Customer engagement platform Twilio (NYSE: TWLO) announced better-than-expected revenue in Q4 CY2025, with sales up 14.3% year on year to $1.37 billion. On top of that, next quarter’s revenue guidance ($1.34 billion at the midpoint) was surprisingly good and 3.9% above what analysts were expecting. Its non-GAAP profit of $1.33 per share was 8.2% 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

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Twilio grew its sales at a solid 23.5% compounded annual growth rate. Its growth beat the average software company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Twilio’s recent performance shows its demand has slowed as its annualized revenue growth of 10.4% 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 year-on-year revenue growth of 14.3%, and its $1.37 billion of revenue exceeded Wall Street’s estimates by 3.6%. Company management is currently guiding for a 14.3% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 7.7% over the next 12 months, a slight deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will see some demand headwinds.

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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 108% in Q4. This means Twilio would’ve grown its revenue by 8% even if it didn’t win any new customers over the last 12 months.

Twilio has a decent net retention rate, showing us that its customers not only tend to stick around but also get increasing value from its software over time.

Key Takeaways from Twilio’s Q4 Results

It was great to see Twilio’s revenue guidance for next quarter top analysts’ expectations. We were also happy its revenue outperformed Wall Street’s estimates. Overall, this print had some key positives. The market seemed to be hoping for more, and the stock traded down 1.7% to $107.17 immediately after reporting.

So should you invest in Twilio right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).