What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-31 compared with 2025-08-08 · 97 added, 126 removed, 361 unchanged (38% of the section changed)

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We believe that operating as one organization best positions us as we seek to deliver one trusted, smart and integrated platform that enables more personalized communications and engagements for customers.

Despite realigning our organizational structure, we have continued to have two reportable segments.

Our Communications reportable segment consists of a variety of APIs and software solutions to optimize communications between our customers and their end users.

Our key offerings in our Communications reportable segment include Messaging, Voice, Email (which includes Marketing Campaigns), Flex, and User Authentication and Identity.

Our Segment reportable segment consists of software products that enable businesses to leverage their contextual data to create unique customer profiles and achieve more effective customer engagement.

Our key offering in our Segment reportable segment is our Segment product.

In the three months ended June 30, 2025 and 2024, our revenue was $1.23 billion and $1.08 billion, respectively, and our net income (loss) was $22.4 million and $(31.9) million, respectively.

In the three months ended June 30, 2025 and 2024, our 10 largest Active Customer Accounts generated an aggregate of 9% and 10% of our total revenue, respectively.

In the third quarter of 2025, we modified the presentation of the financial information that is regularly reviewed by our Chief Executive Officer, who is also our Chief Operating Decision Maker (“CODM”), to reflect this realignment and the change in how management currently views and operates the business.

These changes required us to re-evaluate our operating segment structure and resulted in the conclusion that as of September 30, 2025, we had one operating and reportable segment, which comprised all of the consolidated Company.

On October 30, 2025, we entered into a definitive agreement to acquire Stytch, Inc., an identity platform for AI agents.

We expect the transaction to close in the fourth quarter of 2025, subject to customary closing conditions.

In the three months ended September 30, 2025 and 2024, our revenue was $1.30 billion and $1.13 billion, respectively, and our net income (loss) was $37.2 million and $(9.7) million, respectively.

In the three months ended September 30, 2025 and 2024, our 10 largest Active Customer Accounts generated an aggregate of 9% and 10% of our total revenue, respectively.

Factors Affecting Our Results of Operations

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We pass these fees through to our customers at cost.

As a result, we recognize an equal amount of revenue and cost

of revenue related to these fees.

As a result, we recognize an equal amount of revenue and cost of revenue related to these fees.

The increased fees do not impact our gross profit, but they will create a modest headwind to our gross margins going forward.

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We review a number of operational and financial metrics, including Active Customer Accounts and Dollar-Based Net Expansion Rate, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.

The following table summarizes our year-over-year revenue growth and Dollar-Based Net Expansion Rate for the three months ended June 30, 2025 and 2024, and the number of Active Customer Accounts as of June 30, 2025 and 2024.

The following table summarizes our year-over-year revenue growth and Dollar-Based Net Expansion Rate for the three months ended September 30, 2025 and 2024, and the number of Active Customer Accounts as of September 30, 2025 and 2024.

Three Months Ended

September 30,

Active Customer Accounts

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Active Customer Accounts excludes customer accounts from Zipwhip, Inc.

Communications Active Customer Accounts and Segment Active Customer Accounts are calculated using the same methodology, but using only revenue recognized from accounts in the respective segment.

When presented in this Quarterly Report on Form 10-Q, (i) the number of Active Customer Accounts is rounded down to the nearest thousand, (ii) the number of Communications Active Customer Accounts is rounded down to the nearest thousand, and (iii) the number of Segment Active Customer Accounts is rounded down to the nearest hundred.

When presented in this Quarterly Report on Form 10-Q, the number of Active Customer Accounts is rounded down to the nearest thousand.

Our business and customer relationships have grown since we began reporting the number of Active Customer Accounts using the above definition, which is anchored to a minimum $5 monthly revenue figure.

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Due to this dynamic, we believe that the number of Active Customer Accounts, as currently defined, is less informative now as an indicator of the growth of our business and future revenue trends than it has been in prior periods.

In the three months ended June 30, 2025 and 2024, revenue from Active Customer Accounts represented over 99% of total revenue in each period.

In the three months ended September 30, 2025 and 2024, revenue from Active Customer Accounts represented over 99% of total revenue in each period.

Dollar‑Based Net Expansion Rate

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Revenue from divestitures does not impact the Dollar-Based Net Expansion Rate calculation beginning in the quarter the divestiture closed, unless the divestiture closing date is the last day of a quarter.

Communications Dollar-Based Net Expansion Rate and Segment Dollar-Based Net Expansion Rate are calculated using the same methodology, but using only revenue attributable to the respective segment and Active Customer Accounts and customer accounts from Zipwhip for that respective segment.

We believe that measuring Dollar-Based Net Expansion Rate, on an aggregate basis and at the segment level, provides an important indication of the performance of our efforts to increase revenue from existing customers.

We believe that measuring Dollar-Based Net Expansion Rate provides an important indication of the performance of our efforts to increase revenue from existing customers.

Our ability to drive growth and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with existing Active Customer Accounts and to increase their use of the platform.

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We recognize revenue from our products on either a usage basis or a subscription basis, depending on the nature of the product and the type of customer contract.

The majority of our Communications reportable segment revenue is derived from usage-based fees.

The majority of our revenue is derived from usage-based fees.

The usage-based fees are earned when customers access our cloud-based platform and start using our products.

Examples of our primarily usage-based Communications products are Messaging and Voice.

Examples of our primarily usage-based products are Messaging and Voice.

For Messaging products, we primarily charge fees related to the number of text messages sent or received.

For Voice products, we primarily charge fees for minutes of call duration.

Examples of our primarily subscription-based Communications products are Email and Flex.

For these products, we recognize revenue evenly over the contract term.

Our Segment reportable segment revenue is derived from Segment products that are subscription-based.

For these products we recognize revenue evenly over the contract term.

When our usage-based products are embedded into our subscription-based products, we charge for each product separately on a usage or subscription basis, respectively, and record the revenue in the reportable segment in which each product resides.

Examples of our primarily subscription-based products are Email, Segment and Flex.

For subscription-based revenue derived from these products, we recognize revenue evenly over the contract term.

When our usage-based products are embedded into our subscription-based products, or when multiple products are purchased together as a solution, we charge for each product separately on a usage or subscription basis, as applicable.

Most of our usage-based customers gain access to our platform through our self-service sign-up format, which requires an upfront prepayment via credit card that is drawn down as they use our products.

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Usage-based customers subject to such contracts are typically invoiced monthly in arrears for products used.

In the three months ended June 30, 2025 and 2024, we generated 74% and 71% of our revenue, respectively, from usage-based fees.

In the three months ended September 30, 2025 and 2024, we generated 75% and 72% of our revenue, respectively, from usage-based fees.

Subscription-based fees are earned in accordance with subscription pricing terms.

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Subscription customers are generally invoiced in advance at the start of the contract term.

In the three months ended June 30, 2025 and 2024, we generated 26% and 29% of our revenue, respectively, from non-usage‑based fees.

In the three months ended September 30, 2025 and 2024, we generated 25% and 28% of our revenue, respectively, from non-usage‑based fees.

Amounts that have been charged via credit card or invoiced are recorded in revenue, deferred revenue or customer deposits, depending on whether the revenue recognition criteria have been met.

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Cost of revenue also includes cloud infrastructure fees, direct costs of personnel, such as salaries and stock‑based compensation for our customer support employees, and other non‑personnel costs, such as depreciation and amortization expense related to data centers and hosting equipment, and amortization of capitalized internal-use software development costs and acquired intangible assets.

Costs of revenue are generally directly attributable to each segment.

Certain costs of revenue are allocated to segments based on methodologies that best reflect the patterns of consumption of these costs.

Our arrangements with network service providers require us to pay fees, including based on the volume of phone calls initiated or text messages sent, as well as the number of telephone numbers acquired by us to service our customers.

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We capitalize the portion of our software development costs that meets the criteria for capitalization.

Research and development expenses are generally directly attributable to each segment.

Certain research and development expenses are allocated to segments based on methodologies that best reflect the patterns of consumption of these costs.

A small percentage of research and development costs, such as costs related to digital architecture and information security, are not allocated to segments because they support company-wide processes and are managed on a company-wide level.

We are focusing our research and development investment in the highest impact product areas for our future.

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Sales and marketing expenses also include expenditures related to advertising, marketing, brand awareness activities, costs related to our SIGNAL customer and developer conferences, credit card processing fees, professional services fees, depreciation, amortization of acquired intangible assets and an allocation of our general overhead expenses.

Sales and marketing expenses are generally directly attributable to each segment.

Certain sales and marketing expenses are allocated to segments based on methodologies that best reflect the patterns of consumption of these costs.

A small percentage of sales and marketing costs, such as costs related to corporate communications and global brand awareness, are not allocated to segments because they support company-wide processes and are managed on a company-wide level.

We focus our sales and marketing efforts on generating awareness of our company, platform and products, creating sales leads, expanding relationships with existing customers and establishing and promoting our brand, both domestically and internationally.

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General and administrative expenses also include costs related to business acquisitions and dispositions, legal and other professional services fees, certain taxes, depreciation and amortization, charitable contributions and an allocation of our general overhead expenses.

General and administrative expenses are allocated to each segment when they are directly attributable to each segment or are allocated to segments based on methodologies that best reflect the patterns of consumption of these costs.

A significant portion of general and administrative costs, such as costs related to corporate governance and certain costs related to legal, human resources, finance and accounting functions, are not allocated to segments because they support company-wide processes and are managed on a company-wide level.

Other (Expenses) Income, Net

Our other (expenses) income, net, consist primarily of our share of losses from our equity method investment, impairment charges and gains and losses related to our strategic investments, realized gains and losses from marketable securities, interest income and expense and debt-related costs.

Provision for Income Taxes

Benefit from (Provision for) Income Taxes

Our provision for income taxes consists primarily of federal, state and foreign income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business.

From time to time, we may recognize tax benefits arising from various matters, including newly enacted legislations.

Benefits from income taxes may fully or partially offset the provision for income taxes within a reporting period.

The primary difference between our effective tax rate and the federal statutory rate relates to the valuation allowance the Company established on the federal, state and certain foreign net operating losses and credits.

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Three Months Ended

September 30,

Reconciliation:

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Three Months Ended

September 30,

Reconciliation:

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Three Months Ended

September 30,

Reconciliation:

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Three Months Ended

September 30,

Reconciliation:

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Free cash flow margin 19 % 17 %

Net cash provided by investing activities

Net cash (used in) provided by investing activities

$ (161,502) $ 267,355

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The period-to-period comparisons of our historical results are not indicative of the results that may be expected in the future.

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2025 2024 2025 2024

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(8,264) 1,243 (8,159) (7,620)

Income (loss) before provision for income taxes

Income (loss) before benefit from (provision for) income taxes

32,684 (3,651) 92,860 (75,055)

Provision for income taxes

Benefit from (provision for) income taxes

4,564 (6,075) (13,172) (21,878)

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(1) Includes stock-based compensation expense as follows:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2025 2024 2025 2024

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(2) Includes amortization of acquired intangibles as follows:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2025 2024 2025 2024

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The following table sets forth our results of operations for each of the periods presented as a percentage of our total revenue:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2025 2024 2025 2024

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Total other (expenses) income, net (1) * * *

Income (loss) before provision for income taxes

Provision for income taxes

(1) (1) (1) (1)

Income (loss) before benefit from (provision for) income

Benefit from (provision for) income taxes

Net income (loss) attributable to common stockholders

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** Columns may not sum due to rounding.

Comparison of the Three Months Ended June 30, 2025 and 2024

Comparison of the Three Months Ended September 30, 2025 and 2024

Three Months Ended

September 30,

2025 2024 Change

(Dollars in thousands)

Twilio Communications $ 1,152,955 $ 1,007,302 $ 145,653 14 %

Twilio Segment 75,470 75,200 270 0 %

Consolidated total revenue $ 1,228,425 $ 1,082,502 $ 145,923 13 %

In the three months ended June 30, 2025, Communications revenue increased by $145.7 million, or 14%, compared to the same period last year.

This increase was primarily attributable to the increased usage of our Communications products by our existing customers, as reflected in our Communications Dollar‑Based Net Expansion Rate of 109%, as well as an increase of $55.2 million in revenue derived from our new Communications Active Customer Accounts.

In the three months ended June 30, 2025, Segment revenue increased by $0.3 million, or nearly flat, compared to the same period last year.

This increase was primarily attributable to an increase of $4.0 million in revenue derived from our new Segment Active Customer Accounts, partially offset by the decreased usage of our Segment products due to churn and contraction affecting our existing customers, as reflected in our Segment Dollar-Based Net Expansion Rate of 95%.

$ 1,300,402 $ 1,133,649 $ 166,753 15 %

In the three months ended September 30, 2025, revenue increased by $166.8 million, or 15%, compared to the same period last year.

This increase was primarily attributable to the increased usage of our products by our existing customers, as reflected in our Dollar‑Based Net Expansion Rate of 109%, as well as an increase of $61.0 million in revenue derived from our new Active Customer Accounts.

The increase also reflects $20.2 million in revenue related to the incremental A2P fees introduced by a major US carrier in the previous quarter.

Cost of Revenue and Gross Profit

Three Months Ended

September 30,

2025 2024 Change

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$ 632,077 $ 578,629 $ 53,448 9 %

In the three months ended June 30, 2025, cost of revenue increased by $99.0 million, or 19%, compared to the same period last year.

The increase was primarily attributable to a $94.5 million increase in network service provider costs, net of the impact of hedging instruments.

In the three months ended June 30, 2025, gross profit increased by $46.9 million, or 8%, compared to the same period last year.

In the three months ended September 30, 2025, cost of revenue increased by $113.3 million, or 20%, compared to the same period last year.

The increase was primarily attributable to a $101.2 million increase in network service provider costs, net of the impact of hedging instruments, which includes a $20.2 million increase due to the incremental A2P fees introduced by a major US carrier in the previous quarter.

In the three months ended September 30, 2025, gross profit increased by $53.4 million, or 9%, compared to the same period last year.

This increase was attributable to the factors impacting our revenue and cost of revenue, as described above.

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Three Months Ended

September 30,

2025 2024 Change

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Total operating expenses $ 591,129 $ 583,523 $ 7,606 1 %

In the three months ended June 30, 2025, research and development expenses increased by $0.7 million, or nearly flat, compared to the same period last year.

In the three months ended September 30, 2025, research and development expenses increased by $0.8 million, remaining nearly flat, compared to the same period last year.

Fluctuations in the various research and development expense categories were not significant either individually or in the aggregate.

In the three months ended June 30, 2025, sales and marketing expenses increased by $2.9 million, or 1%, compared to the same period last year.

In the three months ended September 30, 2025, sales and marketing expenses increased by $5.1 million, or 2%, compared to the same period last year.

Fluctuations in the various sales and marketing expense categories were not significant either individually or in the aggregate.

In the three months ended June 30, 2025, general and administrative expenses decreased by $12.7 million, or 11%, compared to the same period last year.

The decrease was primarily attributable to a $13.1 million decrease in charitable contributions that we made through Twilio.org.

Other Expenses, net

In the three months ended September 30, 2025, general and administrative expenses increased by $1.7 million, or 2%, compared to the same period last year.

Fluctuations in the various general and administrative expense categories were not significant either individually or in the aggregate.

Other (Expenses) Income, net

Three Months Ended

September 30,

2025 2024 Change

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19,242 26,522 (7,280) (27) %

Total other expenses, net

Total other (expenses) income, net

$ (8,264) $ 1,243 $ (9,507) (765) %

In the three months ended June 30, 2025, other expenses, net, decreased by $3.8 million, or 53%, compared to the same period last year.

The decrease was primarily attributable to a $5.1 million increase in other income, net, primarily driven by unrealized gains from fluctuations in foreign currency exchange rates, partially offset by a $1.3 million increase in our share of losses from our equity method investment.

Segment Results of Operations

The following table presents the results for non-GAAP income (loss) from operations, as reviewed by our CODM, for each of our Communications and Segment reportable segments for the three months ended June 30, 2025 and 2024:

Three Months Ended

In the three months ended September 30, 2025, other (expenses) income, net, decreased by $9.5 million, or 765%, compared to the same period last year.

The decrease was primarily attributable to a $7.3 million decrease in other income, net, primarily driven by unrealized gains from fluctuations in foreign currency exchange rates and a $2.2 million increase in our share of losses from our equity method investment.

Comparison of the Nine Months Ended September 30, 2025 and 2024

Nine Months Ended

September 30,

2025 2024 Change

(Dollars in thousands)

Twilio Communications $ 280,613 $ 249,930 $ 30,683 12 %

Twilio Segment

$ 3,701,290 $ 3,263,201 $ 438,089 13%

In the three months ended June 30, 2025, Communications non-GAAP income from operations increased by $30.7 million, or 12%, compared to the same period last year.

The increase was driven by an increase in Communications revenue of $145.7 million, as described in the Revenue section above, and was partially offset by a $94.5 million increase in network service provider costs, net of the impact of hedging instruments, a $10.5 million increase in hosting fees, which support the growth in usage of our products by our new and existing customers, and a $14.6 million increase in total personnel costs.

In the three months ended June 30, 2025, Segment non-GAAP income from operations increased by $21.8 million, or 138%, compared to the same period last year.

The increase was driven by a decrease in Segment operating expenses of $20.9 million primarily attributable to a decrease in total personnel costs.

Comparison of the Six Months Ended June 30, 2025 and 2024

Six Months Ended

2025 2024 Change

(Dollars in thousands)

Twilio Communications $ 2,249,762 $ 1,979,308 $ 270,454 14%

Twilio Segment 151,126 150,244 882 1%

Consolidated total revenue $ 2,400,888 $ 2,129,552 $ 271,336 13%

In the six months ended June 30, 2025, Communications revenue increased by $270.5 million, or 14%, compared to the same period last year.

This increase was primarily attributable to the increased usage of our Communications products by our existing customers, as reflected in our Communications Dollar‑Based Net Expansion Rate of 108%, as well as an increase of $106.2 million in revenue derived from our new Communications Active Customer Accounts.

In the six months ended June 30, 2025, Segment revenue increased by $0.9 million, or 1%, compared to the same period last year.

This increase was primarily attributable to an increase of $9.0 million in revenue derived from our new Segment Active Customer Accounts, partially offset by the decreased usage of our Segment products due to churn and contraction affecting our existing customers, as reflected in our Segment Dollar‑Based Net Expansion Rate of 95%.

In the nine months ended September 30, 2025, revenue increased by $438.1 million, or 13%, compared to the same period last year.

This increase was primarily attributable to the increased usage of our products by our existing customers, as reflected in our Dollar‑Based Net Expansion Rate of 108%, as well as an increase of $176.2 million in revenue derived from our new Active Customer Accounts.

The increase also reflects $26.4 million in revenue related to the incremental A2P fees introduced by a major US carrier in the previous quarter.

Cost of Revenue and Gross Profit

Six Months Ended

Nine Months Ended

September 30,

2025 2024 Change

2 unchanged sentences

$ 1,816,384 $ 1,678,515 $ 137,869 8 %

In the six months ended June 30, 2025, cost of revenue increased by $186.9 million, or 18%, compared to the same period last year.

This increase was primarily attributable to a $171.2 million increase in network service providers’ costs, net of the impact of hedging instruments and a $27.0 million increase in hosting fees, which support the growth in usage of our products by our new and existing customers, partially offset by an $8.1 million decrease in customer support costs primarily attributable to a decrease in personnel costs.

In the six months ended June 30, 2025, gross profit increased by $84.4 million, or 8%, compared to the same period last year.

In the nine months ended September 30, 2025, cost of revenue increased by $300.2 million, or 19%, compared to the same period last year.

This increase was primarily attributable to a $272.3 million increase in network service providers’ costs, net of the impact of hedging instruments, which includes a $26.4 million increase due to the incremental A2P fees introduced by a major US carrier in the previous quarter.

The increase was also due to a $42.7 million increase in hosting fees, which support the growth in usage of our products by our new and existing customers.

These increases were partially offset by an $11.1 million decrease in customer support costs primarily driven by a decrease in personnel costs.

In the nine months ended September 30, 2025, gross profit increased by $137.9 million, or 8%, compared to the same period last year.

The increase was attributable to the factors impacting our revenue and cost of revenue, as described above.

Operating Expenses

Six Months Ended

Nine Months Ended

September 30,

2025 2024 Change

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Total operating expenses $ 1,715,365 $ 1,745,950 $ (30,585) (2) %

In the six months ended June 30, 2025, research and development expenses decreased by $5.5 million, or 1%, compared to the same period last year.

In the nine months ended September 30, 2025, research and development expenses decreased by $4.7 million, or 1%, compared to the same period last year.

Fluctuations in the various research and development expense categories were not significant either individually or in the aggregate.

In the six months ended June 30, 2025, sales and marketing expenses increased by $0.5 million, flat compared to the same period last year.

In the nine months ended September 30, 2025, sales and marketing expenses increased by $5.6 million, or 1%, compared to the same period last year.

Fluctuations in the various sales and marketing expense categories were not significant either individually or in the aggregate.

In the six months ended June 30, 2025, general and administrative expenses decreased by $33.2 million, or 15%, compared to the same period last year.

The decrease was primarily attributable to an $11.6 million decrease in charitable contributions that we made through Twilio.org, a $10.7 million decrease in the provision for doubtful accounts and a $9.8 million decrease in professional services fees.

Other Income (Expenses), net

Six Months Ended

In the nine months ended September 30, 2025, general and administrative expenses decreased by $31.5 million, or 9%, compared to the same period last year.

The decrease was primarily attributable to a $15.3 million decrease in professional services fees, an $11.8 million decrease in the provision for doubtful accounts and a $7.8 million decrease in charitable contributions that we made through Twilio.org.

Other Expenses, net

Nine Months Ended

September 30,

2025 2024 Change

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64,040 71,174 (7,134) (10) %

Total other income (expenses), net

$ 105 $ (8,863) $ 8,968 101 %

In the six months ended June 30, 2025, other income (expenses), net increased by $9.0 million, or 101%, compared to the same period last year.

The increase is primarily attributable to a decrease of $8.8 million in our share of losses from our equity method investment.

Segment Results of Operations

Six Months Ended

2025 2024 Change

(Dollars in thousands)

Twilio Communications $ 558,077 $ 498,940 $ 59,137 12 %

Twilio Segment

Total other expenses, net

$ (8,159) $ (7,620) $ (539) (7) %

In the six months ended June 30, 2025, Communications non-GAAP income from operations increased by $59.1 million, or 12%, compared to the same period last year.

The increase was driven by an increase in Communications revenue of $270.5 million, or 14%, as described in the Revenue section above, and was partially offset by a $171.2 million increase in network service provider costs, net of the impact of hedging instruments, a $22.7 million increase in total personnel costs, and a $23.9 million increase in hosting fees, which support the growth in usage of our products by our new and existing customers.

In the six months ended June 30, 2025, Segment non-GAAP income from operations increased by $41.3 million, or 112%, compared to the same period last year.

The increase was driven by a decrease in Segment operating expenses of $42.7 million primarily attributable to a decrease in total personnel costs.

In the nine months ended September 30, 2025, other expenses, net increased by $0.5 million, or 7%, compared to the same period last year.

The increase is primarily attributable to a $7.1 million decrease in other income, net, primarily driven by the income earned on our debt securities, partially offset by a $6.6 million decrease in our share of losses from our equity method investment.

Liquidity and Capital Resources

As of June 30, 2025, we had cash and cash equivalents of $969.2 million and short-term marketable securities of $1.6 billion.

As of September 30, 2025, we had cash and cash equivalents of $734.8 million and short-term marketable securities of $1.7 billion.

Cash equivalents consist of money market funds, commercial paper and U.S.

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The program expires on December 31, 2027.

In the three and six months ended June 30, 2025, we purchased $176.7 million in aggregate value, or 1.8 million shares, and $306.9 million in aggregate value, or 3.0 million shares, respectively, of our Class A common stock on the open market.

In the three and nine months ended September 30, 2025, we repurchased $349.7 million in aggregate value, or 3.4 million shares, and $656.7 million in aggregate value, or 6.4 million shares, respectively, of our Class A common stock.

2029 Notes and 2031 Notes

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The following table summarizes our cash flows:

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

5 unchanged sentences

(649,660) (1,903,802)

Net increase in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

$ 303,406 $ (54,268)

Cash Flows from Operating Activities

In the six months ended June 30, 2025, cash provided by operating activities consisted primarily of our net income of $42.4 million adjusted for non-cash items, including $288.5 million of stock-based compensation expense, $99.4 million of depreciation and amortization expense, $44.7 million of our share of losses from an equity method investment, $38.4 million of amortization of deferred commissions, $10.5 million of non-cash reduction in our operating right-of-use asset, and $59.8 million of cumulative changes in operating assets and liabilities.

In the nine months ended September 30, 2025, cash provided by operating activities consisted primarily of our net income of $79.7 million adjusted for non-cash items, including $446.7 million of stock-based compensation expense, $147.9 million of depreciation and amortization expense, $72.2 million of our share of losses from an equity method investment, $56.9 million of amortization of deferred commissions, $16.6 million of non-cash reduction in our operating right-of-use asset, and $97.2 million of cumulative changes in operating assets and liabilities.

With respect to changes in operating assets and liabilities, accounts receivable and prepaid expenses decreased $46.7 million primarily due to timing of cash receipts and prepayments of certain operating expenses.

Accounts payable and other current liabilities decreased $64.4 million primarily driven by the payment of the 2024 company-wide bonus in the six months ended June 30, 2025.

Other long-term assets increased $51.4 million primarily due to an increase in long-term prepayments to support our business.

Accounts payable and other current liabilities decreased $55.9 million primarily driven by timing of payments to vendors.

Other long-term assets increased $64.3 million primarily due to an increase in long-term prepayments to support our business and an increase in deferred sales commissions related to the growth of our business.

Operating lease liabilities decreased $26.9 million due to payments made against our operating lease obligations.

In the six months ended June 30, 2024, cash provided by operating activities consisted primarily of our net loss of $87.2 million adjusted for non-cash items, including $306.3 million of stock-based compensation expense, $105.4 million of depreciation and amortization expense, $37.8 million amortization of deferred commissions, $53.5 million of share of losses from equity method investments and $32.7 million of cumulative changes in operating assets and liabilities.

In the nine months ended September 30, 2024, cash provided by operating activities consisted primarily of our net loss of $96.9 million adjusted for non-cash items, including $460.8 million of stock-based compensation expense, $156.2 million of depreciation and amortization expense, $57.0 million amortization of deferred commissions, $78.8 million of share of losses from equity method investments and $74.0 million of cumulative changes in operating assets and liabilities.

With respect to changes in operating assets and liabilities, accounts receivable and prepaid expenses decreased $20.9 million primarily due to timing of cash receipts and pre-payments of certain operating expenses.

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Cash Flows from Investing Activities

In the six months ended June 30, 2025, cash provided by investing activities was $382.9 million, primarily consisting of $409.2 million of maturities and sales of marketable securities, net of purchases, partially offset by $24.2 million related to capitalized software development costs, and $2.2 million related to purchases of long-lived assets.

In the six months ended June 30, 2024, cash provided by investing activities was $974.4 million, primarily consisting of $1.0 billion of maturities and sales of marketable securities, net of purchases, partially offset by $25.8 million related to capitalized software development costs and $2.8 million related to purchases of long-lived assets.

In the nine months ended September 30, 2025, cash provided by investing activities was $221.4 million, primarily consisting of $263.7 million of maturities and sales of marketable securities, net of purchases, partially offset by $38.0 million related to capitalized software development costs, and $4.4 million related to purchases of long-lived assets.

In the nine months ended September 30, 2024, cash provided by investing activities was $1.2 billion, primarily consisting of $1.3 billion of maturities and sales of marketable securities, net of purchases, partially offset by $40.3 million related to capitalized software development costs and $3.5 million related to purchases of long-lived assets.

Cash Flows from Financing Activities

In the six months ended June 30, 2025, cash used in financing activities was $301.7 million primarily consisting of $323.2 million of cash paid to repurchase 3.0 million shares of our Class A common stock in the open market, including related costs, offset by $25.9 million in proceeds from exercises of stock options and shares of Class A common stock issued under the Company’s ESPP.

In the six months ended June 30, 2024, cash used in financing activities was $1.3 billion, primarily consisting of $1.3 billion of cash paid to repurchase 21.4 million shares of our Class A common stock in the open market, including related costs.

In the nine months ended September 30, 2025, cash used in financing activities was $649.7 million primarily consisting of $670.5 million of cash paid to repurchase 6.4 million shares of our Class A common stock, including related costs, offset by $26.3 million in proceeds from exercises of stock options and shares of Class A common stock issued under the Company’s ESPP.

In the nine months ended September 30, 2024, cash used in financing activities was $1.9 billion, primarily consisting of $1.9 billion of cash paid to repurchase 10.6 million shares of our common stock, including related costs.

Critical Accounting Policies and Estimates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis