13 $ ( 0.31 ) Diluted $ 0.12 $ ( 0.31 ) Weighted-average shares used to compute net income (loss) per share attributable to common stockholders: Basic 153,345,192 181,017,726 Diluted 161,794,287 181,017,726 See accompanying notes to condensed consolidated financial statements. 4 Table of Contents TWILIO INC. Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Three Months Ended March 31, 2025 2024 (In thousands) Net income (loss) $ 20,017 $ ( 55,349 ) Other comprehensive income (loss): Unrealized gain (loss) on marketable securities 5,058 ( 5,193 ) Net change in market value of effective foreign currency forward exchange contracts 8,386 ( 4,505 ) Share of other comprehensive (loss) income from equity method investment ( 1,785 ) 4,138 Total other comprehensive income (loss) 11,659 ( 5,560 ) Comprehensive income (loss) attributable to common stockholders $ 31,676 $ ( 60,909 ) See accompanying notes to condensed consolidated financial statements. 5 Table of Contents TWILIO INC. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) Common Stock Class A Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Accumulated Deficit Total Stockholders' Equity Shares Amount (In thousands, except share amounts) Balance as of December 31, 2024 152,610,697 $ 153 $ 15,476,124 $ ( 1,301 ) $ ( 7,522,010 ) $ 7,952,966 Net income — — — — 20,017 20,017 Exercises of vested stock options 131,515 — 2,766 — — 2,766 Vesting of restricted stock units 1,712,644 2 ( 2 ) — — — Value of equity awards withheld for tax liability ( 423 ) — ( 53 ) — — ( 53 ) Shares of Class A common stock issued and donated to charity 22,102 — 2,776 — — 2,776 Unrealized gain on marketable securities — — — 5,058 — 5,058 Repurchases of shares of Class A common stock including related costs ( 1,222,193 ) ( 2 ) — — ( 129,772 ) ( 129,774 ) Net change in market value of effective foreign currency forward exchange contracts — — — 8,386 — 8,386 Share of other comprehensive loss from equity method investment — — — ( 1,785 ) — ( 1,785 ) Stock-based compensation — — 143,934 — — 143,934 Balance as of March 31, 2025 153,254,342 $ 153 $ 15,625,545 $ 10,358 $ ( 7,631,765 ) $ 8,004,291 See accompanying notes to condensed consolidated financial statements. 6 Table of Contents TWILIO INC. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) Common Stock Class A Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity Shares Amount (In thousands, except share amounts) Balance as of December 31, 2023 181,945,771 $ 182 $ 14,797,723 $ 619 $ ( 5,065,972 ) $ 9,732,552 Net loss — — — — ( 55,349 ) ( 55,349 ) Exercises of vested stock options 43,835 — 421 — — 421 Vesting of restricted stock units 1,615,930 1 ( 1 ) — — — Value of equity awards withheld for tax liability ( 26,757 ) — ( 1,918 ) — — ( 1,918 ) Shares of Class A common stock issued and donated to charity 22,102 — 1,295 — — 1,295 Shares returned from escrow ( 696 ) — ( 192 ) — — ( 192 ) Unrealized loss on marketable securities — — — ( 5,193 ) — ( 5,193 ) Repurchases of shares of Class A common stock including related costs ( 6,128,298 ) ( 6 ) — — ( 387,022 ) ( 387,028 ) Net change in market value of effective foreign currency forward exchange contracts — — — ( 4,505 ) — ( 4,505 ) Share of other comprehensive income from equity method investment — — — 4,138 — 4,138 Stock-based compensation — — 163,509 — — 163,509 Balance as of March 31, 2024 177,471,887 $ 177 $ 14,960,837 $ ( 4,941 ) $ ( 5,508,343 ) $ 9,447,730 See accompanying notes to condensed consolidated financial statements. 7 Table of Contents TWILIO INC . Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: (In thousands) Net income (loss) $ 20,017 $ ( 55,349 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 49,565 53,318 Non-cash reduction to the right-of-use asset 5,170 5,076 Net amortization of investment premium and discount ( 4,314 ) ( 6,029 ) Stock-based compensation 139,273 158,606 Amortization of deferred commissions 19,265 18,829 Provision for doubtful accounts 2,453 6,204 Share of losses from equity method investment 19,471 29,575 Other adjustments 5,846 4,996 Changes in operating assets and liabilities: Accounts receivable 8,463 15,637 Prepaid expenses and other current assets 33,519 16,901 Other long-term assets ( 9,416 ) 6,859 Accounts payable 7,853 ( 37,762 ) Accrued expenses and other current liabilities ( 94,262 ) ( 12,447 ) Deferred revenue and customer deposits ( 1,634 ) ( 2,127 ) Operating lease liabilities ( 10,306 ) ( 12,470 ) Other long-term liabilities 79 306 Net cash provided by operating activities 191,042 190,123 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities and other investments ( 213,844 ) ( 435,590 ) Proceeds from sales and maturities of marketable securities 207,431 638,185 Capitalized software development costs ( 11,564 ) ( 11,154 ) Purchases of long-lived and intangible assets ( 1,163 ) ( 1,671 ) Net cash (used in) provided by investing activities ( 19,140 ) 189,770 CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on finance leases ( 2,251 ) ( 4,832 ) Value of equity awards withheld for tax liabilities ( 53 ) ( 1,918 ) Repurchases of shares of Class A common stock and related costs ( 126,256 ) ( 356,900 ) Proceeds from exercises of stock options 2,766 421 Net cash used in financing activities ( 125,794 ) ( 363,229 ) NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 46,108 16,664 CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 431,437 655,931 CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period $ 477,545 $ 672,595 Cash paid for income taxes, net $ 5,257 $ 10,761 Cash paid for interest $ 18,791 $ 18,893 RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONDENSED CONSOLIDATED BALANCE SHEETS Cash and cash equivalents $ 467,094 $ 672,595 Restricted cash in other long-term assets 10,451 — Total cash, cash equivalents and restricted cash $ 477,545 $ 672,595 See accompanying notes to condensed consolidated financial statements. 8 Table of Contents TWILIO INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Organization and Description of Business Twilio Inc. (the “Company”) was incorporated in the state of Delaware on March 13, 2008. Today's leading companies trust Twilio's Customer Engagement Platform to build direct, personalized relationships with their customers everywhere in the world. Twilio enables companies to use communications and data to add intelligence and security to every step of their customers’ journey, from sales to marketing to growth, customer service and many more engagement use cases in a flexible, programmatic way. The Company’s headquarters are located in San Francisco, California, and the Company has subsidiaries across North America, South America, Europe, Asia and Australia. 2. Summary of Significant Accounting Policies (a) Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 26, 2025 (“Annual Report”). The condensed consolidated balance sheet as of December 31, 2024, included herein, was derived from the audited financial statements as of that date, but may not include all disclosures including certain notes required by U.S. GAAP on an annual reporting basis. In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive income (loss), stockholders’ equity and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year 2025 or any future period. (b) Principles of Consolidation The condensed consolidated financial statements include the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. (c) Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are used for, but not limited to, revenue allowances and sales credit reserves; recoverability of long-lived and intangible assets; capitalization and useful life of the Company’s capitalized internal-use software development costs; fair value of acquired intangible assets and goodwill; accruals and contingencies. Estimates are based on historical experience and on various assumptions that the Company believes are reasonable under current circumstances. However, future events are subject to change and best estimates and judgments may require further adjustments, therefore, actual results could differ materially from those estimates. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation. (d) Remaining Performance Obligations Revenue allocated to remaining performance obligations for contracts with durations of more than one year was $ 169.4 million as of March 31, 2025, of which 61 % is expected to be recognized over the next 12 months and 92 % is expected to be recognized over the next 24 months. 9 Table of Contents (e) Deferred Revenue and Customer Deposits As of March 31, 2025, and December 31, 2024, the Company recorded $ 154.0 million and $ 155.7 million as its deferred revenue and customer deposits, respectively, that are included in deferred revenue and customer deposits and other long-term liabilities in the accompanying condensed consolidated balance sheets. During the three months ended March 31, 2025 and 2024, the Company recognized $ 70.1 million and $ 65.4 million of revenue, respectively, that was included in the deferred revenue and customer deposits balances as of the end of the previous year. (f) Concentration of Credit Risk Financial instruments that potentially expose the Company to a concentration of credit risk consist primarily of cash, cash equivalents, restricted cash, marketable securities and accounts receivable. The Company maintains cash, restricted cash, cash equivalents and marketable securities with financial institutions. Certain balances held by such financial institutions exceed insured limits. The Company sells its services to a wide variety of customers. If the financial condition or results of operations of any significant customer deteriorates substantially, operating results could be adversely affected. To reduce credit risk, management performs credit evaluations of the financial condition of significant customers and periodic re-evaluations, as needed, of existing customers. The Company does not require collateral from its credit customers and maintains reserves for estimated credit losses on customer accounts when considered necessary. Actual credit losses may differ from the Company’s estimates. As of March 31, 2025, and December 31, 2024, the allowance for doubtful accounts was $ 26.6 million and $ 27.5 million, respectively, and is recorded in accounts receivable, net, in the accompanying condensed consolidated balance sheets. In the three months ended March 31, 2025 and 2024, no customer organization accounted for more than 10% of the Company’s total revenue. As of March 31, 2025, and December 31, 2024, no customer organization represented more than 10% of the Company’s gross accounts receivable. (g) Recently Issued Accounting Guidance, Not yet Adopted In December 2023, the FASB issued ASU 2023-09, “ Income Taxes (Topic 740): Improvements to Income Tax Disclosures, ” which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other income tax related disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, and may be applied on a prospective basis. Early adoption is permitted. The Company expects to adopt ASU 2023-09 in its consolidated financial statements for the year ended December 31, 2025. The adoption will require certain additional disclosure in the notes to the Company’s consolidated financial statements. In November 2024, the FASB issued ASU 2024-03, “ Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which requires the disaggregation of certain expenses in the notes of the financial statements to provide enhanced transparency into the expense captions presented on the face of the statements of operations. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, and may be applied either prospectively or retrospectively. Early adoption is permitted. The adoption will require certain additional disclosure in the notes to the Company’s consolidated financial statements. 10 Table of Contents 3. Fair Value Measurements Financial Assets The following tables provide the financial assets measured at fair value on a recurring basis: Amortized Cost or Carrying Value Gross Unrealized Gains Gross Unrealized Losses Less Than 12 Months Gross Unrealized Losses More Than 12 Months Fair Value Hierarchy as of March 31, 2025 Aggregate Fair Value Level 1 Level 2 Level 3 Financial Assets: (In thousands) Cash and cash equivalents: Money market funds $ 216,560 $ — $ — $ — $ 216,560 $ — $ — $ 216,560 Commercial paper 6,752 — — — — 6,752 — 6,752 U.S. Treasury bills 22,995 — — — 22,995 — — 22,995 Total included in cash and cash equivalents 246,307 — — — 239,555 6,752 — 246,307 Marketable securities: Debt securities: U.S. Treasury securities 370,611 1,653 ( 8 ) ( 31 ) 372,225 — — 372,225 Non-U.S. government securities 2,909 30 — — 2,939 — — 2,939 Corporate debt securities and commercial paper 1,594,751 9,337 ( 560 ) ( 179 ) 21,049 1,582,300 — 1,603,349 Total debt securities 1,968,271 11,020 ( 568 ) ( 210 ) 396,213 1,582,300 — 1,978,513 Equity securities 2,470 — — — 2,470 — — 2,470 Total marketable securities 1,970,741 11,020 ( 568 ) ( 210 ) 398,683 1,582,300 — 1,980,983 Total financial assets $ 2,217,048 $ 11,020 $ ( 568 ) $ ( 210 ) $ 638,238 $ 1,589,052 $ — $ 2,227,290 Amortized Cost or Carrying Value Gross Unrealized Gains Gross Unrealized Losses Less Than 12 Months Gross Unrealized Losses More Than 12 Months Fair Value Hierarchy as of December 31, 2024 Aggregate Fair Value Level 1 Level 2 Level 3 Financial Assets: (In thousands) Cash and cash equivalents: Money market funds $ 207,323 $ — $ — $ — $ 207,323 $ — $ — $ 207,323 Commercial paper 15,059 — — — 15,059 15,059 U.S. Treasury bills 2,748 — — — 2,748 — — 2,748 Total included in cash and cash equivalents 225,130 — — — 210,071 15,059 — 225,130 Marketable securities: Debt securities: U.S. Treasury securities 379,846 1,243 ( 296 ) ( 55 ) 380,738 — — 380,738 Non-U.S. government securities 2,909 27 — — 2,936 — — 2,936 Corporate debt securities and commercial paper 1,571,944 6,415 ( 1,594 ) ( 557 ) 16,890 1,559,318 — 1,576,208 Total debt securities 1,954,699 7,685 ( 1,890 ) ( 612 ) 400,564 1,559,318 — 1,959,882 Equity securities 3,220 — — — 3,220 — — 3,220 Total marketable securities 1,957,919 7,685 ( 1,890 ) ( 612 ) 403,784 1,559,318 — 1,963,102 Total financial assets $ 2,183,049 $ 7,685 $ ( 1,890 ) $ ( 612 ) $ 613,855 $ 1,574,377 $ — $ 2,188,232 11 Table of Contents Debt Securities The Company’s primary objective when investing excess cash is preservation of capital, hence the Company’s debt securities primarily consist of U.S. Treasury securities, non-U.S government securities, high credit quality corporate debt securities and commercial paper. Because the Company views its debt securities as available to support current operations, it has classified all available for sale securities as short-term. Interest earned on debt securities was $ 18.9 million and $ 27.2 million in the three months ended March 31, 2025 and 2024, respectively. The interest is recorded as other income, net, in the accompanying condensed consolidated statements of operations. The following table summarizes the contractual maturities of debt securities: As of March 31, As of December 31, 2025 2024 Amortized Cost Aggregate Fair Value Amortized Cost Aggregate Fair Value Financial Assets: (In thousands) Less than one year $ 783,522 $ 785,570 $ 684,294 $ 685,091 One to three years 1,184,749 1,192,943 1,270,405 1,274,791 Total $ 1,968,271 $ 1,978,513 $ 1,954,699 $ 1,959,882 Strategic Investments As of March 31, 2025 and December 31, 2024, the Company held strategic investments with a carrying value of $ 22.2 million and $ 23.5 million, respectively, recorded as other long-term assets in the accompanying condensed consolidated balance sheets. There were no significant impairments or adjustments recorded in the three months ended March 31, 2025 and 2024, related to these securities. Financial Liabilities The Company’s financial liabilities that are measured at fair value on a recurring basis consist of foreign currency derivative liabilities and are classified as Level 2 financial instruments in the fair value hierarchy. As of March 31, 2025 and December 31, 2024, the aggregate fair value of these liabilities and the associated unrealized losses were not significant. The Company’s financial liabilities that are not measured at fair value on a recurring basis are its Senior Notes due 2029 (“2029 Notes”) and its Senior Notes due 2031 (“2031 Notes”). As of March 31, 2025, the fair values of the 2029 Notes and 2031 Notes were $ 465.5 million and $ 451.4 million, respectively. As of December 31, 2024, the fair values of the 2029 Notes and 2031 Notes were $ 464.9 million and $ 453.9 million, respectively. 12 Table of Contents 4. Property and Equipment Property and equipment consist of the following: As of March 31, As of December 31, 2025 2024 (In thousands) Capitalized internal-use software developments costs $ 370,727 $ 357,334 Data center equipment (1) 58,588 63,672 Leasehold improvements 78,100 78,104 Office equipment 50,859 50,659 Furniture and fixtures 12,618 12,618 Software 14,143 14,143 Total property and equipment 585,035 576,530 Less: accumulated depreciation and amortization (1) ( 401,422 ) ( 385,488 ) Total property and equipment, net $ 183,613 $ 191,042 ____________________________________ ( 1 ) Data center equipment includes $ 28.3 million and $ 33.5 million in assets held under finance leases as of March 31, 2025, and December 31, 2024, respectively. Accumulated depreciation and amortization includes $ 25.5 million and $ 28.6 million of accumulated depreciation for assets held under finance leases as of March 31, 2025, and December 31, 2024, respectively. Depreciation and amortization expense was $ 21.9 million and $ 23.8 million in the three months ended March 31, 2025 and 2024, respectively. The Company capitalized $ 16.2 million and $ 16.1 million in internal‑use software development costs in the three months ended March 31, 2025 and 2024, respectively . 5. Segment Reporting As of March 31, 2025, the Company had two operating and reportable segments: Twilio Communications (“Communications”) and Twilio Segment (“Segment”). Twilio Communications : The Communications segment consists of a variety of application programming interfaces (“APIs”) and software solutions to optimize communications between Twilio customers and their end users. The key products from which the segment derives its revenue are Messaging, Voice and Email. Twilio Segment : The Segment segment consists of software products that enable businesses to achieve more effective customer engagement by providing the tools necessary for customers to build direct, personalized relationships with their end users. The key product from which the segment derives its revenue is Segment. The Company’s Chief Executive Officer, who is also the Chief Operating Decision Maker (“CODM”), reviews the operating results by segment using non-GAAP income (loss) from operations as the measure of segment profitability. The CODM uses this measure of segment profitability to allocate resources and assess performance of each segment by comparing each segment’s actual results to the comparable results in prior periods and to any internally or externally set expectations. Presented below is the discrete financial information by reportable segment for the three months ended March 31, 2025 and 2024, that reflects management’s current view of the business and that is regularly provided to the CODM. Asset information is not reviewed by the CODM on a segment basis. Revenue, costs of revenue and operating expenses are generally directly attributable to each segment. Certain costs of revenue and operating expenses are allocated based on methodologies that best reflect the patterns of consumption of these costs. Corporate costs are not allocated to operating segments. Corporate costs consist of costs that support company-wide processes, are managed on the company-wide level, and include costs related to corporate governance and communication, global brand awareness, information security, and certain legal, human resources, finance and accounting expenses. In addition to corporate costs, cost of revenue and operating expenses not allocated to operating segments include stock-based compensation, amortization of acquired intangibles, payroll taxes related to stock-based compensation, charitable contributions and restructuring costs. 13 Table of Contents Three Months Ended March 31, 2025 Communications Segment Total (In thousands) Revenue $ 1,096,806 $ 75,657 $ 1,172,463 Cost of revenue attributable to segments 550,780 19,681 570,461 Operating expenses attributable to segments 268,564 57,494 326,058 Segment non-GAAP income (loss) from operations $ 277,462 $ ( 1,518 ) $ 275,944 Reconciliation of total segment non-GAAP income from operations to income from operations: Total segment non-GAAP income from operations $ 275,944 Corporate costs not allocated to segments ( 62,536 ) Stock-based compensation ( 137,520 ) Amortization of acquired intangibles ( 27,139 ) Payroll taxes related to stock-based compensation ( 11,200 ) Charitable contributions ( 2,776 ) Restructuring costs ( 11,691 ) Income from operations 23,082 Other income, net 3,502 Income before provision for income taxes $ 26,584 Three Months Ended March 31, 2024 Communications Segment Total (In thousands) Revenue $ 972,005 $ 75,045 $ 1,047,050 Cost of revenue attributable to segments 464,299 16,792 481,091 Operating expenses attributable to segments 258,696 79,247 337,943 Segment non-GAAP income (loss) from operations $ 249,010 $ ( 20,994 ) $ 228,016 Reconciliation of total segment non-GAAP income from operations to loss from operations: Total segment non-GAAP income from operations $ 228,016 Corporate costs not allocated to segments ( 68,406 ) Stock-based compensation ( 156,158 ) Amortization of acquired intangibles ( 28,939 ) Payroll taxes related to stock-based compensation ( 6,776 ) Charitable contributions ( 1,295 ) Restructuring costs ( 9,946 ) Loss from operations ( 43,504 ) Other expenses, net ( 1,657 ) Loss before provision for income taxes $ ( 45,161 ) Depreciation and amortization expenses, except for amortization of acquired intangibles, that are included in non-GAAP income from operations for the Communications reportable segment were $ 16.7 million and $ 19.3 million in the three months ended March 31, 2025 and 2024, respectively. Amortization of deferred commissions included in non-GAAP income from operations for the Communications reportable segment was $ 15.2 million in each of the three months ended March 31, 2025 and 2024, respectively. Depreciation and amortization expenses, except for amortization of acquired intangibles, that are included in non-GAAP loss from operations for the Segment reportable segment were $ 4.9 million and $ 4.1 million in the three months ended March 31, 2025 and 2024, respectively. Amortization of deferred commissions included in non-GAAP loss from operations for the Segment reportable segment was $ 4.0 million and $ 3.6 million in the three months ended March 31, 2025 and 2024, respectively. 14 Table of Contents 6. Derivatives and Hedging As of March 31, 2025, the Company had outstanding foreign currency forward contracts designated as cash flow hedges with a total sell notional value of $ 218.7 million. The notional value represents the amount that will be sold upon maturity of the forward contract. As of March 31, 2025, these contracts had maturities of up to seventeen months. Gains and losses associated with these foreign currency forward contracts were not significant. The Company is subject to master netting agreements with certain counterparties of the foreign exchange contracts, under which it is permitted to net settle transactions of the same currency with a single net amount payable by one party to the other. It is the Company’s policy to present the derivatives at gross in its condensed consolidated balance sheets. The Company’s foreign currency forward contracts are not subject to any credit contingent features or collateral requirements. The Company manages its exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and by actively monitoring its outstanding positions. As of March 31, 2025, the Company did not have any offsetting arrangements. 7. Goodwill and Intangible Assets Goodwill As of March 31, 2025 and December 31, 2024, the balance of the Company’s goodwill was $ 5.2 billion, of which $ 4.9 billion related to the Communications reportable segment and $ 306.1 million related to the Segment reportable segment. There was no goodwill activity during the three months ended March 31, 2025. Intangible assets Intangible assets consist of the following: As of March 31, 2025 Cost Accumulated Amortization Net Amortizable intangible assets: (In thousands) Developed technology $ 388,341 $ ( 319,476 ) $ 68,865 Customer relationships 348,314 ( 226,709 ) 121,605 Supplier relationships 49,756 ( 37,633 ) 12,123 Trade names 25,968 ( 25,284 ) 684 Patent 3,968 ( 1,145 ) 2,823 Total amortizable intangible assets 816,347 ( 610,247 ) 206,100 Non-amortizable intangible assets: Telecommunication licenses 4,920 — 4,920 Trademarks and other 295 — 295 Total $ 821,562 $ ( 610,247 ) $ 211,315 15 Table of Contents As of December 31, 2024 Cost Accumulated Amortization Net Amortizable intangible assets: (In thousands) Developed technology $ 388,341 $ ( 306,063 ) $ 82,278 Customer relationships 348,314 ( 215,523 ) 132,791 Supplier relationships 49,756 ( 35,363 ) 14,393 Trade names 25,968 ( 25,014 ) 954 Patent 3,968 ( 1,096 ) 2,872 Total amortizable intangible assets 816,347 ( 583,059 ) 233,288 Non-amortizable intangible assets: Telecommunication licenses 4,920 — 4,920 Trademarks and other 295 — 295 Total $ 821,562 $ ( 583,059 ) $ 238,503 Amortization expense was $ 27.2 million and $ 29.0 million for the three months ended March 31, 2025 and 2024, respectively. Total estimated future amortization expense is as follows: As of March 31, 2025 Year Ended December 31, (In thousands) 2025 (remaining nine months) $ 80,674 2026 42,149 2027 25,330 2028 19,055 2029 14,970 Thereafter 23,922 Total $ 206,100 8. Balance Sheet Components Prepaid expenses and other current assets consist of the following: As of March 31, As of As of December 31, 2025 2024 (In thousands) Prepaid expenses $ 321,312 $ 333,911 Other current assets 120,843 140,449 Total prepaid expenses and other current assets $ 442,155 $ 474,360 16 Table of Contents Accrued expenses and other current liabilities consist of the following: As of March 31, As of December 31, 2025 2024 (In thousands) Accrued payroll and related $ 56,733 $ 76,708 Company-wide bonus program liability 25,386 109,776 Accrued sales bonus and commissions 22,265 21,585 Accrued cost of revenue 173,372 173,739 Sales and other taxes payable 81,047 79,731 ESPP contributions 16,935 5,745 Accrued other expense 56,562 63,402 Total accrued expenses and other current liabilities $ 432,300 $ 530,686 9. Long-Term Debt Long-term debt, net, consists of the following: As of March 31, As of December 31, 2025 2024 (In thousands) 2029 Senior Notes Principal $ 500,000 $ 500,000 Unamortized discount ( 3,325 ) ( 3,518 ) Unamortized issuance costs ( 748 ) ( 792 ) Net carrying amount 495,927 495,690 2031 Senior Notes Principal 500,000 500,000 Unamortized discount ( 4,017 ) ( 4,166 ) Unamortized issuance costs ( 904 ) ( 937 ) Net carrying amount 495,079 494,897 Total long-term debt, net $ 991,006 $ 990,587 As of March 31, 2025, the Company was in compliance with all of its covenants under the related indentures. 10. Revenue by Geographic Area Revenue by geographic area is based on the IP address or the mailing address of the customer at the time of registration. The following table sets forth revenue by geographic area: Three Months Ended March 31, 2025 2024 Revenue by geographic area: (In thousands) United States $ 749,440 $ 686,527 International 423,023 360,523 Total $ 1,172,463 $ 1,047,050 Percentage of revenue by geographic area: United States 64 % 66 % International 36 % 34 % 17 Table of Contents 11. Commitments and Contingencies (a) Lease and Other Commitments The Company leases its facilities under various non-cancelable operating lease agreements. In the three months ended March 31, 2025, the Company did not enter into any significant new lease agreements. The Company has non-cancelable contractual commitments with its cloud infrastructure provider, network service providers and other vendors. In the three months ended March 31, 2025, the Company entered into several new agreements with terms up to three years for a total purchase commitment of $ 18.3 million . (b) Legal Matters From time to time, the Company may be subject to legal actions, claims, and government investigations or inquiries arising in the ordinary course of business. These matters may include, but are not limited to, matters involving privacy, data protection, data security, intellectual property, competition, telecommunications, consumer protection, taxation, securities, employment and contractual rights. While the Company currently believes that the final outcomes of these matters will not have a material adverse effect on its business, the results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. The Company accrues for contingencies when it believes that a loss is probable and that it can be reasonably estimated. To the extent there is a reasonable possibility that a loss may be incurred that is in excess of amounts already recognized and such additional loss amount may be material, the Company either discloses the estimated additional loss amount or states that such an estimate cannot be made. Significant judgment is required to determine the probability of a loss and to estimate the amount of any probable loss. Legal fees and other costs related to litigation and other legal proceedings are expensed as incurred and are included in general and administrative expenses in the accompanying condensed consolidated statements of operations. (c) Indemnification Agreements In the ordinary course of business and in connection with its financing and business combination transactions, the Company enters into contractual arrangements under which it agrees to provide indemnification of varying scope and terms to business partners, customers and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties and other liabilities relating to or arising from the Company’s products or its acts or omissions. The Company has also signed indemnification agreements with all of its board members and executive officers and certain employees that may require the Company to indemnify them for certain events in connection with their services to the Company or its direct or indirect subsidiaries. As of March 31, 2025, and December 31, 2024, no amounts were accrued related to any outstanding indemnification agreements. (d) Other Taxes The Company conducts operations in many tax jurisdictions within and outside the United States. In many of these jurisdictions, non-income-based taxes, such as sales, use, telecommunications and other local taxes are assessed on the Company’s operations. The Company carries reserves for certain of its non-income-based tax exposures in certain jurisdictions when it is both probable that a liability was incurred and the amount of the exposure can be reasonably estimated. These reserves are based on estimates which include several key assumptions including, but not limited to, the taxability of the Company’s services, the jurisdictions in which management believes it had nexus and the sourcing of revenues to those jurisdictions. The Company continues to remain in discussions with certain jurisdictions regarding its prior sales and other taxes that it may owe. In the event any of these jurisdictions disagree with management’s assumptions and analysis, the assessment of the Company’s tax exposure could differ materially from management’s current estimates. 18 Table of Contents As of March 31, 2025, the liabilities accrued for non-income-based taxes were $ 19.4 million for domestic jurisdictions and $ 22.8 million for jurisdictions outside of the United States. As of December 31, 2024, these liabilities were $ 19.3 million and $ 22.0 million, respectively. 12. Stockholders' Equity Preferred Stock As of March 31, 2025, and December 31, 2024, the Company had authorized 100,000,000 shares of preferred stock, par value $ 0.001 , of which no shares were issued and outstanding in either period. Common Stock As of March 31, 2025 and December 31, 2024, the Company had authorized 1,000,000,000 shares of Class A common stock and 3,170,181 shares of Class B common stock, each with a par value of $ 0.001 per share. As of March 31, 2025 and December 31, 2024, 153,254,342 and 152,610,697 shares of Class A common stock, respectively, and no shares of Class B common stock were issued and outstanding. The Company had reserved shares of common stock for issuance as follows: As of March 31, As of December 31, 2025 2024 Stock options issued and outstanding 1,190,661 1,322,176 Unvested restricted stock units issued and outstanding 15,963,772 18,386,271 Shares of Class A common stock reserved for Twilio.org 331,531 353,633 Stock-based awards available for grant under 2016 Plan 31,234,619 23,292,678 Shares of Class A common stock reserved for issuance pursuant to ESPP 11,235,432 9,709,326 Total 59,956,015 53,064,084 Share Repurchase Program In January 2025, the board of directors of the Company authorized a share repurchase program to repurchase up to $ 2.0 billion in aggregate value of the Company’s outstanding Class A common stock. Repurchases under this program can be made through open market, private transactions or other means, in compliance with applicable federal securities laws, and can include repurchases pursuant to Rule 10b5-1 trading plans. The Company has discretion in determining the conditions under which shares may be repurchased from time to time. The program expires on December 31, 2027. The Company’s previous share repurchase authorizations expired on December 31, 2024. In the three months ended March 31, 2025 and 2024, the Company repurchased 1.2 million and 6.1 million shares of its Class A common stock, respectively, for an aggregate purchase price of $ 130.2 million and $ 384.3 million, respectively. As of March 31, 2025, approximately $ 1.9 billion of the amount originally authorized for share repurchases in January 2025 remained available for future repurchases. 13. Stock-Based Compensation The Company’s 2016 Stock Option and Incentive Plan (the “2016 Plan”) provides for the grant of stock options, restricted stock units, restricted stock awards, stock appreciation rights, unrestricted stock awards, performance share awards, dividend equivalent rights and cash-based awards by the Company to its employees, directors and consultants. Certain of the Company’s outstanding equity awards were granted under equity incentive plans that are no longer active but continue to govern the outstanding equity awards granted thereunder. In the first quarter of 2025, the Company granted to certain of its executive employees performance-based restricted stock units (“PSUs”) covering 185,899 shares of Class A common stock that had an aggregate grant date fair value of $ 27.1 million. The PSUs will vest if certain operational performance or market conditions, as defined in the grant agreements, are met during the performance achievement period, which expires on December 31, 2027. The fair value of the portion of the PSUs with an operational performance target equals the closing price of the Company’s Class A common stock on the date of grant. For this portion, the expense is recognized on a straight-line basis and only if it is probable that the performance target will be achieved during the performance period. The probability of achievement is assessed each reporting period and 19 Table of Contents cumulative adjustments are recorded in the period in which the probability assessment changes. The fair value of the portion of the PSUs with market conditions was determined using a Monte-Carlo simulation model, and the expense is recognized on a straight-line basis over the performance achievement period. At the end of the vesting period, the number of shares actually issued may range from 0 % to 200 % of the target based on levels of performance. In addition, pursuant to the Company’s 2016 Employee Stock Purchase Plan (“ESPP”), eligible employees may purchase shares of the Company’s Class A common stock at a discount of 15 % through payroll deductions of their eligible compensation. The ESPP provides for separate six-month offering periods beginning in May and November of each year. As of March 31, 2025, total unrecognized compensation cost related to unvested restricted stock units (“RSUs”) was $ 1.1 billion which will be amortized over a weighted-average period of 2.4 years. As of March 31, 2025, total unrecognized compensation cost related to unvested stock options and the ESPP was not significant. Stock-Based Compensation Expense The Company recorded total stock-based compensation expense as follows: Three Months Ended March 31, 2025 2024 (In thousands) Cost of revenue $ 4,271 $ 5,891 Research and development 78,066 83,560 Sales and marketing 31,359 34,866 General and administrative 25,577 34,289 Total $ 139,273 $ 158,606 14. Net Income (Loss) Per Share Attributable to Common Stockholders The Company computes net income (loss) per share in accordance with ASC 260 “Earnings per Share” . Basic net income (loss) per share attributable to common stockholders is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share gives effect to all dilutive potential common shares outstanding during the period, such as stock options, RSUs, including PSUs, and shares partially paid for under ESPP, using the treasury stock method; PSUs follow the contingently issuable shares guidance. Diluted net income (loss) per share excludes all dilutive potential common shares if their effect is anti-dilutive. The following table sets forth the calculation of basic and diluted net income (loss) per share attributable to common stockholders during the periods presented: Three Months Ended March 31, 2025 2024 Numerator: Net income (loss) attributable to common stockholders (in thousands) $ 20,017 $ ( 55,349 ) Denominator: Weighted-average shares outstanding, basic 153,345,192 181,017,726 Dilutive effect of outstanding stock options, RSUs and stock committed under ESPP 8,449,095 — Weighted-average shares outstanding, diluted 161,794,287 181,017,726 Net income (loss) per share attributable to common stockholders: Basic $ 0.13 $ ( 0.31 ) Diluted $ 0.12 $ ( 0.31 ) 20 Table of Contents The following outstanding shares of common stock equivalents were excluded from the calculation of the diluted net loss per share attributable to common stockholders because their effect would have been anti-dilutive: As of March 31, 2025 2024 Stock options issued and outstanding 145,350 1,584,426 Unvested restricted stock units issued and outstanding (1) 1,384,775 16,173,773 Shares of Class A common stock reserved for Twilio.org — 419,939 Shares of Class A common stock committed under ESPP — 396,611 Shares of Class A common stock in escrow subject to future vesting — 3,771 Total 1,530,125 18,578,520 ____________________________________ (1) A portion of these unvested restricted stock units are PSUs. The number of PSUs that will ultimately vest may increase or decrease the number of shares that will be issued at the end of the performance period. 15. Income Taxes The Company computes its provision for income taxes for interim periods using an estimated annual effective tax rate based on anticipated annual pretax income or loss. The estimated annual effective tax rate is applied to the Company’s year-to-date income or loss, and is adjusted for discrete items recorded in the period. The primary difference between the Company’s effective tax rate and the federal statutory rate is the full valuation allowance the Company has established on its federal, state and certain foreign net operating losses and credits. The provision for income taxes recorded in the three months ended March 31, 2025 and 2024 consist primarily of federal, state and foreign income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business. The provision for income taxes recorded in the three months ended March 31, 2024 also consists of income tax expense from a foreign audit settlement. The Company is subject to taxation in the U.S. and various other state and foreign jurisdictions. Because the Company has net operating loss carryforwards for U.S. federal and state jurisdictions, the statute of limitations is open for all tax years. 16. Related Party Transactions In May 2022, the Company and Syniverse Corporation (“Syniverse”), an equity method investee, entered into a wholesale agreement pursuant to which Syniverse would process, route and deliver application-to-person messages originating and/or terminating between the Company’s customers and mobile network operators. For the three months ended March 31, 2025 and 2024, the value of the transactions that occurred between the Company and Syniverse were $ 38.7 million and $ 34.0 million, respectively. These transactions were recorded as cost of revenue in the accompanying condensed consolidated statements of operations. 21 Table of Contents Special Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “can,” “will,” “would,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “forecasts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about: • the impact of global economic and political conditions and uncertainty and significant market volatility on our business, customers and partners; • our future financial performance, including expectations regarding our revenue, revenue growth, cost of revenue, gross profit, gross margin and operating expenses, our ability to generate positive cash flow and ability to achieve and sustain profitability on GAAP and non-GAAP bases, the factors affecting our results of operations, the timing of future expenses, the end dates for certain types of expenses, and the assumptions underlying such expectations; • the realignment of our business unit structure, including its expected costs and benefits and the related accounting determinations; • our ability to execute on our vision for our platform, including delivering new product releases and enhancements, reducing friction across our platform and streamlining cross-channel orchestration; • our ability to successfully deliver an interoperable platform that allows businesses to harness the power of customer data and consumer insights to improve customer engagement; • our ability to leverage artificial intelligence and machine learning, including to develop and commercialize products and features for our customers and deploy internal applications for our own operational efficiency; • our ability to drive revenue growth, improve profitability and increase our market share, including by forming and expanding partnerships with independent software vendors and other partners, improving our self-service capabilities, cross-selling our products and expanding internationally; • our ability to simplify and modernize our business processes and improve our overall operating efficiency; • our ability to compete effectively in an intensely competitive market, including our ability to set optimal prices for our products and adapt and respond effectively to rising costs, competing offerings, rapidly changing technology and technology trends, and evolving customer needs and preferences; • our anticipated investments in sales and marketing, research and development and additional systems and processes to support our growth; • our ability to maintain reliable service levels for our customers; • our ability to maintain, protect and enhance our intellectual property; • our ability to comply with modified or new industry standards, laws and regulations applying to our business; • our ability to manage changes in network service provider fees that we pay in connection with the delivery of communications on our platform; • investments and costs required to prevent, detect and remediate potential cybersecurity threats, incidents and breaches of ours or our customers’ systems or information; • our ability to optimize our network service provider coverage and connectivity; • our ability to work closely with email inbox service providers to maintain deliverability rates; 22 Table of Contents • the impact and expected results from changes in our relationships with our larger customers; • the sufficiency of our cash and cash equivalents to meet our liquidity needs; • our expectations regarding share repurchases; • our ability to successfully defend litigation brought against us; • the anticipated results of our foreign currency hedging activities; • our ability to service the interest on our 3.625% senior notes due 2029 (“2029 Notes”) and on our 3.875% notes due 2031 (“2031 Notes,” and together with the 2029 Notes, the “Notes”), and repay such Notes; • our customers’ and other platform users’ violation of our policies or other misuse of our platform; and • our ability to successfully integrate acquired businesses and realize the benefits of our past or future strategic acquisitions, divestitures or investments. We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, results of operations and financial condition. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described below in Part II, Item 1A, “Risk Factors,” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.