Twilio Inc (TWLO) 2025 Q4 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Twilio Inc. fourth-quarter 2025 earnings call. (Operator Instructions)

Please be advised that today's conference is being recorded. (Operator Instructions).

I would now like to hand the conference over to your speaker today, Rodney Nelson, Vice President, Investor Relations.

Thank you, operator. Good afternoon, everyone, and thank you for joining us for Twilio's fourth-quarter 2025 earnings conference call. Joining me today are Khozema Shipchandler, Chief Executive Officer; Aidan Viggiano, Chief Financial Officer; and Thomas Wyatt, Chief Revenue Officer. As a reminder, we will disclose non-GAAP financial measures on this call. Definitions and reconciliations between our GAAP and non-GAAP results can be found in our earnings presentation posted on our IR website at investors.twilio.com.

We will also make forward-looking statements on this call, including statements about our future outlook and goals. Such statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described. Many of those risks and uncertainties are described in our SEC filings, including our most recent Form 10-Q and our forthcoming Form 10-K. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We disclaim any obligation to update any forward-looking statements, except as required by law.

With that, I'll hand it over to Khozema and Aidan, who will discuss our Q4 results, and we'll then open up the call for Q&A.

Thank you, Rodney. Good afternoon, everyone, and thank you for joining us today. Twilio had a great Q4 as we reached record heights with $1.4 billion in revenue, $256 million of non-GAAP income from operations and $256 million in free cash flow. For the full year, we generated $5.1 billion in revenue, $924 million of non-GAAP income from operations and $945 million of free cash flow. Our strong fourth quarter capped off what I believe is one of the most balanced and successful years of execution in our company's history.

Throughout 2025, we've operated with a level of discipline, rigor and focus that has fundamentally transformed our financial profile and innovation velocity. Reflecting on 2025, Twilio stood out with accelerating revenue growth, expanding operating margins and by delivering significant growth in free cash flow. And we did this all while continuing to increase our innovation velocity. Even more validating is what we're hearing from our customers, that we are moving beyond being a provider of communications channels and data toward becoming a foundational infrastructure layer in the age of AI.

Revenue from our voice channel continues to accelerate, aided in part by voice AI, which we believe is just the beginning as these use cases will evolve to be more conversational and cross channel, an area where Twilio is uniquely differentiated. Our go-to-market motion is firing on all cylinders. In Q4, we saw particular strength in self-serve as revenue grew 28% year-over-year led by accelerating voice revenue growth. ISVs were also a bright spot, with revenue growing 26% year-over-year. In Q4, the number of large deals closed of $500,000 or more increased 36% year-over-year.

With this solid foundation, 2026 is set up to be a great year. We are focused on delivering the essential infrastructure that powers experiences across communications, driven by contextual data and evolving automation like voice AI to help customers build personalized lifelong relationships with their own customers.

During the quarter, our go-to-market team delivered several notable wins, including a 9-figure renewal with a leading marketing automation platform, the largest deal in Twilio's history. Other customer wins included Agnes AI, Creditas, Elise AI, Genspark, GrubHub, Lofty, Nestle, Numa, PolyAI, Ramp, Retell AI, Sierra and others who are turning to Twilio as their infrastructure partner to help drive outcomes and scale their businesses.

We also signed a strategic partnership with an existing customer, AEG, a leading global sports and live entertainment company. AEG will use the Twilio platform to better understand fan behavior and power real-time personalized communications before, during and after live events at select venues and for sports teams owned by the organization.

In Q4, we saw healthy signs that reinforced our shift from selling features and products to selling solutions as our multiproduct customer count grew 26% year-over-year, and our software add-on revenue grew over 20% year-over-year. Agent productivity is a great example as it lets customers take advantage of a bundled offering that spans multiple Twilio products. One customer EXA Lab, an Italian systems integrator signed a cross-sell agreement for its client, Dental Pro, to adopt our agent productivity solution powered by Flex, messaging and voice.

Together, they built a virtual agent for customer care and inbound and outbound booking management. In the first 2 months, clinics using conversation relay for AI agents reported a meaningful uplift in service levels with the virtual agent handling a significant share of booking confirmations.

And finally, during Cyber Week, Twilio hit record highs Twilio sent 6.99 billion messages, a 34.5% year-over-year increase, handled 1.07 billion calls, up 58% year-over-year and processed 75.1 billion e-mails, a 14.6% increase year-over-year. Importantly, this week was a powerful reminder of the trust our customers place in us. As the foundational infrastructure that handles their critical workloads, we help them strengthen the relationships they have with their own customers and earn their trust.

On the innovation front, 2025 was a breakout year for voice. Voice year-over-year revenue growth accelerated throughout the year with customers adopting products like branded calling, conversation relay and conversational intelligence. For example, Sierra, a leading company in the customer experience AI space signed a new deal to continue leveraging Twilio's voice functionality to power their platform.

Additionally, they will use voice software products like conferencing to support additional use cases like multiparty calling or taking payment over the phone. While still early days, during Q4, Twilio's branded calling revenue grew roughly 6x year-over-year. RCS continued to gain traction as volume grew roughly 5x quarter-over-quarter. Ramp, a leading financial operations company signed a deal to leverage RCS as the branded messaging experience to power account notifications and 2-way capabilities, such as adding a purchase reason or sending a receipt.

Our innovation strategy and execution continued to be validated by industry analysts. Throughout the year, we were recognized as a leader in major evaluations by Gartner, IDC and Omdia and ended the year by being named the company to beat in CPaaS AI by Gartner. They noted, Twilio's combination of omnichannel communications, contextual data, AI frameworks, developer base and technology partnerships makes it the company to beat in CPaaS AI.

And we're just getting started. A lot of our innovation road map is about capturing what's important in AI today and in the future. We're providing customers with the foundational infrastructure layer that embeds persistence, memory, context and the ability to spin up an agent no matter what its capabilities are, all on the Twilio platform. Several of these products launched into private beta earlier this month, and we look forward to sharing more at SIGNAL in May.

In summary, 2025 was a terrific year. We made tremendous progress against our goals, exceeded our targets for the year and are well positioned to sustain this momentum into 2026 with our robust innovation road map. We remain focused on our vision of creating amazing experiences for brands and are furiously building new and exciting capabilities that capitalize on all that AI has to offer.

These innovations will allow Twilio to deliver memory-driven orchestration and a genetic interactions that inspire engagement and trust. This is why Twilio is an essential infrastructure layer for every company's tech stack. And our ongoing investments in our platform capabilities will continue to position us to be the foundational layer customers rely on to win in the AI era.

And with that, I'll turn it over to Aidan.

Thank you, Khozema, and good afternoon, everyone. Twilio finished the year strong with a record-breaking fourth quarter. We generated record revenue of $1.4 billion, up 14% year-over-year on a reported basis and 12% year-over-year on an organic basis. We also generated record non-GAAP income from operations of $256 million. Free cash flow was $256 million as well.

We came into 2025 with a focus on execution, and we delivered across the board. For the full year, we generated revenue of $5.1 billion representing 14% reported growth and 13% organic growth. We also delivered strong profitability with non-GAAP income from operations increasing 29% year-over-year to $924 million. Free cash flow was up 44% year-over-year to $945 million. And finally, we generated $158 million in GAAP income from operations, marking our first full year of GAAP profitability.

We're continuing to drive top line performance through solid execution across our go-to-market initiatives, while delivering product innovations that are seeing encouraging uptake. Voice finished the year strong as revenue growth accelerated to the high teens in Q4, its best growth rate since 2022. This was aided by strong growth from voice AI customers as voice AI revenue growth accelerated above 60% year-over-year.

Messaging revenue growth was also solid, driven in part by strong volumes during Cyber Week and the holiday season. Software add-on revenue growth exceeded 20% year-over-year in the quarter, led by Verify, which grew more than 25% for the second consecutive quarter. Finally, from a sales channel perspective, we saw continued strength with both self-service and ISV customers with revenue from each channel growing 25%-plus in the quarter.

For the full year, self-serve revenue grew 21%. ISV revenue grew 24%, and software add-on revenue grew 21%, led by Verify and voice add-ons. By product for the year, growth was led by messaging at 18% and voice at 13%. E-mail grew 7%, segment 2% and while other revenue grew 8%, led by user identity and authentication offerings such as Verify.

Our Q4 dollar-based net expansion rate was 109% reflecting the improving growth trends we've seen in our business over the last several quarters. We delivered non-GAAP gross profit of $682 million for the quarter, with growth accelerating to 10% year-over-year. This represented a non-GAAP gross margin of 49.9% down 200 basis points year-over-year and 20 basis points quarter-over-quarter. We incurred carrier pass-through fees of $23 million associated with increased Verizon A2P fees, which primarily drove the sequential decline in gross margin.

For the full year, non-GAAP gross profit was $2.6 billion, up 8% year-over-year, and non-GAAP gross margin was 50.5%. Q4 non-GAAP income from operations came in ahead of expectations at a record $256 million, up 30% year-over-year, driven by strong revenue growth and continued cost discipline. Non-GAAP operating margin was 18.7%, up 220 basis points year-over-year and 70 basis points quarter-over-quarter. The sequential increase was driven by improved gross profit growth and ongoing cost discipline. In addition, we generated $57 million in GAAP income from operations.

For the full year, non-GAAP income from operations was $924 million, up 29% year-over-year. Non-GAAP operating margin was 18.2%, up 220 basis points year-over-year. This margin expansion reflects our sustained financial discipline, evidenced by a 1% year-over-year decline in non-GAAP operating expenses. Q4 stock-based compensation as a percentage of revenue was 11.3%, down 180 basis points year-over-year and down 90 basis points quarter-over-quarter.

For the full year, stock-based compensation as a percentage of revenue was 11.8%, down 200 basis points year-over-year and down 10 percentage points since 2021 when we initiated our efforts to reduce stock-based compensation. In addition, our net burn rate was just 1.5% in 2025, well below the 3% target we set out at our 2025 Investor Day. Our ending share count was $152 million, down slightly year-over-year and down 18% since we initiated our share repurchase efforts in 2023.

We generated free cash flow of $256 million in the quarter. Additionally, we completed $198 million in share repurchases in Q4. For the full year, we completed $855 million in share repurchases and representing 90% of 2025 free cash flow, well above the 50% target established at our 2025 Investor Day.

Turning to guidance. For Q1, we're initiating a revenue target of $1.335 billion to $1.345 billion, representing 14% to 15% reported growth and 10% to 11% organic growth. This includes an assumed $44 million in incremental pass-through revenue from US carrier fees, a $21 million increase from Q4, driven by increased T-Mobile fees that took effect in January. As a reminder, our organic revenue excludes the contribution from incremental increases to US carrier fees.

Moving to the full year. We're encouraged by the broad-based trends we've seen throughout 2025 and into 2026. So we're continuing to plan prudently given our usage-based revenue model. For the full year, we expect reported revenue growth of 11.5% to 12.5% and organic revenue growth of 8% to 9%, above our 2025 Investor Day framework though we continue to orient the business to double-digit organic revenue growth.

In addition, we expect full year non-GAAP gross profit dollar growth to be similar to our organic revenue growth rate. Since middle of 2025, all major US carriers have announced A2P increases, including AT&T, whose rate increases will go into effect on April 1. Our full year revenue guidance assumes approximately $190 million in incremental pass-through revenue from these fees. The year-over-year impact from these fees will be slightly higher in the first half of 2026 due to the timing of Verizon's increase in June of last year.

While the pass-through fees had no impact on our ability to generate gross profit, income from operations or free cash flow dollars, they do impact our margin rates. For modeling purposes, we would expect the incremental fees to reduce our full year 2026 non-GAAP gross margin by roughly 170 basis points, all else equal.

Turning to our profit outlook. For Q1, we expect non-GAAP income from operations of $240 million to $250 million. We are initiating our full year 2026 non-GAAP income from operations range of $1.04 billion to $1.06 billion reflecting our continued focus on cost discipline and operating leverage across the business.

Consistent with 2025, free cash flow in Q1 will be impacted by $140 million payment related to our company-wide cash bonus program that we implemented in 2024 as part of our efforts to reduce stock-based compensation. This will limit free cash flow generation in the first quarter roughly $100 million as planned. That said, we continue to expect to generate strong quarterly free cash flow over the balance of the year and for the full year 2026, we expect free cash flow in the range of $1.04 billion to $1.06 billion.

We are confident in our outlook for 2026 and have made substantial progress against the financial framework established last January. Our cost savings and efficiency initiatives are tracking ahead of plan and our 2027 outlook looks strong. While our 2027 non-GAAP operating margin target did not account for the recent fee increases initiated by all major US carriers absent fees, we are on track to meet or exceed the financial framework we provided last year.

Given these incremental fees are passed through at cost, they are a headwind to our margin rate, but it's important to note that they have no impact on our ability to generate profit dollars. As an alternative, we are providing a 2027 non-GAAP operating income target of at least $1.23 billion which is unaffected by carrier fees and aligns with the high end of our Investor Day framework. We will provide complete full year 2027 guidance during our Q4 26 earnings call next year.

I'm proud of the execution we delivered in 2025, resulting in accelerating organic revenue growth and strong profitability. I'm excited by our opportunity to be the foundational infrastructure layer that powers seamless, intelligent interactions for our customers. And I'm confident that our good market execution and product innovation will help us drive durable, profitable organic growth in 2026 and beyond.

And with that, we'll now open it up for questions.

(Operator Instructions)

Alex Zukin, Wolfe Research.

Really congrats on a solid end to the year. Maybe just the first one for me is, can you break out what drove some of the voice strength in Q4? How much were voice AI-driven use cases versus traditional voice and maybe the outlook for 2026 on that front?

Alex, this is Thomas here. So we saw a broad adoption voice across all of our different customer cohorts. So there are definitely really good strength in our self-service channel. Some of that's the voice AI start-ups, some of that's just the existing self-service customers. We also saw a lot of interest and momentum in the ISV community as well.

Talked about the growth we're seeing in the ISV business in the mid-20s, and that's a lot of voice adding accelerating to that as the ISV community builds more voice AI agents into their core platforms. And we're also seeing it in the direct enterprise space as well, where -- there's a lot of use cases specifically around customer care and sales automation that's voice as being a big part of internal AI assistants that are being built there. So it's been pretty broad and whether it's on the infrastructure or on the voice add-ons software, we've seen great penetration there as well.

Perfect. And then, Aidan, maybe just a follow-up for you. First, really appreciate a lot more detail -- a lot of the detail that you put into the guidance both for the gross profit commentary in the letter and the operating income dollar amount that you provided for '27, but maybe just frame it for us a little bit, if you look at the Q1 guide organically, it's actually -- it's actually a little bit more aggressive than this time last year. So maybe what gives you the visibility there and then contrast that the full year and the level of conservatism that you're providing?

And then finally, I apologize for the 3-parter. The gross profit dollar growth commentary for fiscal '26 similar to revenue growth? Just maybe a finer point on that.

Yes, I'll start with Q1. I mean we feel really good about our guidance coming into Q1. The 10% to 11%, as you noted, it's higher than where we've been. It's our highest quarterly guidance in over 3 years. And it really just kind of speaks to the broad-based strength that we're talking about here.

We get it by product, both voice and messaging, growing in the high teens in the quarter. You look at it by sales channel, ISV, self-serve, both growing very strongly above 25%. You look at our multiproduct adoption, and it's really accelerating. So we feel really good about how the sales team is executing. We really feel really good about our product innovation.

And we've seen these trends kind of consistently over several quarters. So we have the confidence kind of coming into the quarter to guide at 10% to 11%. Now when you think about the year, we're guiding 8% to 9% organically. As you know, Alex, our revenues are primarily usage-based and with that comes a certain level of prudent planning. But as we said, we feel really good about the guidance for Q1. Our full year guidance is 100 basis points higher than our initial 2025 organic revenue growth.

And again, we're encouraged by the broad-based trends. I'd just say we're seeing a lot of opportunity. Our teams are executing well, and we feel optimistic about the setup for the year.

As it relates to the 2026 gross profit growth, we did say we expect it to be similar to the organic growth. I think if you look at the trends over 2025 you started to see the gross profit growth accelerate over the year. And importantly, you saw the gap between gross profit growth and organic growth narrow as we move throughout the year. That's driven by a lot of proactive actions that we've taken.

Now as we head into 2026, there are a couple of factors at play. First, I'd say and most exciting is the accelerated growth for many of our higher-margin products. I just talked about a lot but voice, in particular, a lot of the software add-ons that Thomas just talked about Verify, Lookup, SMS, pumping protection. We're getting a lot of traction on these products. So we're seeing that really take hold.

In addition to that, as we've kind of mentioned over the past few quarters, we're taking a more critical eye towards supply chain costs. That has resulted in certain cost optimizations on the carrier side in the form of more direct connections or more optimization across our kind of carrier supply chain. We're also leveraging our balance sheet to secure discounts in some cases. So we're starting to see some of those things materialize.

And then the last thing I'll talk about is on the hosting cost side. As we talked about in '25, we completed a migration for our e-mail business. They went from on-prem to the cloud. We experienced a double bubble of cost in 2025, that doesn't repeat in 2026. So that's kind of now behind us. So it's really all of those things that gave us the confidence to say that we expect gross profits to grow in line with organic revenue.

Taylor McGinnis, UBS.

Aidan, first one, just if you were to adjust for all the incremental A2Ps, can you offer us what the operating income margin guide would have been relative to the 8.5% reported number. And as a second part to this question, if we look at the 1Q operating margin guide, it actually looks pretty solid relative to the full year. So can you comment, are you guys anticipating any uptick expenses or investments as you move throughout the year? And anything that might have been different or new relative to when you first gave this guide at the Analyst Day?

Yes. Great. So I'm not sure I connected the dots on the 8.5% that you mentioned, Taylor, but let me just talk about how fees impact our guides for 2026. So I called it out in the prepared remarks, but we expect about $190 million in incremental pass-through fees passing through our revenue. That's year-over-year.

Remember, Verizon went into effect in June of last year and then AT&T and T-Mobile are coming into effect in 2026. That's roughly 170 -- 70 basis point headwind on gross margin. And on operating margin, the equivalent is about 60 basis points to 70 basis points. So I think the important thing is we are seeing leverage in the business from our cost savings and our efficiency initiatives, it's just masked by the impact of these carrier fees on a margin basis. Though, again, as we've said many times, they have no impact on our ability to generate gross profit dollars or income from operations or free cash flow.

And then on your next question on just the operating expenditures for Q1. We do have a little bit of kind of front-loading of some expenses. First, we have a full quarter of our Stitch acquisition in Q1 and then we are making some product investments, we're making really around the platform as well as some systems to support our efforts to cross-sell and to move more towards solution selling. So we expect the pace to kind of moderate as we move throughout the year, but a little heavier in Q1.

Perfect. Khozema, one for you. If we look at the messaging growth excluding APTs, I think the growth in the quarter was around 14% despite some of the tougher compares that you guys are coming again. So maybe you could just talk through like what's driving the strength of that business is as you guys look into 2026, how are you thinking about the durability of double-digit growth potentially?

Yes, Taylor, I wouldn't point to like anything specific as it relates to any one of our products actually like most of our products are performing pretty well. I think we're seeing broad-based strength across the business. We parse it by channel, we parse it by industry. We look at it by use case. And I think across the board, we're just seeing a lot of strength across a number of different products, which includes messaging.

We gave the guidance in terms of the year, and Aidan commented on the fact that for Q1, which obviously encompasses messaging, and that's our largest product. But Q1 is the highest it's been for us in 3 years in terms of the guide, and we stepped up the full year guide 100 basis points relative to last year. And hopefully, you can take from some of our commentary like we feel pretty good about the outlook for 2026.

Mark Murphy, JPMorgan.

Congrats. Khozema, lot of us are probably starting to feel the presence of RCS more tangibly in the last several months. When we look at our own SMS text inboxes. I see them from Verizon and United Airlines and banks and hospitals. I think you mentioned a 5x sequential increase, which is hard to have them.

Could you just explain that? What is driving it the shape of that adoption curve? And then remind us any real economics to Twilio. We're hearing about 70% plus open rates on the messages. And then presumably, some of them are going to be rich messages. I'm just wondering what you're seeing there.

Yes. Let me just answer a couple of your questions, and I'll take a step back and give just our views on it generally. I think in terms of the 5x, I mean it is important to kind of characterize that as off of a relatively solar base, right? So yes, it's growing incredibly quickly. Yes, we're very excited about the prospect of what RCS can do for customers, but it is growing off of a relatively small base.

That said, given that kind of momentum, we are very excited about where it goes going forward. I think in terms of like what's driving the shape of the adoption curve is it's sort of embedded in your question in a way, like these rich experiences, I think they really are great for many of our customers. I think that you'll start to see more of a shift towards, I think, increasingly marketing-oriented use cases where RCS is particularly strong.

You haven't really seen that break out just yet. The open rates are very high for all the reasons that I just alluded to a second ago, I think what's really interesting, actually right now is you've got like two corners of it that I think can be really interesting.

So one, like for a small business that probably will not get real estate on somebody's phone. It is an awesome way for you to be able to engage your customer, and it is a lot different and differentiated, therefore, relative to just kind of standard messaging. So I think that's an awesome use case. You'll start to see that, I think, from a lot of small businesses, which will include a lot of startups.

On the flip side, I think it's also an excellent use case for things that perhaps a certain cohort of the population will have real estate on their phone, but infrequent users will not. So things like providing a ticket, you referenced United a moment ago, like I think that's a great vehicle to offer the capability to send someone information in a rich way that's better than kind of conventional SMS.

So very, very excited about where it is today, very excited about the growth that we've experienced recently. And I think just given the nature of it, we said many times that we're sort of cautiously optimistic about it, I think we're gaining optimism as we go.

That's a great answer, Khozema. The other question for you maybe, Aidan, we look back at the last year or 2, it actually did not feel like a rising tide for the space that you operate in because, all I mean is several of your competitors just have not grown at all in a while. And I'm wondering, would you reflect back on that, where do you think the Achilles heels have been for your peers who are struggling in this kind of environment and how you've -- the ways that you've outflanked them, does that feel like it's going to be structurally durable here this year. And then into '27, where you're giving really strong operating income guidance?

I mean, I can't speak for those guys. I don't frankly pay a lot of attention to them. But I think with respect to Twilio, I mean, it's differentiated technology, right? I mean we've always had a phenomenal developer experience, like we work really, really hard to cultivate that. Many of our customers that start as developers, they grow into some of the largest enterprise customers in the world.

Thomas alluded to the growth that we've seen in ISVs, Aidan did too. So you have kind of two ends of the spectrum that are experiencing really rapid growth. And that is almost entirely, I would say, a technology story. Like customers would not buy the higher-priced product, which we are in almost all cases, unless they were getting superior ROI. And credit to our R&D team, they are constantly innovating, whether it's in the channels, whether it's on -- in terms of some of this add-on technology, whether it's in many of the exciting things, which I'm not going to get into today, that we're going to talk about in Signal in a few months like that level of velocity in terms of innovation and being able to continuously offer new and improved features and products to our customers, that's what sets this company apart.

And then I think our ability to leverage data on top of that, which adds a level of context that I think is missing not just from maybe our classic competitive set, but really from any company that's trying to provide this kind of essential infrastructure and then being able to, going forward, build your own AI agents on top of our platform, be able to integrate into anybody agnostic of who the players are, like that's pretty differentiated. And so we feel good about our business, I can't speak to the others, but I think we're doing a pretty good job right now.

One more thing I'd like to add just, Khozema, just what we're seeing is a lot of the point product competitors just don't have the multichannel capabilities that we have. And what we've seen is our ability to add whether it's an existing messaging customer at another channel, whether it's voice or e-mail or something. And then adding AI add-ons on top of it has been pretty compelling.

And so one of the things in particular in the enterprise we're seeing is our large enterprise customers, the companies that spend at least $500,000 with us, they're up 36% year-over-year. So this is just a matter of winning market share based on having a platform play, and I think it's playing out.

Samad Samana, Jefferies.

It's great to see the strong quarter. I wanted to maybe go back to the voice AI side, just as I think about enterprise versus serving as infrastructure inside of next-gen companies, where are you seeing stronger growth today? And as you think about 2026, which of those do you think is the earlier opportunity that will ramp? And I have a follow-up question as well.

Can I just -- so can I just part of your question to make sure that we have got it. You're asking whether or not we see more growth from kind of pure play voice AI companies or whether we see it on the enterprise side, is that right?

Correct, right? Like our large enterprise is directly leveraging it more where you see more growth there versus like Sierras and Poly of the world. And how are you thinking about that trend line maybe through '26.

Yes. I think -- I mean, we're going to guide it based on like specific cohorts of the customer segment at that level of detail, Samad. But what I will say is -- and we're kind of seeing it on both sides. But I think ultimately, like it will be the enterprise that ends up caring the day here. Like I think, yes, we're seeing incredible velocity with the voice AI side of it.

I mean you have literally like hundreds of voice AI companies. We have partnerships with a lot of these guys. We count most of them as customers. They're definitely helping influence the growth characteristics that we're seeing in the voice channel. But as Thomas said earlier, I mean, the voice business is growing great anyway, and that kind of tends to be the icing on top.

I think the reality of it, though, is the big spenders are on the enterprise side, right? And I think, as Thomas again alluded to, like in a lot of these like sales use cases, support use cases, you are seeing a lot of adoption there, I think -- you've got the stage right now where there are a lot of early adopters, you've got a lot of heavy experimenters. And I think the heavy experiments based on the ROI that we're delivering for customers right now is going to start to translate into more durable volume.

And then if you layer on top of that, what Thomas said and answer to the last question, like our ability to offer this multichannel orchestration because customers are telling us directly like based on their own consumers usage patterns, they want the ability to go in and out of session. They want to be able to do at async, sync and having multichannel capabilities is really important based on the lifestyles of the customers that we deal with, based on connectivity issues, based on the complexity of the workloads.

And so my bet would be probably enterprise is what drives it and carries the day ultimately. But not at the expense of what we're seeing in voice AI. I don't know, Thomas, anything different?

The only thing I'd add to that is just the other court that's really leaning into voice is the larger, more established ISV community. So it's not necessarily AI natives but it's the larger players that are -- software players that are embedding voice capabilities as part of their core platform. And they're a big consumer of our voice business as well.

Siti Panigrahi, Mizuho.

Congrats on a great quarter. I just want to extend Samad’s question and also your comment about Twilio becoming this AI infrastructure layer. So it’s not just the voice AI. Is there a way to quantify in terms of revenue contribution coming from all the AI-related use cases, not just voice AI, maybe even the messaging side? Are you seeing where agentic AI adoption, where a customer trying to use? And what kind of a jump zone you have backed into next couple of years, like when you guide even '27, where do you -- when do you think this agentic AI tech software -- you’ll see both your messaging and voice adoption?

Yes. Thanks for the question. So the way we think about it really is Twilio is the platform where AI agents can get infrastructure services, whether it's the ability to communicate across any channel, whether it's the ability to create customer memory understanding and personalization from the data substrate that we have, largely powered by our CDP and segment capabilities and the ability to validate somebody and make sure that the person is who they say they are with our identification and identity and security products. So really think about Twilio as a platform where you come as a critical ingredient to build the next-generation agents.

Now that being said, each of our channels does have AI capabilities embedded on top of it. And we talked a little bit about voice orchestration, conversation relay as an example. If you talk about in the area of account security, we do a lot of AI in the way we do fraud detection and identity verification. So I'll just give you an example of some of that. And of course, around personalization. We use a lot of AI to be able to determine anonymous people and make them known people based on synthesizing data and applying AI to it. So really, it's more of a platform play for us than any individual channel.

I would just add one thing to what Thomas said. Like I think what you're seeing today is a tremendous amount of investment and excitement in the voice AI space to just maybe underscore a part of what he said is we view this as like ultimately like multichannel orchestration. I think it's like conversation relay, the product that we launched a little while ago, like that's also experiencing really great growth, again, off of a relatively small base, but we're very excited about it. But the promise of that product is to be able to handle these very complex workloads across multiple channels without losing the customer. And in fact, not just not losing them, but engaging them better than one of our customers ever has before.

And so like that's kind of the promise going forward. And I think what's going to happen most likely is that a lot of the activity that you're seeing in voice is going to end up transitioning or also start happening in some of the other channels. But again, as Thomas rightly pointed out, like it's across the platform, right? So the point is not to per se necessarily focus on any one channel that rather meet the customer where they are serving the control plane across whether it's an agent to agent interaction, whether it's a human to agent interaction or a human-to-human interaction, like we want to make sure that we're the infrastructure that allows for all of it to happen in the most seamless way possible.

Ryan MacWilliams, Wells Fargo.

Good to see Twilio Verify growth. And look, I’m going to try to take a deep, big, deep breath before asking this, but I know how kind of crazy this sounds, but let’s just say that there is an increase in spam communications traffic due to AI agents, and I know there’s a lot of legal reasons why that’d be difficult to occur, but in that kind of environment, how do you think this would help Twilio Verify and maybe RCS, as I think things would be important, as would help authorize the appropriate messages that people actually want?

You said spam, right? That was the net of your question.

Yes, yes.

Yes. I mean I think this is actually a place where Twilio is ideally positioned. And the whole notion of being branded is key here, right? So we've done a lot of work around branded calling, for example, to make sure that not only are you getting a number -- getting a call from a number that you recognize that's specifically identified, but it's also logoed so that you really understand what's going to happen on the other side of that interaction, Very, very difficult to replicate otherwise. And so there's a technology lift that you get there.

And the data kind of validates that, that's a great solution because the pickup rates on those kind of calls are much, much more significant. So you get kind of a two for it. One is that you get better authentication and identity; two is that you get better pickup rates because the other side isn't just looking at some random number, they're getting a known identified number on the other side. I think this is already technology that we have, and I think you'll start to see it more broadly adopted is you'll have the exact same thing end up happening over SMS. And I think that, again, kind of reinforces like what we're trying to accomplish.

The products that you referenced like a Verify, certainly RCS already has kind of branding in the nature of the product, like you'll start to see pickups in those products because the channels only work if you know that everything is authenticated especially in an agent to agent interaction, like that's one where we've got to make sure that we know the originator is, who the receiver is so that we're conducting a proper transaction.

By the way, that's also one of the reasons that we picked up this identity company a quarter or so ago, like we think they can be really important to validating and reconciling these different kinds of interactions, especially agent-to-agent. And we think all of that is ultimately an uplift for every one of our products.

Nick Altmann, BTIG.

Awesome. It's great to hear there's another quarter of acceleration in voice and the continued traction with voice AI. But Khozema and Thomas, I know it's early, but what can you share with investors whether it's how use cases are scaling production, longer-term commitments from customers around voice and voice AI. Anything else that can get us help get us kind of more comfortable with the durability over the next couple of years in the voice side of the business?

Yes. Nick, it's Thomas. So a couple of thoughts. And the first thing I'd say is the voice growth and strength has been broad-based. It's not just the start-ups. It is the enterprise, it is the ISVs, and it's been a global phenomenon for us as well. So that's part of it.

We're also seeing it in the context of not just the self-service channel, which is usually where most customers onboard into Twilio, but also our direct sales team and the way they go after new logos and new business, voice has been a big driver of that teams success of this past quarter. In fact, it was the best new business quarter we've had in years across the globe. So I think just fundamentally, the voice is having its renaissance.

It is a key part of the next-generation user experience of AI-powered applications and agents. And so we feel it's pretty durable, and we're doing everything we can to accelerate our product capabilities and our go-to-market partnerships at scale even faster.

Jamie Reynolds, Morgan Stanley.

This is Jamie on for Elizabeth Porter. It's just the question from our side is really impressive list of customer wins that you guys had flagged. So just trying to get a better sense, are you guys getting better at just sort of that upfront portion of the selling motion as opposed to landing and expanding with more functionality later?

Yes. So the way to think about it is we have really two different ways of acquiring customers. The first way is the self-service channel, which is largely product-led growth. It's marketing, it's more efficient marketing. It's using AI to help us make onboarding and activating customers more seamless than ever. There's a lot of product capabilities that we've implemented in the last year that reduce the friction of customers getting started with Twilio.

And then there's the direct sales team that is focused primarily on going after named new accounts, logos that we want to take in. Generally, they're larger ISVs or enterprise-type customers. And that business has been really strong for us in the last 6 months. And that motion is largely about the AEs are hunting these logos. They get customers started on the Twilio capabilities.

And then once the customers are starting to see some value, we have -- we shift that logo over to strategic AEs that will help grow that account over time. And so this motion has been working for us for some time, and we're just continuing to fuel it.

James Fish, Piper Sandler.

Just quickly, are you guys planning any change in comp plans for '26? Is there going to be an idea to drive more cross-sell to drive that multiproduct adoption, including incentivizing maybe the ISVs through their customer base to kind of adopt more of your API?

Yes. Great question, Jim. So yes, we did make some changes in our comp plan in 2026 to drive more cross-sell and upsell incentives into the sales plan. And again, just to remind people that we did bring the total global sales team together this past year in 2026, and then we created a specialist function as well to support the global sales team with our more advanced technologies.

And so the combination is that the AEs are very incented to land a customer and then show them the value of the platform and get expansions through that. And I think in Q4, we had a 26% growth in new product customer count. And so this is the beginning of a journey that we're on, but we're feeling pretty good about the multiproduct customer account acceleration.

Joshua Reilly, Needham.

As you look at the strength in the international messaging business, can you speak to the margin dynamics you're seeing around these deals as customers may be adding more higher-margin add-on products now than they would have 2 years ago, with these deals that kind of offsets the inherent lower gross margin on international messaging, and can this accelerate further in the next couple of years?

Yes. From an international messaging perspective, I'll just say we focus on unit economics, and that's always been our approach. So we continue to do the same. We've seen a lot of success in international messaging over the course of 2025, very strong growth. And then in terms of multiproduct adoption, like in general, we're seeing it pretty broad-based.

So with our national messaging customers and others. So that tends to mix us up on margins, as you know, but I'll let Thomas talk about some of the upsells and other things that he's noting in the market.

Yes. I think the other thing that we're seeing is that SI partners, system integrators have been really helpful for us to scale internationally in bringing some of these multiproduct capabilities to the international markets and helping our customers have success with more integrations with other systems that they use. So the combination of the platform itself plus the partnerships is helping us accelerate in international markets.

Will Power, Baird.

Okay. Maybe first, just a quick follow-up, but nice to see the improving trends in gross profit growth. I know, Aidan, you laid out some of the visibility drivers that help with the 2026 guidance. I guess, anything else you call out on the Q4 improvements? Is it all those same factors or anything else to note? And then my other question, just to come back to the voice strength. I know it was still earlier, and I guess, in the software add-on bucket but anything you could share just on the trends with Conversation Relay and Conversational Intelligence would be great.

Yes, I'll start with gross margins. Well, yes, it's more of the same really. So when you look at Q4, on a reported basis, we were down 200 basis points year-over-year. No, it was really driven by two things. About 80 basis points was the fees. So we had them in Q4 of this year. They didn't exist in Q4. They were increased after Q4 of last year. So that was about an 80 basis point headwind.

And the remainder was really messaging mix. And we provide some information in our presentation. But when you look at it, messaging as a percentage of revenue, is up about 200 basis points year-over-year. As you know, that's our lowest margin product. And so as that business grows faster than the average, obviously, it mixes us down in gross margin.

Again, we really look at it from a unit economic perspective, and we take on business that think hurdles a certain rate. So those are the two dynamics that we saw in the quarter, messaging mix and the US carrier fee increase. And then I'll hand it to Thomas to talk about the voice question.

Yes. So just in terms of voice, I mean, there's the three components, I'd say, the voice infrastructure, connectivity layers and very strong across all the key use cases, whether it's marketing, customer care, et cetera. Then there's the software application set on top more of the AI orchestration conversational insights, conferencing, recording, transcribing, all of those features are growing very fast on top of the existing voice infrastructure, including conversational relay. So this is just, again, the beginning. It's early on this voice acceleration, but we feel good about where we're at.

Jackson Ader, KeyBanc Capital Markets.

This is Jack on for Jackson Ader. I was wondering if you could talk about kind of the biggest levers for the NRR acceleration year-over-year and then also if these levers are going to continue into 2026. And then as a follow-up question on multiproduct customers. how are you thinking about the pipeline of single product customers adopting the incremental 1 or 2 throughout 2026, driving that growth higher.

Yes. On the DP&E side, so we saw it at 109% this quarter, roughly flat quarter-over-quarter. It was a couple of things. In terms of where we've seen the acceleration over the course of the year, it kind of ties back to what Thomas has been saying about multiproduct adoption. It's really expansion is where we're seeing the acceleration.

And it's pretty broad-based, like we see it across our ISVs as well as our other kind of direct enterprise customers. And then in particular, I'd say, voice and messaging tend to be the drivers of where we're seeing it. And given our guide of 10% to 11% for the quarter in Q1 and 8% to 9% for the year, yes, we would expect that level of strength to continue.

Yes, I'll just comment on the multiproduct customers. So there's really two different ways that we see the scaling. The first is the self-service channel itself. And we've got some really awesome new product capabilities that are coming to market shortly that's going to make it even easier for customers to take advantage of more products on the Twilio platform. And that's the lion's share of the customers that are single product are actually self-service customers. And so our goal is to get them using more and more channels and more and more software on top of that.

Then when it comes to the direct selling motion, going back to the earlier question around compensation plans and account planning and how we're doing that, the global AEs this year are really focused on helping customers see the value of multiple channels and multiple services across the Twilio platform, and their compensation is tied to that as well. And so, what we find though is that customers see a lot more ROI with Twilio when they use 2, 3 and 4 channels, their spend goes up and their ROI goes up significantly.

And so we know if we can get them to the second and third channel, they're going to have a lot of benefits. And so our goal is to use a specialist organization combined with the new comp plan to help our AEs be even more effective in doing that this year than ever before.

Koji Ikeda, Bank of America.

I wanted to go back to an earlier question about the gross profit tracking to organic revenue growth. And I totally get that in reference to the guidance. But how should we think about it if there's upside to organic revenue? I mean it sounds like it should at least flow directly to gross profit and it sounds like there's a few ways that gross profit could grow even faster than organic revenue. And so is that the right way to think about this? And if that is not the case, then why would it be that way?

I'd say for the year, we said it should grow similar to, and so that's kind of the guidance that we've given. I think a big factor in how to think about it is product mix. Now we've seen some of our higher-margin products really accelerate voice being the big one really over the back half of the year. We saw a voice tick up quite a bit. That's very helpful in terms of expanding gross margins and also getting gross profit to grow more in line with organic revenue growth.

But messaging is still a very big part of our business. It's almost 58% of our revenue. So I'd say that could be a factor in how much higher gross profit could grow relative to revenue for 2026. For now, we're saying we expect it to be similar to, which is better than what we've been tracking.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect Goodbye.