Titan International, Inc. (TWI) Q1 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to Twilio, Inc.'s First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Rodney Nelson, VP, Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining us for Twilio's First Quarter 2026 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-K and our forthcoming Form 10-Q. 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 Q1 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 terrific Q1, accelerating revenue and gross profit to their highest growth rates in more than 3 years. We delivered over $1.4 billion in revenue, up 20% year-over-year on a reported basis and drove 16% growth in both organic revenue and non-GAAP gross profit. We also generated $279 million of non-GAAP income from operations and $132 million of free cash flow. Today's results are the outcome of a multiyear company-wide evolution that has fundamentally transformed Twilio's innovation velocity, go-to-market efficiency and financial rigor. In Q1, we continued to see unprecedented demand for voice, reimagined through the lens of AI, which is increasingly an entry point to the Twilio platform for AI natives and enterprises alike. Customers no longer view Twilio as just a provider of communications channels. Instead, they are relying on us to be a foundational infrastructure layer for the era of AI. I can't wait to unveil the next evolution of Twilio's platform at SIGNAL next week. Our voice channel revenue grew 20% year-over-year, marking its sixth consecutive quarter of accelerated growth with AI being a catalyst. We expect voice AI use cases will continue to evolve, to be more conversational and cross-channel over time. We've already begun to see evidence of this as our customers expand their footprint on Twilio's platform. For example, software add-ons such as Branded Calling and Conversational Intelligence both grew revenue more than 100% year-over-year. Our platform strategy is delivering immediate measurable ROI for our customers. As an example, Scorpion, a leading digital marketing and technology partner for local businesses, developed an AI agent by integrating Voice, Messaging and ConversationRelay. In just 3 months, the agent boosted its booking rates by 39%, capturing 6,500 appointments that otherwise would have been lost and generated $8.4 million in revenue. That same performance is why AI native leaders like Sierra and Bland.ai are also deepening their relationships with Twilio. Sierra, a leading customer experience AI company, signed a significant cross-sell deal to fuel their global expansion, while Bland.ai committed to a multiyear partnership to use Messaging, Voice and software add-ons such as recordings and Branded Calling to power their AI agent platform. Finally, Twilio's reputation for reliability is what won over a historic professional sports league, which signed a 7-figure deal to use Verify as the high-trust authentication layer for millions of fans. Messaging revenue growth also accelerated in the quarter, aided by strong growth in WhatsApp and RCS. RCS volume more than doubled quarter-over-quarter, and we saw significant traction in our international markets, inking notable RCS deals with KPN Netherlands to power RCS across all major mobile operators in the Netherlands and with Telavox to enable RCS for organizations in regulated industries. We are encouraged by the continued strength in messaging even as carriers have raised fees on our customers. While this dynamic doesn't impact Twilio's profitability directly, we recognize the pressure it puts on our customers, particularly small businesses. This is exactly why our platform strategy is so important. Our priority is to ensure our customers understand the choice of channels available to them, including over-the-top channels so they can deliver on their use cases and cost effectively reach their customers while maintaining high ROI. Our go-to-market initiatives continue to perform with our self-serve and ISV cohorts driving exceptional revenue growth again this quarter at 25% plus year-over-year. On the self-serve front, we've made significant investments to simplify our onboarding and upgrade process, which has driven higher conversion rates. I'm excited to share more on how we've reimagined the Twilio console experience next week at SIGNAL. In Q1, the team also signed customers, including Aloware, Grupo ProTG, Posh, Sela AI and Solace and landed a key multiyear partnership with the PGA of America. The PGA of America will be expanding their usage of the Twilio platform to power personalized engagement for 30,000 PGA of America golf professionals and millions of golfers. Without giving too much away today, next week at SIGNAL, we'll launch some of the most consequential innovations in our company's history, introducing new capabilities that orchestrate context-rich conversations with persistent memory across every channel for humans and AI agents. We will also unveil new partners. And most importantly, we'll show how Twilio is becoming the foundation for how businesses engage their customers in the age of AI. This moment in time demands a new kind of infrastructure and Twilio has been building just that. It's been amazing watching our marquee customers experience Twilio's new platform and products during our private beta, and many of them will be speaking about their early experiences at the conference. We can't wait to share more on the SIGNAL stage in San Francisco on May 6 and 7. Twilio's innovations continue to get industry analyst recognition as Twilio was positioned as a leader in the inaugural IDC Worldwide Communications Engagement Platform 2026 MarketScape, scoring highest in both strategies and capabilities. Twilio was also named a leader for the fourth time by Omdia in its CEP Universe report. This validation, coupled with our strong execution this quarter, illustrates why we believe that Twilio is truly positioned to be a critical infrastructure leader in the age of AI. Before closing, I also wanted to officially welcome Doug Robinson to Twilio's Board of Directors. Doug is known for growing teams and businesses, helping to scale Workday to the multibillion-dollar business that it is today. His expertise will be invaluable at Twilio as we drive operational excellence and continue to transform our go-to-market organization. Welcome, Doug. And with that, I'll turn it over to Aidan.

Thank you, Khozema, and good afternoon, everyone. Twilio had an outstanding Q1, delivering revenue of $1.4 billion, up 20% year-over-year on a reported basis and 16% year-over-year on an organic basis, along with non-GAAP gross profit growth of 16%. We also generated record non-GAAP income from operations of $279 million. Free cash flow was $132 million. Top line performance was driven by strong volumes and solid execution, resulting in our fastest organic revenue growth rate since 2022. Our self-serve and ISV channels delivered revenue growth of 25% plus in the quarter, and we are seeing strength across the product portfolio. Voice growth accelerated once again with revenue up 20% year-over-year. We continue to see strong growth from Voice AI use cases as well as accelerating growth in voice software add-ons. Messaging revenue growth accelerated to 25%, driven by solid growth in SMS and aided by strength in WhatsApp and RCS. Incremental carrier fees contributed roughly 7 points to messaging's growth. Finally, software add-on revenue growth exceeded 20% year-over-year, driven by Verify and newer products such as Branded Calling and Conversational Intelligence. Our Q1 dollar-based net expansion rate was 114%, reflecting the improving growth trends we've seen in our business over the last several quarters. Incremental carrier fees contributed roughly 4 points to DBNE. We delivered record non-GAAP gross profit of $697 million for the quarter, with growth accelerating to 16% year-over-year, up from 10% in Q4 '25, our best non-GAAP gross profit growth rate since 2022. This was driven by continued momentum in our higher-margin products in addition to meaningful cost efficiencies. Non-GAAP gross margin was 49.6%, down 180 basis points year-over-year and 40 basis points quarter-over-quarter. We incurred incremental carrier pass-through fees of $46 million associated with increased U.S. A2P fees, which drove the year-over-year and quarter-over-quarter declines. Without these incremental fees, non-GAAP gross margin would have been 50 basis points higher sequentially. Q1 non-GAAP income from operations came in ahead of expectations at a record $279 million, up 31% year-over-year, driven by strong gross profit growth and continued cost leverage. Non-GAAP operating margin was a record 19.8%, up 160 basis points year-over-year and 110 basis points quarter-over-quarter despite a roughly 70 basis point headwind from incremental U.S. carrier fees. In addition, we generated $108 million in GAAP income from operations. Q1 stock-based compensation as a percentage of revenue was 9.7%, down 220 basis points year-over-year and 160 basis points quarter-over-quarter. This marks the first time since our IPO that stock-based compensation has fallen below 10% of revenue, and we've reached this level well ahead of our prior target of 2027. We generated free cash flow of $132 million in the quarter, which includes $141 million payment tied to our 2025 cash bonus program that we noted during our Q4 earnings call. Additionally, we completed $253 million in share repurchases in Q1 and have roughly $900 million remaining on our current authorization. Turning to guidance. For Q2, we're initiating a revenue target of $1.42 billion to $1.43 billion, representing 15.5% to 16.5% reported growth and 10% to 11% organic growth. In addition to previously announced U.S. carrier fee increases, Verizon has implemented an additional fee increase that will take effect on May 1. As a result, our Q2 reported revenue guidance assumes $71 million in incremental U.S. carrier fees. As a reminder, our organic revenue excludes the contribution from incremental increases to U.S. carrier fees. Moving to the full year. We're encouraged by the broad-based trends we saw in the first quarter. For the full year, we're raising our organic growth range to 9.5% to 10.5%, up from 8% to 9% previously. We are raising our reported revenue growth range to 14% to 15%, up from 11.5% to 12.5% previously. In addition, we continue to expect full year non-GAAP gross profit dollar growth to be similar to our organic revenue growth rate. Our full year revenue guidance assumes approximately $235 million in incremental pass-through revenue from U.S. carrier fees, up from $190 million previously. This reflects the U.S. carrier fee increases announced in prior earnings cycles plus Verizon's most recent fee increase that takes effect on May 1. As a reminder, while the pass-through fees have no impact on our 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 200 basis points when compared to full year 2025 non-GAAP gross margins, all else equal. Turning to our profit outlook. For Q2, we expect non-GAAP income from operations of $250 million to $260 million, reflecting incremental costs associated with our annual merit increases as well as expenses for our SIGNAL conference next week. Based on our Q1 performance and Q2 guidance, we're raising our full year 2026 non-GAAP income from operations range to $1.08 billion to $1.1 billion, up from $1.04 billion to $1.06 billion previously. Similarly, we are raising our full year free cash flow guidance to $1.08 billion to $1.1 billion. I'm very pleased with the accelerated revenue and gross profit growth we delivered in the first quarter as well as our ongoing cost leverage that is driving strong profitability and free cash flow. We remain focused on our key go-to-market initiatives and delivering the essential infrastructure that will help our customers win in the AI era. And finally, we're looking forward to seeing many of you at SIGNAL in San Francisco next week. And with that, we'll now open it up for questions.

[Operator Instructions] Our first question comes from the line of Alex Zukin of Wolfe Research.

I cannot express my congratulations enough on a truly exceptional quarter in a truly difficult environment for software. So maybe first on -- I'm going to make it really easy. I'm going to ask about messaging, and I'm going to ask about voice. Messaging, extremely strong growth, again, almost surprising, I think, for Q1. So just maybe if you could unpack some of the meaningful drivers also between geographies, U.S. and international and how we think about that trajectory? And then on Voice, it's continuing to accelerate, as you mentioned, Kho. Maybe just stepping back, any unique experiences either on the consumer-facing side -- consumer-facing agent side or B2B that you're seeing kind of with some of these deals that you're announcing driving that growth rate?

Alex, I'll start, and then I'll hand it over to Thomas and Khozema to chime in. So yes, really strong quarter for both messaging and voice, both grew 20% plus. On the messaging side, just to be clear, it was -- it grew about 25%, but about 7 points of that was driven by the fees. So high teens on an apples-to-apples basis, but really strong growth. And we've seen that in the messaging business over the last several quarters. This isn't a new dynamic. And I would say it was pretty broad-based when you look at it geographically. The U.S. was strong. International was strong. I think pretty exciting to see RCS volumes ramping. It's still early there, but we are seeing some adopters on that product, which is great. And then I'd say increasingly, volume from AI natives on the messaging channel. And then voice continues to accelerate, 20% growth in that product. That's the highest growth rate in that product in 19 quarters. So really excited about that. And it's a continuation of the acceleration we've seen on the back of the AI use cases as well as, I'd say, the adoption of software add-on products like Conversational Intelligence, Branded Calling, et cetera. So really strong performance in both products, and I'll hand it over to Thomas to give you more of the go-to-market perspective.

Yes. Just -- thanks, Alex. So just to dig in a little more on the Voice specifically. We saw a real acceleration in Voice in our self-service business. It was up 45%. And then if you look at the Voice add-on software, that was also really strong in the mid-30s. So more broadly, it wasn't just connectivity. It was the software layer on top of that. And what's important about it is what we're seeing is most of our customers are not going at it just single channel. They are expanding. If they started in Voice, they're adding that messaging capability. We talked about some of that already with Sierra and Bland and a handful of others. But just think of it as use cases like customer support and services. We're seeing a lot more self-service agents that ISVs are rolling out to help small businesses, for example, when they can't be attentive 24/7 with humans. AI assistants are helping with that. We're seeing a lot of AI Copilots being built for live agents and contact centers. And we're seeing a lot of sales use cases as well where using AI assistant for inbound leads and using that to help customers qualify, answer questions and ultimately hand it off to a sales representative once it's needed. So just a wide variety of use cases across a wide variety of verticals, and it's pretty broad-based strength.

Our next question comes from the line of Taylor McGinnis of UBS.

Congrats on a great quarter. One question for me, just on a continuation on the messaging side. So if we look at the strong growth in 1Q, I think you guys made 2 comments, which is, one, you're seeing good adoption of RCS. And then two, you mentioned that AI natives are starting to attach more Messaging volumes to use cases. So is there any way to quantify, I guess, how much of that led to the acceleration that you guys saw in 1Q? And then as we think about the durability of the messaging channel growth from here, I know as you get into 2Q, you're coming up against a little bit of a tougher compare. But with some of these emerging trends, like how early are we in that? And could you potentially continue to build off of that as we look into the future? And could this be a reason why messaging growth maintains similar levels as we move throughout the year?

I don't think RCS and the AI natives are contributing super meaningfully. Remember, messaging is like almost 60% of our business, right? So it's got a huge revenue base. RCS is very small. It's grown very quickly, but it's not contributing meaningfully. I would say on the AI native side, maybe a little bit more, but nothing outsized in terms of what we're seeing there. I don't know that there's too much else I would say. If you look at it again, operationally, it's up about 18% year-over-year. And that's not too far off from how we've been trending in messaging, a little bit higher, but that business has been growing kind of mid- to high teens for several quarters now. So strong operational growth in that business. It's our biggest biz product, and we continue to perform well there.

Yes. I would just add, Taylor, I mean, I think you asked about durability. I mean, like we feel pretty good about like the way that the business is performing. We obviously took up our guidance, right, for the balance of the year, and that reflects it in some respects. But I think the kind of bigger opportunity going forward with respect to messaging and AI is, as Thomas alluded to, there's Voice customers who are now going more cross-channel and who are doing much more conversational AI as we go forward. And I think while everything has sort of started in Voice, the opportunity is in some of these other channels as we go forward. And we think that, that provides kind of ongoing durability into the future.

Our next question comes from the line of Ittai Kidron of Oppenheimer & Company.

This is George Iwanyc on for Ittai. And I'll add my congratulations to the strong results. From -- given how strongly the business is performing, can you give us some perspective on whether macro is having any impact at all either on a regional basis or on a vertical basis?

Yes. I don't think macro is like -- I mean it's a super dynamic macro environment, right? I mean -- which is probably the understatement of the year. So I wouldn't say it's really having any effect one way or the other. I mean you got a lot of, obviously, things in sort of the consumer realm that would point to pressure potentially. You've obviously got the Middle East. You've got inflation. So I don't think it's really playing into it one way or the other. I think what we're finding is that broadly, the business is performing very nicely. Obviously, we're in a little bit of an AI tailwind right now. But I think broadly, I mean, the business is performing well. And I mean, even AI is not, I would say, meaningfully contributing to the overall results. It's certainly a catalyst for some of it. But I think on balance, the business is just having kind of all around good results.

And maybe building on that, with the success you're seeing with the sales motion, can you give us some color on what you're seeing from a multiproduct adoption standpoint and how broadly across the customer base that is unfolding?

Yes. We are seeing acceleration of our multiproduct customer count. It was actually up 29% in Q1, which is really encouraging and revenue from multiproduct customers is also accelerating, and we think it will continue to accelerate throughout the year as customers begin rolling out more of these software capabilities that sit on top of the channels. And what's interesting about it is what we're seeing is the use cases that customers want to roll out are naturally multiproduct in nature because you're talking about use cases where personalization and understanding of the relationship between a brand and a consumer requires software orchestration and memory that connects to the underlying communication channel, whether it be e-mail, voice or messaging and having a consistent experience where you have observability and sentiment across all those channels. It just makes it so that customers see the value of the platform and they consolidate spend across the channels with Twilio. So all in all, I think the multiproduct motion is just in the early stages of really accelerating. And it's fundamentally because customers look at Twilio as critical infrastructure for how customer engagement is done in the agentic era, and we're just helping them throughout that journey.

Our next question comes from the line of Siti Panigrahi of Mizuho.

Congrats on a great quarter. I want to ask about Voice AI. How would you characterize your largest Voice AI customer scale at this point? I know you talked about a lot about experiments and testing last year moving in that direction to a full-scale production in use cases. So has that opened up in a meaningful way yet? Or are you still seeing some kind of experiment? And if so, what's the bottleneck there?

I think it depends on the kind of company and then -- well, it depends on the kind of company. So I would say that with a lot of the AI natives that we support, we're seeing a lot of takeoff velocity there, but it's off of a relatively small base, which is why it contributes to our financial results, but it's not meaningful in sort of the way that Aidan characterized earlier. I think the second thing is that you see it -- you see a higher adoption in -- I'll just make it super simple, like nonregulated industries versus regulated industries. So I think e-commerce, retail, food service, like we're seeing a lot of pilots and heavy experimentation translate into production environments. And I wouldn't say that we're seeing a lot of agent-to-agent necessarily there, but certainly human-to-agent interactions. On the regulated side, I would say it's pretty slow. You're definitely seeing very, very heavy experimentation. But I think just given the high stakes nature of what many of those companies do, it's going to take some time, which I think is good for us because it sort of provides like a longer-term tailwind, if you will, and certainly larger spend, but I think it's going to take some time.

Our next question comes from the line of Mark Murphy of JPMorgan.

I'll add my congrats. So Aidan, you have margins continually expanding. You grew operating income 31% year-over-year. It's quite impressive. I'm interested in structurally, how are you thinking about the headcount that's going to be required to run the business, especially as some of the AI tooling becomes more powerful, you can augment some of your employees and you can amplify what they could do. And then secondarily, can you comment on what are you budgeting for like seat-based SaaS applications that you use internally? I think there's a little bit of a debate. Will that kind of grow in line with your headcount? Or do you think -- is there any motion to try to vibe code some of the SaaS solutions yourself in-house?

Yes. Let me start on the headcount side and maybe the AI cost. So what I would say, like as you would imagine, right, we tested a variety of AI tools over the last couple of years. We've rolled out a select number of them to our employee base, including some coding tools, some tools for knowledge workers. And I'd say while it's an area of spend that we're watching, our inference costs are manageable. The impact of those are kind of embedded in the guidance that we're providing. And so from a headcount perspective, we've been roughly flat for, I don't know, 2 or 3 years at this point. I would -- for your modeling purposes, I'd keep it around that level, Mark. We're not intending to add meaningful numbers of heads. We continue to focus on controlling our OpEx. I mean if you look at our track record over the last couple of years, we've been about flat from an OpEx perspective. We continue to take down stock-based compensation. So we'll continue to be very disciplined in that regard. In terms of the SaaS tooling, I would say nothing meaningful to highlight there. We regularly invest in different tools. I don't expect the costs associated with them to grow meaningfully, maybe down a little bit. But again, it's all embedded in our guidance. And in terms of vibe coding tools, I mean, nothing that I'd call out that's worthy of noting here.

Our next question comes from the line of Nick Altmann of BTIG.

Awesome. Actually, I kind of wanted to stick on the margin side of the equation. The 8% GAAP operating margins this quarter is super impressive. Aidan, you talked about stock-based comp and how that's well ahead of targets. But just any onetime items that helped the GAAP margins this quarter? And then going forward, any goalposts for how we should think about GAAP operating margins for the remainder of the year?

Yes. Thanks, Nick. No, there's nothing I would call out that's unusual. Like when you look at our GAAP operating margins, it's really driven by a couple of things. Number one, obviously, our non-GAAP op profit is growing. We saw margins expand there. Second is we continue to take down stock-based compensation. We were sub 10% as a percentage of revenue. Our original target was to get there in 2027, got there much earlier. And as you know, we've taken a number of different actions to enable that. The last thing I'd call out is that our intangible amortization, which impacts GAAP but not non-GAAP has come down as well. So those are the 3 drivers of what's kind of resulting in the 8% GAAP op margin as well as the over $100 million of GAAP profit in the quarter. Big focus for us. We'll continue to focus on both non-GAAP OpEx as well as SBC going forward.

Our next question comes from the line of Derrick Wood of TD Cowen.

Great. And I'll echo my congratulations. Khozema, could you talk about how you see the next phase of Segment playing out as you look over the next few years? I mean you've completed the back-end rearchitecture. I think you've made the data interoperability much more native on a communications platform. So where do you see the most synergies with the comms product? And can we be expecting a revival in growth in Segment this year?

Yes. I mean we're not as focused, I would say, on Segment as a stand-alone. I think we're much more interested in using the data technology to enrich communications. I mean I think what's obvious in sort of the AI era is that if you don't have context, you're probably looking at much higher cost in terms of your AI workloads and you're not actually solving the customer's problem. And so I think having a CDP in that respect is incredibly valuable, enriching every one of our communications with data is incredibly valuable. And as you look at like some of these AI natives, for example, that we've cited recently that are using tools such as conversational intelligence, just that ability to use data as a means to get smarter about the conversation that's in progress, get to problem resolution a lot faster, like that's kind of the way that I see it. We're going to talk more about it certainly next week at SIGNAL, largely through the lens of having memory and persistency in these interactions so that you can truly create what's sort of proverbially been known as this notion of like lifetime customer value is actually now really possible if you can create memory. So the business on a kind of stand-alone is less the focus. It's more about how it fits into the overall picture.

Our next question comes from the line of Arjun Bhatia of William Blair.

Congrats on a great quarter here. I had 2 quick questions. First, maybe for you, Khozema. I'm curious why AI and the benefit that you're sort of getting from it is different between Voice and Messaging. I know it's super early on both fronts, but would you expect messaging to see somewhat of a similar tailwind from AI adoption? Or is this sort of a Voice-specific use case? And then second, I'm just curious in terms of go-to-market, how you think about readiness and the sales force's ability to sell more software add-ons, given you have, I think, a lot of product with things like Verify, ConversationRelay and others?

Yes. I'll take the first question and then let Thomas take the second. I do think that there's a longer-term opportunity with respect to Messaging. I mean both are growing really, really well, right? Let me start there. I think as it relates to Voice, the reason you're seeing the takeoff there initially at least is that most of the AI start-ups are starting in Voice. It's our expectation completely that in the same way as happened, I don't know, 10, 15 years ago and Voice workloads moved over to text, I think you're not going to see quite as dramatic a shift, but instead, what you're going to see is conversational AI, where basically, you're using the AI to be able to reach the customer through the channel that they want and using the context that they want. And so I think that benefits not just Messaging, by the way, but also e-mail. And so we're very excited about the longer-term prospects as a result of AI in all of our channels, frankly. Thomas, do you want to take the go-to-market?

Yes. Just on the go-to-market side, we put a lot of energy into organizing the sales organization this year, setting up compensation plans and driving enablement to enable AEs combined with specialist motion to really optimize the multiproduct selling and the cross-sell of the portfolio that we have. And what we're seeing now is the acceleration of the software add-ons that sit on top of those channels like Verify, ConversationRelay, Branded Calling, all good examples of what we've seen, but also the percentage of deals that have multiple products involved at the close is increasing as well. And so from a readiness perspective, we feel pretty good about where we are in Q1. We think it's going to get better every quarter as we get more reps and continue to -- repetitions, I should say, not necessarily reps, but get more repetitions into this motion, but generally feeling good about the progression our team is making and the skill set they have to continue to drive multiproduct scale selling.

Our next question comes from the line of Koji Ikeda at Bank of America.

So voice and voice AI demand sounds really good. And I think the opportunity is big and really just getting started. And so what is it about Twilio's offering today and what Twilio may offer in the coming years that's giving you the confidence that you don't get disrupted by the time the opportunity really starts to get going from here?

Yes. A couple of things. So first of all, I mean, we're the market leader by a mile. We have the best technology. We're priced higher than the competition, which I think reflects the fact that we do, in fact, have the best technology. Our multichannel ability is unprecedented relative to anybody out there in the marketplace. And then finally, having a great brand is a really, really good place to be because as the average vibe coder is trying to go figure out how to use connectivity, which they may not even understand any of the vernacular on the way in. They're just trying to figure out a way to reach a customer on the other side. All of our research indicates that Twilio will always be sort of the first person -- first company, excuse me, that is requested. So that's a pretty good starting point. Longer term, I mean, the way that I would characterize it is that if you just think about like what being an infrastructure company means as it relates to communications and data, I think on the communications side, I mean, it's very, very challenging for any AI-related company to be able to get 4,800 different kinds of interconnections across 180 and plus growing countries. And going through all of the compliance checks and KYC hurdles, that is like a very complex body of work that's very regulated and turns out to be like quite operational and relatively physical, not necessarily entirely software-driven. So that creates a substantial amount of moat. And then going forward, being able to drive, and I don't want to get too far ahead of it, but we'll talk about this at SIGNAL next week, our ability to migrate from Voice, which is already sort of a source of strength to multichannel orchestration where now any one of our customers can reach their consumers in exactly the way in which they want to be reached, that's where the data asset really shines because you're using the channels, but then you're using data to inform how that happens, when it happens, what's the kind of context that's necessary and then using that data to actually be able to go and solve the consumer's problem. Like that full wrapper, I think, is a real advantage for Twilio that no other company on the planet has.

Our next question comes from the line of William Power of Baird.

Okay. Great. I'm going to come back to the organic revenue growth improvement. Obviously, really impressive, reaching 16%. I mean it sounds like the answer maybe that it's broad-based given the commentary on Messaging, Voice, software add-ons, et cetera. But nicely above the trend line you've been on for a while. So I just want to see if there's anything else you'd call out as to why now we're seeing this kind of inflection versus the last -- maybe the past couple of quarters. And then kind of tied to that, as you look at guidance, I guess, Q2, it does assume a decent deceleration in growth from Q1. So I'm just trying to think through any potential comps versus conservatives and other things that are factored in there.

Yes. So I mean, it was a really good quarter, Will. I mean, like you said, 16% growth. Like last year in total, we were -- or for the year, we were 13%. It's our strongest growth rate in several years. I would say from a product perspective, you highlighted the 2, Messaging and Voice, we've talked about them quite a bit here. From a sales channel perspective, it was ISVs and self-serve, 25% plus each. I will say it was partly driven by higher seasonal volumes earlier in the quarter as well. But really mostly, it was solid execution across the board. I guess the other data point I'd give you is from an industry perspective, it was pretty broad as well. Some of our biggest industries, financial services, tech, health care, they were all very strong. And then I think importantly, all of that -- all of those factors contributed to revenue growth, and I would say, perhaps more importantly, accelerated gross profit growth at 16% as well. And then from a Q2 guidance perspective, I'd say the guidance trends are pretty strong. Our Q2 guidance is 10% to 11% organically. That's consistent with our Q1 guidance, which was at the time we gave it, right, 3 months ago, the highest guidance we had provided in several years, and it really just reflects the strong underlying trends that we're seeing in the business. But I would say, consistent with how we've guided over the last, I'd say, few years, we continue to plan prudently just given the usage-based nature of the business.

Our next question comes from the line of Jim Fish of Piper Sandler.

Great quarter. Not trying to take away from the quarter and the deals that you guys are landing here as they're quite impressive. But obviously, one of your competitors on the agent force side of things and just trying to understand how you guys kind of thought about that opportunity, what you guys see on sort of aligning with some of the more CRMs in the space, how you guys see the environment playing out between really these up and comers that you guys are tracking well with as, kind of, the underneath infrastructure versus those systems of records of the world.

Yes. It's not really what we're worried about. I mean I would say it this way that I think in the emerging AI landscape, what's important is can you be the company that is the single best integrator of all the tools and capabilities that are out there. And so for Twilio, like we've always occupied this space where if you want to bring your own data warehouse, fantastic. If you want to bring your own cloud, fantastic. And the interoperability with those different kinds of tools may also include systems of record, by the way, with which we also integrate. But then going forward, increasingly, like the way that we see it playing out is that customers are going to bring their own LLM capabilities. They're going to bring their own agent capabilities. I think our bet is that it's possible that it could happen in systems of record. I don't think that's going to happen just based on the way that AI is developing with respect to the way that SaaS tools historically develop. And so that's not our concern, whether it's agent force, whether it's the company that you're referring to with respect to agent force, I think we see a much broader opportunity in the landscape, and we're going to continue supporting all of these AI companies and continue to be kind of like the Switzerland, if you will, in support of integrations with anybody that brings them to us to be able to support their business needs.

And just to maybe add one more point to that is we -- last week, we did announce an embeddable version of our Flex products that can be integrated into CRMs or other systems of record, and that allows customers to take advantage of Twilio inside of these systems and also consume usage-based pricing for that as well, so including bringing your own voice. So we're definitely trying to integrate where our customers are and make sure the tools are all available to them.

The next question comes from the line of Joshua Reilly of Needham.

This kind of builds off the last point you were making here, but it seems like your competitive moat is being enhanced given the complexity of the evolving ecosystem around AI is kind of the trusted neutral partner. You can orchestrate agents using OpenAI running on AWS infrastructure and pulling data from a Snowflake warehouse. How much of this neutrality is helping accelerate your opportunity as the complexity of the broader kind of ecosystem with AI is growing?

Yes. I would say it's like a mild accelerant probably today. I mean I think going forward, like it probably helps a lot more. I mean the reality is, is that today, you have sort of conventional developers putting together a lot of this different tooling. I think going forward, I think we all imagine a world in which both agents and vibe coders like really take off in a much more meaningful way. And as that happens and companies have already kind of built on their own stacks, they tend not to want to rip and replace. And so a company's ability to use its existing technology, they're going to need communications and data to be able to create the outcomes that they are for their consumers on the other side and then being able to plug into all of these other different choice points that we have. I think the example that Thomas pointed out a moment ago, I think, is representative. Like it's great to have that, but it's also necessary to have as many other integration points as we possibly can so that the customer always has choice and that they don't have to add cost to their existing tech stack. So going forward, I'd say sort of mild accelerant becomes larger as Vibe coding and agent-based coding starts to take off.

Our next question comes from the line of Jackson Ader of KeyBanc Capital Markets.

It's really nice to see the self-serve improvement that you've made so far. I hate to be greedy, but do you guys think -- is this one of those situations where the low-hanging fruit on the self-serve mechanism has kind of been picked and now we might be entering a normalized phase in that channel? Or is it you're just kind of laying the foundation and now it unlocks like a bunch more actions that you can take in order to optimize this channel over the next multi-years, maybe?

Yes. Jackson, it's Thomas. We feel really good about the strength of our self-service business, and it's -- some of it is things that we've done over the last 12 months to optimize the onboarding and the upgrade process for customers. But it's going beyond that. In fact, next week, we're going to launch some new capabilities as part of the console that's going to really make it even easier for our self-service customers to get started with Twilio and adopt more than one product. And so multiproduct adoption should continue to accelerate through our channel there. So we continue to see opportunities to continue to improve conversion rates across the funnel, but we feel really good about the strength and durability of that business and the new products that are coming over the next week or 2 to unlock even more growth.

Our next question comes from the line of Jamie Reynolds of Morgan Stanley.

This is Jamie on for Elizabeth Porter and congrats on the strong results. Just the ISV channel, obviously, really good traction here. Is that primarily being driven by just like a handful of ISVs? Or is this more a sign that the breadth is kind of widening in a material way?

Yes. So it's a wide range of ISVs across the major verticals. So it's beyond the marketing, it's service desk, it's education ISVs. We see it in hospitality, just a broad portfolio across all the different verticals. And I think really, the growth is coming from the adoption of multiple channels. So if an ISV grew up with us in one area, they're now expanding to that second or third area, and that's helping us accelerate growth in multimillion-dollar customers as part of that.

Our next question comes from the line of Patrick Walravens of Citizens.

This is Nick Lee on for Pat. Congrats on the quarter. On Voice AI, I've sort of come to understand that customer service is one of the most popular uses for it. But as these deployments mature, where do you see customers taking Voice AI next?

Yes. I think the very early Voice AI use cases were largely just customer support. But what we're seeing now is much more outbound sales motions, inbound sales motions. I'll give you a couple of examples like live seller augmentation. Next best actions for sellers to be able to recommend what product given the live nature of a conversation they may be having with a virtual agent. There's use cases around compliance that are starting to be introduced. We're seeing increases in Voice Recording as a software layer on top of our stack. So it's just the beginning of what we're seeing. The classic use cases have been evaluated and rolling into production. And now people are getting creative and they're introducing a whole new variety of virtual agents combined with human-assisted agents through an escalation path. And it really just depends on the vertical, but there's a lot of different use cases being unlocked.

I'd say one of the more interesting ones from our perspective is like Mainstreet businesses, when they're closed at night, their ability to service customers during the off hours like that's super exciting and benefits the real economy and businesses that would otherwise not be able to afford it. They'll probably get served by an ISV in between. But still, I mean, it's really compelling technology for a Mainstreet business.

Our next question comes from the line of Ryan MacWilliams of Wells Fargo.

This is Zeeshan on for Ryan Mac. In your top customer wins, there was a mention of a large customer consolidating their traffic on to Twilio. I wanted to get your perspective on how meaningful competitive takeaways have been for you over the past couple of quarters and where competitors might be falling short and consequently ceding share.

Yes, I can speak to that one, Ryan. So it really starts with the platform capabilities that Twilio is offering and the value prop of having a brand work with a consumer and have the understanding of sentiment, observability and orchestration of how to work with the consumer across multiple channels. And so when customers understand that road map and they see the power of the software that sits on top of our traditional communication channels, they see the value to consolidate spend with Twilio, which is leading us to take more market share in different parts of the world. And so I think it's the platform approach that we're taking and the uniqueness of our ability to scale globally across all the different channels that we do provides customers the confidence and trust that we're the right partner to pick, especially when they have to introduce the more complex use cases that we've talked to about some of these Voice AI use cases, in particular, it does require personalization and memory and orchestration. And you just can't do all of that if you're using multiple providers across multiple channels, and that's been an advantage for us.

Our next question comes from the line of Rishi Jaluria of RBC.

Nice to see continued strength and acceleration at scale, especially given everything going on in the environment. Maybe I want to touch a little bit on the momentum that you're getting with the AI natives and particularly in Voice AI. Without speaking to a particular customer, a lot of us have been on the outside looking at the headline numbers that we've seen out of some of your reference customers and can imagine some of that is helping. But maybe just from a high-level perspective, can you help us understand as those companies grow and you not only grow with them on your consumption/usage-based model, but also expand your footprint on them, how should we just be thinking about what that time line looks like because it's clearly not everything can happen in real time. But I just want to kind of be able to control and temper our expectations as we see exciting headline numbers out there.

Yes. I mean I guess the way I would characterize it, Rishi, is that it's still relatively early. I mean most of these companies that are in that start-up space, as you know, I mean, they're relatively small still. I mean they're growing at very, very fast rates, no question. But they're at relatively low, let's say, triple-digit kind of hundreds of millions revenue numbers. We will obviously end up taking a piece of that based on the work that they end up doing with us. So I would characterize it as like quite early days. I mean, frankly, I think the bigger pony here is probably as this migrates over to enterprises, whether those AI companies -- AI start-ups that is act as ISVs on our behalf or whether we end up deploying directly to enterprises, I would say that is happening just more slowly given the nature of enterprises and their buying cycles. I'm sure you heard the answer to my question earlier about like what's sort of the schism here. You've got retail, e-comm, food service adopting rapidly. On the other side, you've got regulated adopting less rapidly. So I think there's a lot of tailwind here in terms of the way that this plays out. I think there's a lot of Voice AI workloads still to deploy. And as we've said a number of times, I think Voice ends up moving over to other channels as well. And when this becomes conversational AI, there's an even bigger opportunity there. So pretty early days.

Our next question comes from the line of Andrew King of Rosenblatt Securities.

Congratulations on the good quarter. Just wanted to see if you could provide any color as to how much of an accelerator that AI has been to these cross-sell opportunities for you? And then if I can just sneak in a second one. Can you just remind us as to how you are viewing the balance between driving profitability and maintaining AI investments?

Maybe I'll start with the second one. So we are -- as I think someone asked a question similar on AI earlier, but we're definitely investing in AI tools. It's embedded in our guidance. And I'd say it's moderate right now in terms of the amount of cost. It's manageable in terms of what's hitting the P&L. It's all embedded in guidance right now. Profitability continues to be a big focus for us. We just increased our guidance for the year on both cash and profitability. And yes, continue to be a focus for us, both on the GAAP and the non-GAAP line.

And I'll just take the first part of the question around AI acceleration from cross-sell. And it's really just -- there's probably 2 elements to it. One is the direct acceleration, which you're seeing in the acceleration of our software add-ons because we use AI as part of that software stack to do fraud detection or to do personalization of conversations using our conversational insights layer and the ConversationRelay layer. But also, we're getting an indirect acceleration because overall spend is consolidating with us as well across the channels to take advantage of that software stack. So it's hard to quantify financially exactly what the accelerant is, but we do see it in the deal cycles where customers really want to go deeper in some of these more advanced areas of our portfolio, and that's setting us up nicely from a pipeline perspective for the rest of the year.

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