Twilio Q2 FY26: revenue up 22%, but GAAP EPS $6.68 is a tax artifact
Twilio's quarter was strong on the top line and messy on the bottom line, which is why the view is Neutral rather than Bearish. Revenue rose 22.0% to $1.50 billion and free cash flow hit $352.6 million, but GAAP EPS of $6.68 is mostly a $5.91 non-cash tax benefit; the non-GAAP figure was $1.47. Next quarter's guide implies growth slowing to 16.0% reported and 11.0%–12.0% organic.
1 · Expected vs. Actual
Free preview belowGAAP EPS of $6.68 versus $0.14 a year ago looks explosive, but $5.91 per share of it is a non-cash benefit from releasing a valuation allowance against U.S. deferred tax assets. Strip that out and non-GAAP EPS was $1.47, up from $1.19, or roughly 9.3% above the $1.345 consensus estimate. Treat the $6.68 as an accounting event, not as earnings power.
Revenue of $1.50 billion rose 22.0% from $1.23 billion a year earlier, with organic growth of 17.0% after excluding $71.1 million of A2P carrier fees and $1.7 million of acquisition revenue. The Dollar-Based Net Expansion Rate improved to 116% from 108%, the clearest sign that existing customers are spending more. Gross margin slipped to 48.4% from 49.1%, so the growth still comes with a small cost in unit economics.
For Q3, Twilio guides revenue to $1.505–$1.515 billion, a midpoint of $1.510 billion, which management says implies reported growth of 16.0%–16.5% and organic growth of 11.0%–12.0%. Full-year reported growth guidance was raised to 18.0%–18.5% from 14.0%–15.0%, and the non-GAAP operating income and free cash flow targets both moved up to $1.135–$1.155 billion. The tension is that the full year looks better while the next quarter looks like a step down from the 22.0% just reported.
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Figures on this page come from the company's original SEC filings. The analysis is generated automatically and checked against validation rules, but may still contain errors or omissions. Not investment advice. · Generated 2026-10-11
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