Customer engagement platform Twilio (NYSE: TWLO) reported Q2 CY2026 results exceeding the market’s revenue expectations, with sales up 22% year on year to $1.50 billion. On top of that, next quarter’s revenue guidance ($1.51 billion at the midpoint) was surprisingly good and 3.2% above what analysts were expecting. Its non-GAAP profit of $1.47 per share was 11.1% above analysts’ consensus estimates.

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Company Overview

Known for the clever "Twilio Magic" demo that had developers creating functioning communications apps in minutes, Twilio (NYSE: TWLO) provides a platform that enables businesses to communicate with their customers through voice, messaging, email, and other digital channels.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, Twilio’s sales grew at a decent 19.8% compounded annual growth rate over the last five years. Its growth was slightly above the average software company and shows its offerings resonate with customers.

Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Twilio’s recent performance shows its demand has slowed as its annualized revenue growth of 14.7% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs.

This quarter, Twilio reported robust year-on-year revenue growth of 22%, and its $1.50 billion of revenue topped Wall Street estimates by 5%. Company management is currently guiding for a 16.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 9.4% over the next 12 months, a deceleration versus the last two years. This projection doesn’t excite us and suggests its products and services will face some demand challenges.

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Customer Retention

One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.

Twilio’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 116% in Q2. This means Twilio would’ve grown its revenue by 16% even if it didn’t win any new customers over the last 12 months.

Significantly up from the last quarter, Twilio has a good net retention rate, proving that customers are satisfied with its software and getting more value from it over time, which is always great to see.

Key Takeaways from Twilio’s Q2 Results

We were impressed by how significantly Twilio blew past analysts’ adjusted operating income expectations this quarter. We were also glad its EPS guidance for next quarter exceeded Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 15.7% to $224.35 immediately after reporting.

Indeed, Twilio had a rock-solid quarterly earnings result, but is this stock a good investment here? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).