TWILIO INC 10-Q

Item 1. Financial Statements TWILIO INC. Condensed Consolidated Balance Sheets (Unaudited) As of March 31, As of December 31, 2026 2025 (In thousands) ASSETS Current assets: Cash and cash equivalents $ 541,976 $ 682,335 Short-term marketable securities 1,804,286 1,788,007 Accounts receivable, net 710,516 636,736 Prepaid expenses and other current assets 390,041 469,650 Total current assets 3,446,819 3,576,728 Property and equipment, net 181,388 176,963 Operating right-of-use assets 29,561 39,031 Equity method investment 275,093 301,642 Intangible assets, net 125,399 142,065 Goodwill 5,292,457 5,291,787 Other long-term assets 226,088 242,674 Total assets $ 9,576,805 $ 9,770,890 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 91,706 $ 85,089 Accrued expenses and other current liabilities 456,931 608,119 Deferred revenue and customer deposits 159,569 158,677 Operating lease liability, current 32,119 35,123 Total current liabilities 740,325 887,008 Operating lease liability, noncurrent 43,290 54,162 Long-term debt, net 992,722 992,287 Other long-term liabilities 16,384 15,887 Total liabilities 1,792,721 1,949,344 Commitments and contingencies (Note 10) Stockholders’ equity: Preferred stock — — Class A common stock 152 152 Additional paid-in capital 16,294,528 16,148,190 Accumulated other comprehensive (loss) income ( 4,317 ) 15,668 Accumulated deficit ( 8,506,279 ) ( 8,342,464 ) Total stockholders’ equity 7,784,084 7,821,546 Total liabilities and stockholders’ equity $ 9,576,805 $ 9,770,890 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, 2026 2025 (In thousands, except share and per share amounts) Revenue $ 1,406,907 $ 1,172,463 Cost of revenue 722,663 590,896 Gross profit 684,244 581,567 Operating expenses: Research and development 262,166 254,295 Sales and marketing 211,866 212,113 General and administrative 102,546 92,077 Total operating expenses 576,578 558,485 Income from operations 107,666 23,082 Other (expenses) income, net: Share of losses from equity method investment ( 27,223 ) ( 19,471 ) Other income, net 21,789 22,973 Total other (expenses) income, net ( 5,434 ) 3,502 Income before provision for income taxes 102,232 26,584 Provision for income taxes ( 12,093 ) ( 6,567 ) Net income attributable to common stockholders $ 90,139 $ 20,017 Net income per share attributable to common stockholders: Basic $ 0.59 $ 0.13 Diluted $ 0.57 $ 0.12 Weighted-average shares used to compute net income per share attributable to common stockholders: Basic 152,424,306 153,345,192 Diluted 157,759,141 161,794,287 See accompanying notes to condensed consolidated financial statements. 4 Table of Contents TWILIO INC. Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended March 31, 2026 2025 (In thousands) Net income $ 90,139 $ 20,017 Other comprehensive (loss) income: Unrealized (loss) gain on marketable securities ( 10,069 ) 5,058 Net change in market value of effective foreign currency forward exchange contracts ( 10,590 ) 8,386 Share of other comprehensive income (loss) from equity method investment 674 ( 1,785 ) Total other comprehensive (loss) income ( 19,985 ) 11,659 Comprehensive income attributable to common stockholders $ 70,154 $ 31,676 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 Income (Loss) Accumulated Deficit Total Stockholders' Equity Shares Amount (In thousands, except share amounts) Balance as of December 31, 2025 152,411,346 $ 152 $ 16,148,190 $ 15,668 $ ( 8,342,464 ) $ 7,821,546 Net income — — — — 90,139 90,139 Exercises of vested stock options 37,169 — 559 — — 559 Vesting of restricted stock units 1,724,035 2 ( 2 ) — — — Value of equity awards withheld for tax liability ( 355 ) — ( 42 ) — — ( 42 ) Shares of Class A common stock issued and donated to charity 22,102 — 2,445 — — 2,445 Unrealized loss on marketable securities — — — ( 10,069 ) — ( 10,069 ) Repurchases of shares of Class A common stock including related costs ( 2,088,298 ) ( 2 ) — — ( 253,954 ) ( 253,956 ) Net change in market value of effective foreign currency forward exchange contracts — — — ( 10,590 ) — ( 10,590 ) Share of other comprehensive income from equity method investment — — — 674 — 674 Stock-based compensation — — 143,378 — — 143,378 Balance as of March 31, 2026 152,105,999 $ 152 $ 16,294,528 $ ( 4,317 ) $ ( 8,506,279 ) $ 7,784,084 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 (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. 7 Table of Contents TWILIO INC . Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2026 2025 CASH FLOWS FROM OPERATING ACTIVITIES: (In thousands) Net income $ 90,139 $ 20,017 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 34,167 49,565 Non-cash reduction to the right-of-use asset 4,715 5,170 Net amortization of investment premium and discount ( 2,122 ) ( 4,314 ) Stock-based compensation 136,511 139,273 Amortization of deferred commissions 17,139 19,265 Unrealized (gains) losses on marketable equity securities ( 4,795 ) 750 Share of losses from equity method investment 27,223 19,471 Other adjustments 10,426 7,549 Changes in operating assets and liabilities: Accounts receivable ( 74,869 ) 8,463 Prepaid expenses and other current assets 75,414 33,519 Other long-term assets ( 3,175 ) ( 9,416 ) Accounts payable 6,502 7,853 Accrued expenses and other current liabilities ( 155,755 ) ( 94,262 ) Deferred revenue and customer deposits 892 ( 1,634 ) Operating lease liabilities ( 9,096 ) ( 10,306 ) Other long-term liabilities ( 110 ) 79 Net cash provided by operating activities 153,206 191,042 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions, net of cash acquired. and payments related to prior period acquisitions ( 685 ) — Purchases of marketable securities and other investments ( 353,288 ) ( 213,844 ) Proceeds from sales and maturities of marketable securities and other investments 333,644 207,431 Capitalized software development costs ( 16,708 ) ( 11,564 ) Purchases of long-lived assets ( 4,153 ) ( 1,163 ) Net cash used in investing activities ( 41,190 ) ( 19,140 ) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on finance leases ( 64 ) ( 2,251 ) Value of equity awards withheld for tax liabilities ( 42 ) ( 53 ) Repurchases of shares of Class A common stock and related costs ( 253,027 ) ( 126,256 ) Proceeds from exercises of stock options 559 2,766 Net cash used in financing activities ( 252,574 ) ( 125,794 ) NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 140,558 ) 46,108 CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 682,534 431,437 CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period $ 541,976 $ 477,545 Cash paid for income taxes, net $ 21,220 $ 5,257 Cash paid for interest $ 18,756 $ 18,791 RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONDENSED CONSOLIDATED BALANCE SHEETS Cash and cash equivalents $ 541,976 $ 467,094 Restricted cash in other long-term assets — 10,451 Total cash, cash equivalents and restricted cash $ 541,976 $ 477,545 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 unaudited 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 24, 2026 (“Annual Report”). The unaudited condensed consolidated balance sheet as of December 31, 2025, 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 unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive income, 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 2026 or any future period. (b) Principles of Consolidation The unaudited 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 values of acquired intangible assets, goodwill and equity method investments; 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 $ 158.5 million as of March 31, 2026, of which 67 % is expected to be recognized over the next 12 months and 96 % is expected to be recognized over the next 24 months. 9 Table of Contents (e) Deferred Revenue and Customer Deposits As of March 31, 2026, and December 31, 2025, the Company recorded $ 159.6 million and $ 158.7 million as its deferred revenue and customer deposits, respectively, that are included in deferred revenue and customer deposits in the accompanying unaudited condensed consolidated balance sheets. During the three months ended March 31, 2026 and 2025, the Company recognized $ 76.8 million and $ 70.1 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, 2026, and December 31, 2025, the allowance for doubtful accounts was $ 20.5 million and $ 21.5 million, respectively, and is recorded in accounts receivable, net, in the accompanying unaudited condensed consolidated balance sheets. In the three months ended March 31, 2026 and 2025, no customer organization accounted for more than 10% of the Company’s total revenue. As of March 31, 2026, and December 31, 2025, no customer organization represented more than 10% of the Company’s gross accounts receivable. (g) Segment Reporting The Company operates in and reports its results in a single operating and reportable segment. Operating and reportable segments are determined in accordance with ASC 280 Segment Reporting , which requires financial information to be reported based on how the chief operating decision maker (“CODM”), who is the Company's Chief Executive Officer, reviews and manages the business, and establishes criteria for aggregating operating segments into reportable segments. The financial information of the Company regularly provided to the CODM is on a consolidated level and consolidated net income is its measure of profitability. This measure of profitability is used by the CODM to allocate resources and assess performance of the Company by comparing its actual results to the comparable results in prior periods and to any internally or externally set expectations. The consolidated financial information provided to the CODM, including significant expenses, is presented in a manner consistent with the information already disclosed in the accompanying unaudited condensed consolidated financial statements and the notes thereof. (h) Recently Issued Accounting Guidance, Not yet Adopted In September 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-06, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software,” which modernizes the accounting for internal-use software by replacing the previous stage-based model and aligning the capitalization process with current development practices, especially agile and iterative methods. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, and may be applied prospectively, retrospectively, or using a modified transition approach. Early adoption is permitted. The Company is in process of evaluating the impact of the adoption of this ASU on its 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 disaggregation of certain expenses in the notes to 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 prospectively or retrospectively. Early adoption is permitted. 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 Fair Value Hierarchy as of March 31, 2026 Aggregate Fair Value Level 1 Level 2 Level 3 Financial Assets: (In thousands) Cash and cash equivalents: Money market funds $ 239,963 $ — $ — $ 239,963 $ — $ — $ 239,963 Commercial paper 34,272 — — — 34,272 — 34,272 U.S. Treasury bills 4,000 — — 4,000 — — 4,000 Total included in cash and cash equivalents 278,235 — — 243,963 34,272 — 278,235 Marketable securities: Debt securities: U.S. Treasury securities 196,422 443 ( 288 ) 196,577 — — 196,577 Corporate debt securities and commercial paper 1,598,462 3,428 ( 3,196 ) — 1,598,694 — 1,598,694 Total debt securities 1,794,884 3,871 ( 3,484 ) 196,577 1,598,694 — 1,795,271 Equity securities 9,015 — — 9,015 — — 9,015 Total marketable securities 1,803,899 3,871 ( 3,484 ) 205,592 1,598,694 — 1,804,286 Total financial assets $ 2,082,134 $ 3,871 $ ( 3,484 ) $ 449,555 $ 1,632,966 $ — $ 2,082,521 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, 2025 Aggregate Fair Value Level 1 Level 2 Level 3 Financial Assets: (In thousands) Cash and cash equivalents: Money market funds $ 454,505 $ — $ — $ — $ 454,505 $ — $ — $ 454,505 Commercial paper 37,517 — — — 37,517 37,517 Total included in cash and cash equivalents 492,022 — — — 454,505 37,517 — 492,022 Marketable securities: Debt securities: U.S. Treasury securities 249,396 1,190 ( 9 ) — 250,577 — — 250,577 Corporate debt securities and commercial paper 1,523,935 9,360 ( 84 ) ( 1 ) — 1,533,210 — 1,533,210 Total debt securities 1,773,331 10,550 ( 93 ) ( 1 ) 250,577 1,533,210 — 1,783,787 Equity securities 4,220 — — — 4,220 — — 4,220 Total marketable securities 1,777,551 10,550 ( 93 ) ( 1 ) 254,797 1,533,210 — 1,788,007 Total financial assets $ 2,269,573 $ 10,550 $ ( 93 ) $ ( 1 ) $ 709,302 $ 1,570,727 $ — $ 2,280,029 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, 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 $ 17.5 million and $ 18.9 million in the three months ended March 31, 2026 and 2025, respectively. The interest is recorded as other income, net, in the accompanying unaudited condensed consolidated statements of operations. 11 Table of Contents The following table summarizes the contractual maturities of debt securities: As of March 31, As of December 31, 2026 2025 Amortized Cost Aggregate Fair Value Amortized Cost Aggregate Fair Value Financial Assets: (In thousands) Less than one year $ 690,783 $ 693,336 $ 588,022 $ 590,997 One to three years 1,104,101 1,101,935 1,185,309 1,192,790 Total $ 1,794,884 $ 1,795,271 $ 1,773,331 $ 1,783,787 Strategic Investments As of March 31, 2026 and December 31, 2025, the Company held strategic investments with a carrying value of $ 22.2 million and $ 24.5 million, respectively, recorded as other long-term assets in the accompanying unaudited condensed consolidated balance sheets. There were no significant impairments or adjustments recorded in the three months ended March 31, 2026 and 2025 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, 2026 and December 31, 2025, 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, 2026, the fair values of the 2029 Notes and 2031 Notes were $ 479.7 million and $ 468.2 million, respectively. As of December 31, 2025, the fair values of the 2029 Notes and 2031 Notes were $ 489.7 million and $ 483.9 million, respectively. 4. Property and Equipment Property and equipment consist of the following: As of March 31, As of December 31, 2026 2025 (In thousands) Capitalized internal-use software developments costs $ 444,047 $ 421,795 Data center equipment 19,915 27,843 Leasehold improvements 62,876 62,143 Office equipment 48,340 46,709 Furniture and fixtures 10,486 10,399 Software 14,927 14,927 Total property and equipment 600,591 583,816 Less: accumulated depreciation and amortization ( 419,203 ) ( 406,853 ) Total property and equipment, net $ 181,388 $ 176,963 Depreciation and amortization expense was $ 17.0 million and $ 21.9 million in the three months ended March 31, 2026 and 2025, respectively. The Company capitalized $ 23.3 million and $ 16.2 million in internal‑use software development costs in the three months ended March 31, 2026 and 2025, respectively. 12 Table of Contents 5. Derivatives and Hedging As of March 31, 2026, the Company’s outstanding foreign currency forward contracts designated as cash flow hedges had a total sell notional value of $ 294.6 million. The notional value represents the amount that will be sold upon maturity of the forward contract. As of March 31, 2026, 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 unaudited 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, 2026, the Company did not have any offsetting arrangements. 6. Goodwill and Intangible Assets Goodwill The goodwill balance as of March 31, 2026 and December 31, 2025, and the changes during the period, were as follows: Total (In thousands) Balance as of December 31, 2025 $ 5,291,787 Measurement period adjustment and other 670 Balance as of March 31, 2026 $ 5,292,457 Intangible assets Intangible assets consist of the following: As of March 31, 2026 Cost Accumulated Amortization Net Amortizable intangible assets: (In thousands) Developed technology $ 398,205 $ ( 366,535 ) $ 31,670 Customer relationships 350,283 ( 267,457 ) 82,826 Supplier relationships 49,756 ( 46,713 ) 3,043 Trade names 25,968 ( 25,948 ) 20 Patent 3,968 ( 1,343 ) 2,625 Total amortizable intangible assets 828,180 ( 707,996 ) 120,184 Non-amortizable intangible assets: Telecommunication licenses 4,920 — 4,920 Trademarks and other 295 — 295 Total $ 833,395 $ ( 707,996 ) $ 125,399 13 Table of Contents As of December 31, 2025 Cost Accumulated Amortization Net Amortizable intangible assets: (In thousands) Developed technology $ 398,205 $ ( 359,450 ) $ 38,755 Customer relationships 350,283 ( 260,216 ) 90,067 Supplier relationships 49,756 ( 44,443 ) 5,313 Trade names 25,968 ( 25,928 ) 40 Patent 3,968 ( 1,293 ) 2,675 Total amortizable intangible assets 828,180 ( 691,330 ) 136,850 Non-amortizable intangible assets: Telecommunication licenses 4,920 — 4,920 Trademarks and other 295 — 295 Total $ 833,395 $ ( 691,330 ) $ 142,065 Amortization expense was $ 16.7 million and $ 27.2 million for the three months ended March 31, 2026 and 2025, respectively. Total estimated future amortization expense is as follows: As of March 31, 2026 Year Ended December 31, (In thousands) 2026 (remaining nine months) $ 27,949 2027 27,796 2028 21,520 2029 17,353 2030 16,614 Thereafter 8,952 Total $ 120,184 7. Balance Sheet Components Prepaid expenses and other current assets consist of the following: As of March 31, As of December 31, 2026 2025 (In thousands) Prepaid expenses $ 277,494 $ 307,263 Other current assets 112,547 162,387 Total prepaid expenses and other current assets $ 390,041 $ 469,650 14 Table of Contents Accrued expenses and other current liabilities consist of the following: As of March 31, As of December 31, 2026 2025 (In thousands) Accrued payroll and related liabilities $ 77,808 $ 95,795 Company-wide bonus program liability 34,574 136,221 Accrued sales bonus and commissions 11,476 21,922 Accrued cost of revenue 206,411 226,878 Sales and other taxes payable 52,694 58,259 ESPP contributions 19,361 6,925 Accrued other expense 54,607 62,119 Total accrued expenses and other current liabilities $ 456,931 $ 608,119 8. Long-Term Debt Long-term debt, net, consists of the following: As of March 31, As of December 31, 2026 2025 (In thousands) 2029 Senior Notes Principal $ 500,000 $ 500,000 Unamortized discount ( 2,532 ) ( 2,733 ) Unamortized issuance costs ( 570 ) ( 615 ) Net carrying amount 496,898 496,652 2031 Senior Notes Principal 500,000 500,000 Unamortized discount ( 3,409 ) ( 3,563 ) Unamortized issuance costs ( 767 ) ( 802 ) Net carrying amount 495,824 495,635 Total long-term debt, net $ 992,722 $ 992,287 As of March 31, 2026, the Company was in compliance with all of its covenants under the related indentures. 9. 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, 2026 2025 Revenue by geographic area: (In thousands) United States $ 898,894 $ 749,440 International 508,013 423,023 Total $ 1,406,907 $ 1,172,463 Percentage of revenue by geographic area: United States 64 % 64 % International 36 % 36 % 15 Table of Contents 10. 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, 2026, 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. The Company had $ 273.2 million of non-cancelable purchase commitments as of March 31, 2026 with remaining terms up to five years . (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 associated with legal matters 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 unaudited 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, 2026, and December 31, 2025, 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. 16 Table of Contents As of March 31, 2026, the liabilities accrued for non-income-based taxes were $ 21.8 million for domestic jurisdictions and $ 21.0 million for jurisdictions outside of the United States. As of December 31, 2025, these liabilities were $ 21.1 million and $ 21.8 million, respectively. 11. Stockholders' Equity Preferred Stock As of March 31, 2026 and December 31, 2025, the Company had authorized 100,000,000 shares of preferred stock, par value $ 0.001 per share, of which no shares were issued and outstanding. Common Stock As of March 31, 2026 and December 31, 2025, the Company had authorized 1,000,000,000 shares of Class A common stock, par value $ 0.001 per share. As of March 31, 2026 and December 31, 2025, 152,105,999 and 152,411,346 shares of Class A common stock, respectively, were issued and outstanding. The Company had reserved shares of common stock for issuance as follows: As of March 31, As of December 31, 2026 2025 Stock options issued and outstanding 864,951 902,120 Unvested restricted stock units issued and outstanding 12,071,029 13,663,977 Shares of Class A common stock reserved for Twilio.org 243,123 265,225 Stock-based awards available for grant under 2016 Plan 35,759,787 28,543,969 Shares of Class A common stock reserved for issuance pursuant to ESPP 12,361,051 10,836,938 Total 61,299,941 54,212,229 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. In the three months ended March 31, 2026 and 2025, the Company repurchased 2.1 million and 1.2 million shares of its Class A common stock, respectively, for an aggregate purchase price of $ 253.4 million and $ 130.2 million, respectively. As of March 31, 2026, approximately $ 892.0 million of the amount authorized in January 2025 for share repurchases remained available for future repurchases. 12. 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 (“RSUs”), 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 2026, the Company granted to certain of its executive employees performance-based restricted stock units (“PSUs”) covering 210,301 shares of Class A common stock that had an aggregate grant date fair value of $ 24.8 million. The PSUs will vest if certain operational performance conditions, as defined in the grant agreements, are met during the three-year performance achievement period, which expires on December 31, 2028. Additionally, if certain market conditions are met during the performance achievement period, the number of shares that ultimately vest may further increase or decrease. 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. 17 Table of Contents The fair value of the PSUs was determined using a Monte-Carlo simulation model. The expense is recognized on a straight-line basis when it is probable that the performance target will be achieved during the performance period. The probability of achievement is assessed each reporting period and cumulative adjustments are recorded in periods in which the probability assessment changes. The Company’s 2016 Employee Stock Purchase Plan (“ESPP”) allows eligible employees to 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, 2026, total unrecognized compensation cost related to unvested RSUs was $ 885.6 million, which will be amortized over a weighted-average period of 2.0 years. As of March 31, 2026, 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, 2026 2025 (In thousands) Cost of revenue $ 3,374 $ 4,271 Research and development 73,011 78,066 Sales and marketing 31,149 31,359 General and administrative 28,977 25,577 Total $ 136,511 $ 139,273 13. Net Income Per Share Attributable to Common Stockholders The following table sets forth the calculation of basic and diluted net income per share attributable to common stockholders during the periods presented: Three Months Ended March 31, 2026 2025 Numerator: Net income attributable to common stockholders (in thousands) $ 90,139 $ 20,017 Denominator: Weighted-average shares outstanding, basic 152,424,306 153,345,192 Dilutive effect of outstanding common stock equivalents 5,334,835 8,449,095 Weighted-average shares outstanding, diluted 157,759,141 161,794,287 Net income per share attributable to common stockholders: Basic $ 0.59 $ 0.13 Diluted $ 0.57 $ 0.12 18 Table of Contents The following outstanding shares of common stock equivalents were excluded from the calculation of the diluted net income per share attributable to common stockholders because their effect would have been anti-dilutive: Three Months Ended March 31, 2026 2025 Stock options issued and outstanding 145,350 145,350 Unvested restricted stock units issued and outstanding (1) 940,692 1,384,775 Total 1,086,042 1,530,125 ____________________________________ (1) A portion of these unvested restricted stock units are PSUs. The number of PSUs that ultimately vest may increase or decrease the number of shares that will be issued at the end of the performance period. 14. 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. Given the Company’s recent history of generating net income in the U.S., the Company believes that there is a reasonable possibility that during 2026 sufficient positive evidence may become available to allow the Company to determine that a significant portion of the valuation allowance recorded against the Company’s U.S. deferred tax assets should be released. This would result in a significant income tax benefit for the period when the Company releases the valuation allowance in the U.S. However, the exact timing and amount of the valuation allowance release are subject to change based on the Company’s actual operating results. The provision for income taxes recorded in the three months ended March 31, 2026 and 2025 consists primarily of federal, state and foreign income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business. 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. In February 2026, the Internal Revenue Service notified the Company of its intent to commence an audit of the Company's federal income tax return for the year ended December 31, 2023. The audit is in its preliminary stages. While the final outcome of this audit is uncertain, management believes that adequate amounts have been reserved for any adjustments that may result and does not expect the audit to have a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows. 15. 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, 2026 and 2025, the value of transactions that occurred between the Company and Syniverse were $ 31.0 million and $ 38.7 million, respectively. These transactions were recorded as cost of revenue in the accompanying unaudited condensed consolidated statements of operations. 19 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, operating expenses, and stock-based compensation, our ability to generate positive cash flow and our ability to achieve, improve and sustain profitability; • our expectations regarding the factors affecting our results of operations, the timing of future expenses, and the assumptions underlying such expectations; • 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 use of and ability to leverage artificial intelligence (“AI”) 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 durable, profitable growth and increase our market share, including through product innovation, leveraging artificial intelligence, forming and enhancing relationships 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; • the impact of, and our ability to comply with, modified or new industry standards, laws and regulations applying to our business, including legislative developments that may affect our tax obligations or tax expense; • our expectations regarding the potential release of the valuation allowance recorded against our U.S. deferred tax assets; • our expectations regarding changes in network service provider fees that we pay in connection with the delivery of communications on our platform, including A2P messaging fees, our ability to manage such fees and their impact on our financial results; 20 Table of Contents • 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; • 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. Unless otherwise indicated or the context otherwise requires, all references in this Quarterly Report on Form 10-Q to “Twilio,” the “Company,” “we,” “our,” “us,” or similar terms are to Twilio Inc. and its consolidated subsidiaries.