UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________

FORM 10-Q

_____________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2024~~2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37806

_____________________________________________

TWILIO INC.

(Exact name of registrant as specified in its charter)

_____________________________________________


Delaware						26-2574840
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

101 Spear Street, Fifth Floor

San Francisco, California 94105

(Address of principal executive offices) (Zip Code)

(415) 390-2337

(Registrant’s telephone number, including area code)

____________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.001 per share	TWLO	New York Stock Exchange

As of ~~October~~April 2415, ~~2024~~2025, ~~153~~152,~~383~~674,~~697~~214 shares of the registrant’s Class A common stock were outstanding.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Table of Contents

TWILIO INC.

Quarterly Report on Form 10-Q

For the Three Months Ended ~~September~~March 3031, ~~2024~~2025

TABLE OF CONTENTS

		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023	3
	Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023	4
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2025 and 2024	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2024 and 2023	5
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2025 and 2024	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2024 and 2023	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2025 and 2024	6
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023	10
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024	8
	Notes to Condensed Consolidated Financial Statements	119
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2623
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4237
Item 4.	Controls and Procedures	4337
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	4438
Item 1A.	Risk Factors	4438
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7971
Item 5.	Other Information	7972
Item 6.	Exhibits	8073
	Signatures	8173

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

TWILIO INC.

Condensed Consolidated Balance Sheets

(Unaudited)

As of September 30,

As of December 31,

As of March 31,

As of December 31,

2024

2023

2025

2024

(In thousands)

ASSETS

Current assets:

Cash and cash equivalents

~~583~~467,~~969~~094

~~655~~421,~~931~~297

Short-term marketable securities

21,~~114~~980,~~279~~983

31,~~356~~963,~~064~~102

Accounts receivable, net

~~550~~577,~~901~~624

~~562~~588,~~773~~540

Prepaid expenses and other current assets

~~299~~442,~~173~~155

~~329~~474,~~204~~360

Total current assets

3,~~548~~467,~~322~~856

43,~~903~~447,~~972~~299

Property and equipment, net

~~194~~183,~~677~~613

~~209~~191,~~639~~042

Operating right-of-use assets

5848,~~509~~914

7353,~~959~~405

Equity method investment

~~514~~464,~~977~~580

~~593~~485,~~582~~835

Intangible assets, net

~~265~~211,~~841~~315

~~350~~238,~~490~~503

Goodwill

5,243,266

Other long-term assets

~~211~~195,~~665~~171

~~234~~206,~~799~~122

Total assets

109,~~037~~814,~~257~~715

119,~~609~~865,~~707~~472

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

71107,~~320~~707

~~119~~100,~~615~~169

Accrued expenses and other current liabilities

~~452~~432,~~343~~300

~~424~~530,~~311~~686

Deferred revenue and customer deposits

~~138~~154,~~752~~047

~~144~~155,~~499~~680

Operating lease liability, current

3831,~~322~~886

4933,~~872~~685

Total current liabilities

~~700~~725,~~737~~940

~~738~~820,~~297~~220

Operating lease liability, noncurrent

9478,~~762~~048

~~120~~85,~~770~~875

Long-term debt, net

~~990~~991,~~173~~006

~~988~~990,~~953~~587

Other long-term liabilities

2215,~~718~~430

2915,~~135~~824

Total liabilities

1,~~808~~810,~~390~~424

1,~~877~~912,~~155~~506

Commitments and contingencies (Note 12)

Commitments and contingencies (Note 11)

Stockholders' equity:

Stockholders’ equity:

Preferred stock

—

Class A common stock

~~155~~153

~~182~~153

Additional paid-in capital

15,~~299~~625,~~179~~545

1415,~~797~~476,~~723~~124

Accumulated other comprehensive income

24,395

619

Accumulated other comprehensive income (loss)

10,358

(1,301)

Accumulated deficit

(7,~~094~~631,~~862~~765)

(57,~~065~~522,~~972~~010)

Total stockholders’ equity

8,~~228~~004,~~867~~291

97,~~732~~952,~~552~~966

Total liabilities and stockholders’ equity

109,~~037~~814,~~257~~715

119,~~609~~865,~~707~~472

See accompanying notes to condensed consolidated financial statements.

Table of Contents

TWILIO INC.

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2024		2023		2024		2023
	2025		2024
	(In thousands, except share and per share amounts)
Revenue	$	1,~~133~~172,~~649~~463	$	1,~~033~~047,~~670~~050	$	~~3,263,201~~	$	~~3,077,995~~
Cost of revenue	~~555~~590,~~020~~896		~~517~~503,~~351~~009		~~1,584,686~~		~~1,565,231~~
Gross profit	~~578~~581,~~629~~567		~~516~~544,~~319~~041		~~1,678,515~~		~~1,512,764~~
Operating expenses:
Research and development	~~260~~254,~~903~~295		~~241~~260,~~654~~457		~~756,170~~		~~707,145~~
Sales and marketing	212,~~576~~113		~~262~~214,~~898~~503		~~644,150~~		~~784,383~~
General and administrative	~~106~~92,~~350~~077		~~114~~112,~~071~~585		~~332,300~~		~~361,491~~
Restructuring costs	3,694		3,437		13,330		140,281
Total operating expenses	558,485		587,545
Impairment of long-lived assets	—		3,162		—		34,278
Income (loss) from operations	23,082		(43,504)
Total operating expenses	583,523		625,222		1,745,950		2,027,578
Loss from operations	(4,894)		(108,903)		(67,435)		(514,814)
Other income (expenses), net:
Share of losses from equity method investment	(2519,~~279~~471)		(3129,~~058~~575)		~~(78,794)~~		~~(93,838)~~
Impairment of strategic investments	(803)		—		(1,470)		(46,154)
Other income, net	22,973		27,918
Other income, net	27,325		1		72,644		17,731
Total other income (expenses), net	3,502		(1,657)
Total other income (expenses), net	1,243		(31,057)		(7,620)		(122,261)
Income (loss) before provision for income taxes	26,584		(45,161)
Loss before provision for income taxes	(3,651)		(139,960)		(75,055)		(637,075)
Provision for income taxes	(6,567)		(10,188)
Provision for income taxes	(6,075)		(1,747)		(21,878)		(12,958)
Net income (loss) attributable to common stockholders	$	20,017	$	(55,349)
Net loss attributable to common stockholders	$	(9,726)	$	(141,707)	$	(96,933)	$	(650,033)
Net income (loss) per share attributable to common stockholders:
Net loss per share attributable to common stockholders, basic and diluted	$	(0.06)	$	(0.78)	$	(0.57)	$	(3.54)
Basic	$	0.13	$	(0.31)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	159,091,110		181,749,309		170,063,452		183,854,526
Diluted	$	0.12	$	(0.31)
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:
Basic	153,345,192		181,017,726
Diluted	161,794,287		181,017,726

See accompanying notes to condensed consolidated financial statements.

Table of Contents

TWILIO INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2024		2023		2024		2023
	2025		2024
	(In thousands)
Net loss	$	(9,726)	$	(141,707)	$	(96,933)	$	(650,033)
Net income (loss)	$	20,017	$	(55,349)
Other comprehensive income:
Other comprehensive income (loss):
Unrealized gain on marketable securities	29,317		13,921		22,303		53,276
Unrealized gain (loss) on marketable securities	5,058		(5,193)
Foreign currency translation	—		5,018		—		5,587
Net change in market value of effective foreign currency forward exchange contracts	8,386		(4,505)
Net change in market value of effective foreign currency forward exchange contracts	6,613		(8,626)		1,285		(7,458)
Share of other comprehensive (loss) income from equity method investment	(1,785)		4,138
Share of other comprehensive (loss) income from equity method investment	(864)		(2,764)		188		17,030
Total other comprehensive income (loss)	11,659		(5,560)
Total other comprehensive income	35,066		7,549		23,776		68,435
Comprehensive income (loss) attributable to common stockholders	$	31,676	$	(60,909)
Comprehensive income (loss) attributable to common stockholders	$	25,340	$	(134,158)	$	(73,157)	$	(581,598)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

TWILIO INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

Three Months Ended September 30, 2024


	Common Stock Class A			Additional Paid-In Capital	Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
	(In thousands, except share amounts)
Balance as of December 31, 2024	152,610,697	$	153		$	15,476,124	$	(1,301)	$	(7,522,010)	$	7,952,966
Net income	—	—			—		—		20,017		20,017
Exercises of vested stock options	131,515	—			2,766		—		—		2,766
Vesting of restricted stock units	1,712,644	2			(2)		—		—		—
Value of equity awards withheld for tax liability	(423)	—			(53)		—		—		(53)

Shares of Class A common stock issued and donated to charity	22,102	—			2,776		—		—		2,776


Unrealized gain on marketable securities	—	—			—		5,058		—		5,058
Repurchases of shares of Class A common stock including related costs	(1,222,193)	(2)			—		—		(129,772)		(129,774)

Net change in market value of effective foreign currency forward exchange contracts	—	—			—		8,386		—		8,386
Share of other comprehensive loss from equity method investment	—	—			—		(1,785)		—		(1,785)
Stock-based compensation	—	—			143,934		—		—		143,934

Balance as of March 31, 2025	153,254,342	$	153		$	15,625,545	$	10,358	$	(7,631,765)	$	8,004,291

	Common StockClass A			Additional Paid-In Capital	Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
	(In thousands, except share amounts)
Balance as of June 30, 2024	164,150,089	$	164		$	15,136,786	$	(10,671)	$	(6,446,806)	$	8,679,473
Net loss	—	—			—		—		(9,726)		(9,726)
Exercises of vested stock options	43,562	—			969		—		—		969
Vesting of restricted stock units	1,813,439	2			(2)		—		—		—
Value of equity awards withheld for tax liability	(302)	—			(18)		—		—		(18)
Shares of Class A common stock issued and donated to charity	22,102	—			1,301		—		—		1,301
Unrealized gain on marketable securities	—	—			—		29,317		—		29,317
Repurchases of shares of Class A common stock including related costs	(10,642,581)	(11)			—		—		(638,330)		(638,341)
Net change in market value of effective foreign currency forward exchange contracts	—	—			—		6,613		—		6,613
Share of other comprehensive loss from equity method investment	—	—			—		(864)		—		(864)
Stock-based compensation	—	—			159,413		—		—		159,413
Stock-based compensation - restructuring	—	—			730		—		—		730
Balance as of September 30, 2024	155,386,309	$	155		$	15,299,179	$	24,395	$	(7,094,862)	$	8,228,867

See accompanying notes to condensed consolidated financial statements.

Table of Contents

TWILIO INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

Nine Months Ended September 30, 2024


	Common Stock Class A			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
	(In thousands, except share amounts)
Balance as of December 31, 2023	181,945,771	$	182	$	14,797,723	$	619	$	(5,065,972)	$	9,732,552
Net loss	—	—		—		—		(55,349)		(55,349)
Exercises of vested stock options	43,835	—		421		—		—		421
Vesting of restricted stock units	1,615,930	1		(1)		—		—		—
Value of equity awards withheld for tax liability	(26,757)	—		(1,918)		—		—		(1,918)


Shares of Class A common stock issued and donated to charity	22,102	—		1,295		—		—		1,295
Shares returned from escrow	(696)	—		(192)		—		—		(192)

Unrealized loss on marketable securities	—	—		—		(5,193)		—		(5,193)
Repurchases of shares of Class A common stock including related costs	(6,128,298)	(6)		—		—		(387,022)		(387,028)

Net change in market value of effective foreign currency forward exchange contracts	—	—		—		(4,505)		—		(4,505)
Share of other comprehensive income from equity method investment	—	—		—		4,138		—		4,138
Stock-based compensation	—	—		163,509		—		—		163,509

Balance as of March 31, 2024	177,471,887	$	177	$	14,960,837	$	(4,941)	$	(5,508,343)	$	9,447,730

	Common StockClass A			Additional Paid-In Capital	Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
	(In thousands, except share amounts)
Balance as of December 31, 2023	181,945,771	$	182		$	14,797,723	$	619	$	(5,065,972)	$	9,732,552
Net loss	—	—			—		—		(96,933)		(96,933)
Exercises of vested stock options	114,995	—			2,068		—		—		2,068
Vesting of restricted stock units	4,893,903	5			(5)		—		—		—
Value of equity awards withheld for tax liability	(27,839)	—			(1,981)		—		—		(1,981)
Shares issued under ESPP	394,479	—			20,601		—		—		20,601
Shares of Class A common stock issued and donated to charity	66,306	—			3,911		—		—		3,911
Shares returned from escrow	(696)	—			(192)		—		—		(192)
Unrealized gain on marketable securities	—	—			—		22,303		—		22,303
Repurchases of shares of Class A common stock including related costs	(32,000,610)	(32)			—		—		(1,931,957)		(1,931,989)
Net change in market value of effective foreign currency forward exchange contracts	—	—			—		1,285		—		1,285
Share of other comprehensive income from equity method investment	—	—			—		188		—		188
Stock-based compensation	—	—			473,876		—		—		473,876
Stock-based compensation - restructuring	—	—			3,178		—		—		3,178
Balance as of September 30, 2024	155,386,309	$	155		$	15,299,179	$	24,395	$	(7,094,862)	$	8,228,867

See accompanying notes to condensed consolidated financial statements.

Table of Contents

TWILIO INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

	Common StockClass A			Additional Paid-In Capital	Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
	(In thousands, except share amounts)
Balance as of June 30, 2023	181,174,616	$	181		$	14,418,946	$	(60,275)	$	(4,382,293)	$	9,976,559
Net loss	—	—			—		—		(141,707)		(141,707)
Exercises of vested stock options	100,000	—			871		—		—		871
Vesting of restricted stock units	1,669,596	2			(2)		—		—		—
Value of equity awards withheld for tax liability	(417)	—			(27)		—		—		(27)
Shares of Class A common stock issued and donated to charity	22,102	—			1,339		—		—		1,339
Unrealized gain on marketable securities	—	—			—		13,921		—		13,921
Repurchases of shares of Class A common stock including related costs	(899,799)	(1)			—		—		(54,962)		(54,963)
Foreign currency translation	—	—			—		5,018		—		5,018
Net change in market value of effective foreign currency forward exchange contracts	—	—			—		(8,626)		—		(8,626)
Share of other comprehensive loss from equity method investment	—	—			—		(2,764)		—		(2,764)
Stock-based compensation	—	—			189,293		—		—		189,293
Stock-based compensation - restructuring	—	—			467		—		—		467
Balance as of September 30, 2023	182,066,098	$	182		$	14,610,887	$	(52,726)	$	(4,578,962)	$	9,979,381

See accompanying notes to condensed consolidated financial statements.

TWILIO INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

	Common StockClass A			Common StockClass B			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount		Shares	Amount
	(In thousands, except share amounts)
Balance as of December 31, 2022	176,358,104	$	174	9,617,605	$	12	$	14,055,853	$	(121,161)	$	(3,375,836)	$	10,559,042
Net loss	—	—		—	—		—		—		(650,033)		(650,033)
Exercises of vested stock options	200,406	—		127,982	—		5,612		—		—		5,612
Vesting of restricted stock units	4,330,342	5		—	—		(5)		—		—		—
Value of equity awards withheld for tax liability	(38,254)	—		—	—		(2,536)		—		—		(2,536)
Conversion of shares of Class B common stock into shares of Class A common stock	9,745,587	12		(9,745,587)	(12)		—		—		—		—
Shares issued under ESPP	579,857	—		—	—		23,337		—		—		23,337
Shares of Class A common stock issued and donated to charity	66,306	—		—	—		3,985		—		—		3,985
Unrealized gain on marketable securities	—	—		—	—		—		53,276		—		53,276
Repurchases of shares of Class A common stock including related costs	(9,176,250)	(9)		—	—		—		—		(553,093)		(553,102)
Foreign currency translation	—	—		—	—		—		5,587		—		5,587
Net change in market value of effective foreign currency forward exchange contracts	—	—		—	—		—		(7,458)		—		(7,458)
Share of other comprehensive income from equity method investment	—	—		—	—		—		17,030		—		17,030
Stock-based compensation	—	—		—	—		513,545		—		—		513,545
Stock-based compensation - restructuring	—	—		—	—		11,096		—		—		11,096
Balance as of September 30, 2023	182,066,098	$	182	—	$	—	$	14,610,887	$	(52,726)	$	(4,578,962)	$	9,979,381

See accompanying notes to condensed consolidated financial statements.

TWILIO INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2024		2023
	2025		2024
CASH FLOWS FROM OPERATING ACTIVITIES:	(In thousands)
Net loss	$	(96,933)	$	(650,033)
Net income (loss)	$	20,017	$	(55,349)
Adjustments to reconcile net loss to net cash provided by operating activities:
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	~~156~~49,~~170~~565		~~218~~53,~~968~~318
Non-cash reduction to the right-of-use asset	145,~~157~~170		215,~~815~~076
Net amortization of investment premium and discount	(184,~~100~~314)		4(6,~~403~~029)
Impairment of long-lived assets	—		34,278
Stock-based compensation	139,273		158,606
Stock-based compensation including restructuring	460,824		509,367
Amortization of deferred commissions	19,265		18,829
Amortization of deferred commissions	56,984		54,428
Provision for doubtful accounts	2,453		6,204
Unrealized loss on equity securities	2,641		9,750
Share of losses from equity method investment	19,471		29,575
Provision for doubtful accounts	18,123		41,454
Other adjustments	5,846		4,996
Share of losses from equity method investment	78,794		93,838
Loss on net assets divested	—		32,277
Impairment of strategic investments	1,470		46,154
Other adjustments	7,673		15,807
Changes in operating assets and liabilities:
Accounts receivable	~~(12~~8,~~646)~~463		~~(69~~15,~~116)~~637
Prepaid expenses and other current assets	33,~~590~~519		~~(56~~16,~~506)~~901
Other long-term assets	(199,~~443~~416)		~~(15~~6,~~367)~~859
Accounts payable	~~(49~~7,~~256)~~853		(237,~~578~~762)
Accrued expenses and other current liabilities	16(94,~~035~~262)		(5912,~~677~~447)
Deferred revenue and customer deposits	(51,~~748~~634)		6(2,~~827~~127)
Operating lease liabilities	(3510,~~391~~306)		(4112,~~446~~470)
Other long-term liabilities	~~(1,149)~~79		~~(2,436)~~306
Net cash provided by operating activities	~~607~~191,~~795~~042		~~192~~190,~~207~~123
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired and payments related to prior period acquisitions	—		(5,770)
Purchases of marketable securities and other investments	(213,844)		(435,590)
Divestitures, net of cash divested	—		38,194
Proceeds from sales and maturities of marketable securities	207,431		638,185
Purchases of marketable securities and other investments	(739,721)		(1,391,975)
Capitalized software development costs	(11,564)		(11,154)
Proceeds from sales and maturities of marketable securities	2,025,267		1,764,841
Purchases of long-lived and intangible assets	(1,163)		(1,671)
Capitalized software development costs	(40,259)		(30,526)
Net cash (used in) provided by investing activities	(19,140)		189,770
Purchases of long-lived and intangible assets	(3,548)		(9,019)
Net cash provided by investing activities	1,241,739		365,745
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt and finance leases	(10,208)		(13,763)
Principal payments on finance leases	(2,251)		(4,832)
Value of equity awards withheld for tax liabilities	(~~1,981~~53)		(21,~~536~~918)
Repurchases of shares of Class A common stock and related costs	(1126,~~914,282~~256)		(~~548~~356,~~871~~900)
Proceeds from exercises of stock options and shares of Class A common stock issued under ESPP	22,669		28,949
Proceeds from exercises of stock options	2,766		421
Net cash used in financing activities	(1125,~~903,802~~794)		(~~536~~363,~~221~~229)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—		108
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	46,108		16,664
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(54,268)		21,839
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period	431,437		655,931
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period	655,931		656,078
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period	$	477,545	$	672,595
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period	$	601,663	$	677,917
Cash paid for income taxes, net	$	5,257	$	10,761
Cash paid for income taxes, net	$	25,225	$	22,916
Cash paid for interest	$	18,791	$	18,893
Cash paid for interest	$	37,842	$	38,216
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONDENSED CONSOLIDATED BALANCE SHEETS
Cash and cash equivalents	$	~~583~~467,~~969~~094	$	~~677~~672,~~917~~595
Restricted cash in other current assets	7,554		—
Restricted cash in other long-term assets	10,451		—
Restricted cash in other long-term assets	10,140		—
Total cash, cash equivalents and restricted cash	$	477,545	$	672,595
Total cash, cash equivalents and restricted cash	$	601,663	$	677,917

See accompanying notes to condensed consolidated financial statements.

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TWILIO INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Description of Business

Twilio Inc. (the “Company”) was incorporated in the state of Delaware on March 13, 2008. Today's leading companies trust Twilio's Customer Engagement Platform to build direct, personalized relationships with their customers everywhere in the world. Twilio enables companies to use communications and data to add intelligence and security to every step of their customers’ journey, from sales to marketing to growth, customer service and many more engagement use cases in a flexible, programmatic way.

The Company’s headquarters are located in San Francisco, California, and the Company has subsidiaries across North America, South America, Europe, Asia and Australia.

2. Summary of Significant Accounting Policies

(a)Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 2726, ~~2024~~2025 (“Annual Report”).

The condensed consolidated balance sheet as of December 31, ~~2023~~2024, included herein, was derived from the audited financial statements as of that date, but may not include all disclosures including certain notes required by U.S. GAAP on an annual reporting basis.

In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive income (loss), stockholders’ equity and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ~~2024~~2025 or any future period.

(b)Principles of Consolidation

The condensed consolidated financial statements include the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

(c)Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are used for, but not limited to, revenue allowances and sales credit reserves; recoverability of long-lived and intangible assets; ~~allocation of goodwill to reporting units; impairment assessments of goodwill and indefinite-lived intangible assets;~~ capitalization and useful life of the Company’s capitalized internal-use software development costs; fair value of acquired intangible assets and goodwill; accruals and contingencies. Estimates are based on historical experience and on various assumptions that the Company believes are reasonable under ~~then~~ current circumstances. However, future events are subject to change and best estimates and judgments may require further adjustments, therefore, actual results could differ materially from those estimates. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation.

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(d)Remaining Performance Obligations

Revenue allocated to remaining performance obligations for contracts with durations of more than one year was $~~148~~169.14 million as of ~~September~~March 3031, ~~2024~~2025, of which 6561% is expected to be recognized over the next 12 months and 9592% is expected to be recognized over the next 24 months.

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(e)Deferred Revenue and Customer Deposits

As of ~~September~~March 3031, ~~2024~~2025, and December 31, ~~2023~~2024, the Company recorded $~~138~~154.80 million and $~~144~~155.57 million, ~~respectively,~~ as its deferred revenue and customer deposits~~. During the three months ended September 30~~, ~~2024 and 2023, the Company recognized $16.3 million and $16.7 million of revenue,~~ respectively, that ~~was~~are included in ~~the~~ deferred revenue and customer deposits ~~balances~~and asother oflong-term liabilities in the ~~end~~accompanying ofcondensed ~~the~~consolidated ~~previous~~balance ~~year~~sheets. During the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025 and ~~2023~~2024, the Company recognized $~~113~~70.71 million and $~~115~~65.34 million of revenue, respectively, that was included in the deferred revenue and customer deposits balances as of the end of the previous year.

(f)Concentration of Credit Risk

Financial instruments that potentially expose the Company to a concentration of credit risk consist primarily of cash, cash equivalents, restricted cash, marketable securities and accounts receivable. The Company maintains cash, ~~cash~~restricted ~~equivalents~~cash, ~~restricted~~ cash equivalents and marketable securities with financial institutions. Certain balances held by such financial institutions exceed insured limits.

The Company sells its services to a wide variety of customers. If the financial condition or results of operations of any significant customer deteriorates substantially, operating results could be adversely affected. To reduce credit risk, management performs credit evaluations of the financial condition of significant customers and periodic re-evaluations, as needed, of existing customers. The Company does not require collateral from its credit customers and maintains reserves for estimated credit losses on customer accounts when considered necessary. Actual credit losses may differ from the Company’s estimates. As of ~~September~~March 3031, ~~2024~~2025, and December 31, ~~2023~~2024, the allowance for doubtful accounts was $26.76 million and $4227.05 million, respectively, and is recorded in accounts receivable, net, in the accompanying condensed consolidated balance sheets.

In the three ~~and nine~~ months ended ~~September~~March 3031, ~~2024~~2025 and ~~2023~~2024, no customer organization accounted for more than 10% of the Company’s total revenue.

As of ~~September~~March 3031, ~~2024~~2025, and December 31, ~~2023~~2024, no customer organization represented more than 10% of the Company’s gross accounts receivable.

(g)~~Restructuring~~Recently ~~Costs~~Issued Accounting Guidance, Not yet Adopted

~~The~~In ~~Company~~December ~~records~~2023, ~~restructuring~~the ~~expenses~~FASB ~~when~~issued ASU 2023-09, “Income Taxes (iTopic 740): ~~management~~Improvements ~~commits~~ to aIncome ~~restructuring~~Tax ~~plan~~Disclosures,” ~~(ii)~~which ~~the~~requires ~~restructuring~~disclosure ~~plan~~of ~~identifies~~disaggregated ~~all~~income ~~significant~~taxes ~~actions~~paid, ~~(iii)~~prescribes standard categories for the ~~period~~components of ~~time~~the toeffective ~~complete~~tax ~~the~~rate ~~restructuring~~reconciliation ~~plan~~and ~~indicates~~modifies ~~that~~other ~~significant~~income ~~changes~~tax torelated ~~the~~disclosures. ~~plan~~ASU ~~are~~2023-09 ~~not~~is ~~likely~~effective for annual periods beginning after December 15, 2024, and ~~(iv)~~may ~~employees~~be ~~who~~applied ~~are~~on ~~impacted~~a ~~have~~prospective ~~been~~basis. ~~notified~~Early ofadoption is permitted. The Company expects to adopt ASU 2023-09 in its consolidated financial statements for the ~~pending~~year ~~involuntary~~ended ~~termination~~December 31, 2025. The adoption will require certain additional disclosure in the notes to the Company’s consolidated financial statements.

~~The~~In ~~Company~~November ~~enacted~~2024, ~~various~~the ~~workforce~~FASB ~~reduction~~issued ~~plans~~ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which requires the disaggregation of certain expenses in ~~2023~~the ~~and~~notes ~~2024.~~of Inthe financial statements to provide enhanced transparency into the ~~nine~~expense ~~months~~captions ~~ended~~presented ~~September 30,~~on the face of the statements of operations. ASU 2024,-03 ~~restructuring~~is ~~charges~~effective ~~incurred~~for annual reporting periods beginning after December 15, ~~cash~~2026, ~~paid~~and interim periods beginning after December 15, 2027, and ~~the~~may ~~estimated~~be ~~remaining~~applied ~~expenses~~either ~~related~~prospectively or retrospectively. Early adoption is permitted. The adoption will require certain additional disclosure in the notes to ~~these~~the ~~plans~~Company’s ~~were~~consolidated ~~not~~financial ~~significant~~statements.

~~(h)Recently Issued Accounting Guidance, Not yet Adopted~~10

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosures. The ASU expands segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of segment profit or loss. It also requires disclosure of the amount and description of the composition of other segment items and interim disclosures of a reportable segment's profit or loss and assets. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with retrospective application required. Early adoption is permitted. The Company expects to adopt ASU 2023-07 upon its effective date. The adoption will require certain additional disclosure in the notes to the Company’s consolidated financial statements.

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In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other income tax related disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 and may be applied on a prospective basis. Early adoption is permitted. The Company expects to adopt ASU 2023-09 upon its effective date. The adoption will require certain additional disclosure in the notes to the Company’s consolidated financial statements.

3. Fair Value Measurements

Financial Assets

The following tables provide the financial assets measured at fair value on a recurring basis:

	AmortizedCost orCarryingValue		GrossUnrealizedGains		GrossUnrealizedLosses Less Than 12 Months		GrossUnrealizedLosses MoreThan12 Months		Fair Value Hierarchy as of ~~September~~March 3031, ~~2024~~2025						AggregateFair Value
									Level 1		Level 2		Level 3
Financial Assets:	(In thousands)
Cash and cash equivalents:
Money market funds	$	~~380~~216,~~767~~560	$	—	$	—	$	—	$	~~380~~216,~~767~~560	$	—	$	—	$	~~380~~216,~~767~~560
Commercial paper	16,~~400~~752		—		—		—		~~1,400~~—		—6,752		—		16,~~400~~752
U.S. Treasury bills	1522,~~969~~995		—		—		—		1522,~~969~~995		—		—		1522,~~969~~995
Total included in cash and cash equivalents	~~398~~246,~~136~~307		—		—		—		~~398~~239,~~136~~555		—6,752		—		~~398~~246,~~136~~307
Marketable securities:
Debt securities:
U.S. Treasury securities	~~354~~370,~~415~~611		31,~~887~~653		—(8)		(7031)		~~358~~372,~~232~~225		—		—		~~358~~372,~~232~~225
Non-U.S. government securities	62,~~643~~909		5630		—		~~(2)~~—		62,~~697~~939		—		—		62,~~697~~939
Corporate debt securities and commercial paper	1,~~730~~594,~~807~~751		179,~~690~~337		(~~1,011~~560)		(~~396~~179)		1321,~~140~~049		1,~~733~~582,~~950~~300		—		1,~~747~~603,~~090~~349
Total debt securities	21,~~091~~968,~~865~~271		2111,~~633~~020		(~~1,011~~568)		(~~468~~210)		~~378~~396,~~069~~213		1,~~733~~582,~~950~~300		—		21,~~112~~978,~~019~~513
Equity securities	2,~~260~~470		—		—		—		2,~~260~~470		—		—		2,~~260~~470
Total marketable securities	21,~~094~~970,~~125~~741		2111,~~633~~020		(~~1,011~~568)		(~~468~~210)		~~380~~398,~~329~~683		1,~~733~~582,~~950~~300		—		21,~~114~~980,~~279~~983
Total financial assets	$	2,~~492~~217,~~261~~048	$	2111,~~633~~020	$	(~~1,011~~568)	$	(~~468~~210)	$	~~778~~638,~~465~~238	$	1,~~733~~589,~~950~~052	$	—	$	2,~~512~~227,~~415~~290

	AmortizedCost orCarryingValue		GrossUnrealizedGains		GrossUnrealizedLosses Less Than 12 Months		GrossUnrealizedLosses MoreThan12 Months			Fair Value Hierarchy as of December 31, ~~2023~~2024						AggregateFair Value
									Level 1	Level 2		Level 3
Financial Assets:	(In thousands)
Cash and cash equivalents:
Money market funds	$	~~408~~207,~~696~~323	$	—	$	—	$	—		$	~~408~~207,~~696~~323	$	—	$	—	$	~~408~~207,~~696~~323
Total included in cash and cash equivalents	408,696		—		—		—			408,696		—		—		408,696
Commercial paper	15,059		—		—		—					15,059				15,059
U.S. Treasury bills	2,748		—		—		—			2,748		—		—		2,748
Total included in cash and cash equivalents	225,130		—		—		—			210,071		15,059		—		225,130
Marketable securities:
Debt securities:
U.S. Treasury securities	~~410~~379,~~665~~846		21,~~162~~243		(7296)		(~~1,665~~55)			~~411~~380,~~155~~738		—		—		~~411~~380,~~155~~738
Non-U.S. government securities	832,~~576~~909		5527		~~(111)~~—		~~(1,209)~~—			822,~~311~~936		—		—		822,~~311~~936
Corporate debt securities and commercial paper	21,~~859~~571,~~071~~944		156,~~366~~415		(101,~~818~~594)		(~~5,922~~557)			16,~~690~~890		21,~~841~~559,~~007~~318		—		21,~~857~~576,~~697~~208
Total debt securities	31,~~353~~954,~~312~~699		177,~~583~~685		(101,~~936~~890)		(~~8,796~~612)			~~510~~400,~~156~~564		21,~~841~~559,~~007~~318		—		31,~~351~~959,~~163~~882
Equity securities	43,~~901~~220		—		—		—			43,~~901~~220		—		—		43,~~901~~220
Total marketable securities	31,~~358~~957,~~213~~919		177,~~583~~685		(101,~~936~~890)		(~~8,796~~612)			~~515~~403,~~057~~784		21,~~841~~559,~~007~~318		—		31,~~356~~963,~~064~~102
Total financial assets	$	32,~~766~~183,~~909~~049	$	177,~~583~~685	$	(101,~~936~~890)	$	(~~8,796~~612)		$	~~923~~613,~~753~~855	$	21,~~841~~574,~~007~~377	$	—	$	32,~~764~~188,~~760~~232

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~~The~~Debt ~~Company’s primary objective when investing excess cash is preservation of capital, hence the Company’s debt securities primarily consist of U.S. Treasury~~ Securities, non-U.S government securities, high credit quality corporate debt securities and commercial paper. Because the Company views its debt securities as available to support current operations, it has classified all available for sale securities as short-term.

~~Interest~~The ~~earned~~Company’s onprimary ~~debt~~objective ~~securities~~when ~~was~~investing ~~$20.1~~excess ~~million~~cash ~~and~~is ~~$70.7~~preservation ~~million~~of incapital, hence the ~~three~~Company’s ~~and~~debt ~~nine~~securities ~~months~~primarily ~~ended~~consist ~~September~~of ~~30,~~U.S. ~~2024,~~Treasury ~~respectively~~securities, ~~and $19~~non-U.3S ~~million~~government ~~and~~securities, ~~$53.2~~high ~~million~~credit inquality ~~the~~corporate ~~three~~debt securities and ~~nine~~commercial ~~months~~paper. ~~ended~~Because ~~September~~the ~~30,~~Company ~~2023,~~views ~~respectively.~~its ~~The~~debt ~~interest~~securities isas ~~recorded~~available asto ~~other~~support ~~income,~~current ~~net~~operations, init ~~the~~has ~~accompanying~~classified ~~condensed~~all ~~consolidated~~available ~~statements~~for ofsale ~~operations~~securities as short-term.

Interest earned on debt securities was $18.9 million and $27.2 million in the three months ended March 31, 2025 and 2024, respectively. The interest is recorded as other income, net, in the accompanying condensed consolidated statements of operations.

The following table summarizes the contractual maturities of debt securities:

As of September 30,

As of December 31,

As of March 31,

As of December 31,

2024

2023

2025

2024

AmortizedCost

AggregateFair Value

AmortizedCost

AggregateFair Value

Financial Assets:

(In thousands)

Less than one year

~~772~~783,~~631~~522

~~773~~785,~~324~~570

1684,~~448,256~~294

1685,~~434,149~~091

One to three years

1,~~319~~184,~~234~~749

1,~~338~~192,~~695~~943

1,~~905~~270,~~056~~405

1,~~917~~274,~~014~~791

Total

21,~~091~~968,~~865~~271

21,~~112~~978,~~019~~513

31,~~353~~954,~~312~~699

31,~~351~~959,~~163~~882

Strategic Investments

As of ~~September~~March 3031, ~~2024~~2025 and December 31, ~~2023~~2024, the Company held strategic investments with a carrying value of $3022.32 million and $3023.75 million, respectively, recorded as other long-term assets in the accompanying condensed consolidated balance sheets. ~~The carrying value of these securities is determined under the measurement alternative on a non-recurring basis and adjusted for observable changes in fair value or impairment.~~ There were no significant impairments or adjustments recorded in the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025 ~~related~~and ~~to these investments. During the nine months ended September 30~~2024, ~~2023, the Company recorded an impairment loss of $46.2 million~~ related to ~~one of~~ these ~~investments in other income (expenses), net, in the accompanying condensed consolidated statement of operations~~securities.

Financial Liabilities

The Company’s financial liabilities that are measured at fair value on a recurring basis consist of foreign currency derivative liabilities and are classified as Level 2 financial instruments in the fair value hierarchy. As of ~~September~~March 3031, ~~2024~~2025 and December 31, ~~2023~~2024, the aggregate fair value of these liabilities and the associated unrealized losses were not significant.

The Company’s financial liabilities that are not measured at fair value on a recurring basis are its Senior Notes due 2029 (“2029 Notes”) and its Senior Notes due 2031 (“2031 Notes”). As of ~~September~~March 3031, ~~2024~~2025, the fair values of the 2029 Notes and 2031 Notes were $~~467~~465.05 million and $~~462~~451.4 million, respectively. As of December 31, ~~2023~~2024, the fair values of the 2029 Notes and 2031 Notes were $~~462~~464.49 million and $~~452~~453.39 million, respectively.

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4. Property and Equipment

Property and equipment ~~consisted~~consist of the following:

As of September 30,

As of December 31,

As of March 31,

As of December 31,

2024

2023

2025

2024

(In thousands)

Capitalized internal-use software developments costs

~~349~~370,~~038~~727

~~297~~357,~~655~~334

Data center equipment (1)

~~104~~58,~~583~~588

~~104~~63,~~543~~672

Leasehold improvements

9278,~~148~~100

9278,~~315~~104

Office equipment

5750,~~983~~859

6050,~~905~~659

Furniture and fixtures

1412,~~562~~618

1412,~~558~~618

Software

14,~~639~~143

Total property and equipment

~~632~~585,~~953~~035

~~584~~576,~~615~~530

Less: accumulated depreciation and amortization (1)

(~~438~~401,~~276~~422)

(~~374~~385,~~976~~488)

Total property and equipment, net

~~194~~183,~~677~~613

~~209~~191,~~639~~042

____________________________________

(1) Data center equipment ~~contains~~includes $7228.43 million and $33.5 million in assets held under finance leases as of ~~September~~March 3031, ~~2024~~2025, and December 31, ~~2023~~2024, respectively. Accumulated depreciation and amortization includes $6525.5 million and $5528.96 million of accumulated depreciation for assets held under finance leases as of ~~September~~March 3031, ~~2024~~2025, and December 31, ~~2023~~2024, respectively.

Depreciation and amortization expense was $2221.89 million and $23.28 million in the three months ended ~~September~~March 3031, ~~2024~~2025 and ~~2023, respectively, and $70.0 million and $67.5 million in the nine months ended September 30,~~ 2024 ~~and 2023~~, respectively.

The Company capitalized $2016.02 million and $1416.71 million in internal‑use software development costs in the three months ended ~~September~~March 3031, ~~2024~~2025 and ~~2023, respectively, and $56.5 million and $43.7 million in the nine months ended September 30,~~ 2024 ~~and 2023~~, respectively.

5. ~~Divestitures~~Segment Reporting

~~There~~As ~~were~~of noMarch 31, ~~divestitures~~2025, in the ~~three~~Company had two operating and ~~nine~~reportable ~~months~~segments: ~~ended~~Twilio ~~September~~Communications ~~30,~~(“Communications”) ~~2024~~and Twilio Segment (“Segment”).

InTwilio ~~the~~Communications: ~~three~~The ~~months~~Communications ~~ended~~segment ~~September~~consists ~~30, 2023, the Company completed the sale~~ of ~~its ValueFirst business, which operated an enterprise communications platform in India, for~~ a ~~total~~variety ~~cash sales price~~ of ~~$45.5 million,~~application orprogramming ~~$38.2 million~~interfaces in(“APIs”) ~~proceeds,~~and ~~net~~software ofsolutions ~~cash~~to ~~divested.~~optimize Ascommunications ~~part~~between ofTwilio ~~the~~customers ~~transaction, the Company divested $17.4 million of tangible net assets, $17.3 million of intangible assets~~ and ~~$34.6 million~~their ofend ~~goodwill~~users. The ~~sale~~key ~~resulted~~products infrom awhich ~~loss of $28.8 million. The loss was recorded within general and administrative expenses in~~ the ~~accompanying~~segment ~~condensed~~derives ~~consolidated~~its ~~statement~~revenue ofare ~~operations for the nine months ended September 30~~Messaging, ~~2023.~~Voice ~~No other significant divestitures were completed in the three~~ and ~~nine months ended September 30, 2023~~Email.

6.Twilio Segment: ~~Reporting~~The Segment segment consists of software products that enable businesses to achieve more effective customer engagement by providing the tools necessary for customers to build direct, personalized relationships with their end users. The key product from which the segment derives its revenue is Segment.

AsThe Company’s Chief Executive Officer, who is also the Chief Operating Decision Maker (“CODM”), reviews the operating results by segment using non-GAAP income (loss) from operations as the measure of ~~September~~segment profitability. The CODM uses this measure of segment profitability to allocate resources and assess performance of each segment by comparing each segment’s actual results to the comparable results in prior periods and to any internally or externally set expectations. Presented below is the discrete financial information by reportable segment for the three months ended March 3031, 2025 and 2024, that reflects management’s current view of the ~~Company~~business ~~had~~and ~~two~~that is regularly provided to the CODM. Asset information is not reviewed by the CODM on a segment basis. Revenue, costs of revenue and operating expenses are generally directly attributable to each segment. Certain costs of revenue and ~~reportable~~operating expenses are allocated based on methodologies that best reflect the patterns of consumption of these costs. Corporate costs are not allocated to operating segments:. ~~Twilio~~Corporate ~~Communications~~costs ~~(“Communications”)~~consist of costs that support company-wide processes, are managed on the company-wide level, and ~~Twilio~~include ~~Segment~~costs ~~(“Segment”)~~related to corporate governance and communication, global brand awareness, information security, and certain legal, human resources, finance and accounting expenses. In addition to corporate costs, cost of revenue and operating expenses not allocated to operating segments include stock-based compensation, amortization of acquired intangibles, payroll taxes related to stock-based compensation, charitable contributions and restructuring costs.

Twilio Communications: The Communications reportable segment consists of a variety of application programming interfaces (“APIs”) and software solutions to optimize communications between Twilio customers and their end users. The key products from which the segment derives its revenue are Messaging, Voice, and Email and Marketing Campaigns.13

Twilio Segment: The Segment reportable segment consists of software products that enable businesses to achieve more effective customer engagement by providing the tools necessary for customers to build direct, personalized relationships with their end users. The key product from which the segment derives its revenue is Segment.

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Presented below is the discrete financial information by reportable segment for the three and nine months ended September 30, 2024 and 2023, that is regularly reviewed by the CODM for performance assessment and resource allocation decisions. Prior period amounts were reclassified to conform to the current period’s presentation. Asset information is not presented below since it is not reviewed by the CODM on a segment by segment basis. Revenue, costs of revenue and operating expenses are generally directly attributable to each segment. Certain costs of revenue and operating expenses are allocated based on methodologies that best reflect the patterns of consumption of these costs. Corporate costs consist of costs that support company-wide processes and are managed on the company-wide level, and include costs related to corporate governance and communication, global brand awareness, information security, and certain legal, human resources, finance and accounting expenses.


	Three Months Ended March 31, 2025
	Communications		Segment		Total
	(In thousands)
Revenue	$	1,096,806	$	75,657	$	1,172,463
Cost of revenue attributable to segments	550,780		19,681		570,461
Operating expenses attributable to segments	268,564		57,494		326,058
Segment non-GAAP income (loss) from operations	$	277,462	$	(1,518)	$	275,944

Reconciliation of total segment non-GAAP income from operations to income from operations:
Total segment non-GAAP income from operations					$	275,944
Corporate costs not allocated to segments					(62,536)
Stock-based compensation					(137,520)
Amortization of acquired intangibles					(27,139)


Payroll taxes related to stock-based compensation					(11,200)
Charitable contributions					(2,776)
Restructuring costs					(11,691)

Income from operations					23,082
Other income, net					3,502
Income before provision for income taxes					$	26,584

		Three Months EndedSeptember 30,				Nine Months EndedSeptember 30,
		Three Months Ended March 31, 2024
		2024		2023		2024		2023
		Communications		Segment		Total
	~~(In thousands)~~	(In thousands)
Revenue:
Revenue		$	972,005	$	75,045	$	1,047,050
Communications		$	1,060,250	$	960,289	$	3,039,558	$	2,857,772
Cost of revenue attributable to segments		464,299		16,792		481,091
Segment		73,399		73,381		223,643		220,223
Operating expenses attributable to segments		258,696		79,247		337,943
Total		$	1,133,649	$	1,033,670	$	3,263,201	$	3,077,995
Segment non-GAAP income (loss) from operations		$	249,010	$	(20,994)	$	228,016
Non-GAAP income (loss) from operations:
Reconciliation of total segment non-GAAP income from operations to loss from operations:
Communications		$	267,773	$	220,610	$	766,713	$	593,599
Total segment non-GAAP income from operations						$	228,016
Segment		(15,805)		(17,740)		(52,613)		(53,937)
Corporate costs not allocated to segments						(68,406)
Corporate costs		(69,550)		(66,436)		(196,753)		(179,294)
Stock-based compensation						(156,158)
Total		$	182,418	$	136,434	$	517,347	$	360,368
Amortization of acquired intangibles						(28,939)
Reconciliation of non-GAAP income from operations to loss from operations:
Payroll taxes related to stock-based compensation						(6,776)
Total non-GAAP income from operations		$	182,418	$	136,434	$	517,347	$	360,368
Charitable contributions						(1,295)
Stock-based compensation		(153,831)		(185,007)		(457,646)		(498,271)
Restructuring costs						(9,946)
Amortization of acquired intangibles		(27,437)		(48,872)		(84,560)		(149,836)
Loss from operations						(43,504)
Acquisition and divestiture related expenses		—		(183)		—		(5,515)
Other expenses, net						(1,657)
Loss on net assets held for sale		—		—		—		(32,277)
Loss before provision for income taxes						$	(45,161)
Payroll taxes related to stock-based compensation		(1,049)		(3,337)		(11,335)		(10,739)
Charitable contributions		(1,301)		(1,339)		(17,911)		(3,985)
Restructuring costs		(3,694)		(3,437)		(13,330)		(140,281)
Impairment of long-lived assets		—		(3,162)		—		(34,278)
Loss from operations		(4,894)		(108,903)		(67,435)		(514,814)
Other income (expenses), net		1,243		(31,057)		(7,620)		(122,261)
Loss before provision for income taxes		$	(3,651)	$	(139,960)	$	(75,055)	$	(637,075)

Depreciation and amortization expenses, except for amortization of acquired intangibles, that are included in non-GAAP income from operations for the Communications reportable segment were $16.7 million and $19.3 million ~~Derivatives~~in the three months ended March 31, 2025 and ~~Hedging~~2024, respectively. Amortization of deferred commissions included in non-GAAP income from operations for the Communications reportable segment was $15.2 million in each of the three months ended March 31, 2025 and 2024, respectively.

AsDepreciation ofand ~~September 30,~~amortization ~~2024~~expenses, ~~the~~except ~~Company~~for ~~had~~amortization ~~outstanding~~of ~~foreign~~acquired ~~currency~~intangibles, ~~forward~~that ~~contracts~~are ~~designated~~included asin ~~cash~~non-GAAP ~~flow~~loss ~~hedges~~from ~~with~~operations afor ~~total~~the ~~sell~~Segment ~~notional~~reportable ~~value~~segment ofwere $~~200~~4.6 9 million and $4.1 million ~~The~~in ~~notional~~the ~~value~~three ~~represents~~months ~~the~~ended ~~amount~~March ~~that~~31, ~~will~~2025 beand ~~sold~~2024, ~~upon~~respectively. ~~maturity~~Amortization of ~~the~~deferred ~~forward~~commissions ~~contract.~~included Asin ofnon-GAAP ~~September 30,~~loss ~~2024,~~from ~~these~~operations ~~contracts~~for ~~had~~the ~~maturities~~Segment ofreportable upsegment towas ~~16 months~~$4.0 million ~~Gains~~ and ~~losses~~$3.6 million ~~associated~~in ~~with~~the ~~these~~three ~~foreign~~months ~~currency~~ended ~~forward~~March ~~contracts~~31, ~~were~~2025 ~~not~~and ~~significant~~2024, respectively.

The Company is subject to master netting agreements with certain counterparties of the foreign exchange contracts, under which it is permitted to net settle transactions of the same currency with a single net amount payable by one party to the other. It is the Company’s policy to present the derivatives at gross in its condensed consolidated balance sheets. The Company’s foreign currency forward contracts are not subject to any credit contingent features or collateral requirements. The Company manages its exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and by actively monitoring its outstanding positions. As of September 30, 2024, the Company did not have any offsetting arrangements. 14

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86. ~~Goodwill~~Derivatives and ~~Intangible Assets~~Hedging

As of March 31, 2025, the Company had outstanding foreign currency forward contracts designated as cash flow hedges with a total sell notional value of $218.7 million. The notional value represents the amount that will be sold upon maturity of the forward contract. As of March 31, 2025, these contracts had maturities of up to seventeen months. Gains and losses associated with these foreign currency forward contracts were not significant.

The Company is subject to master netting agreements with certain counterparties of the foreign exchange contracts, under which it is permitted to net settle transactions of the same currency with a single net amount payable by one party to the other. It is the Company’s policy to present the derivatives at gross in its condensed consolidated balance sheets. The Company’s foreign currency forward contracts are not subject to any credit contingent features or collateral requirements. The Company manages its exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and by actively monitoring its outstanding positions. As of March 31, 2025, the Company did not have any offsetting arrangements.

7. Goodwill and Intangible Assets

Goodwill

As of ~~September~~March 3031, ~~2024~~2025 and December 31, ~~2023~~2024, the balance of the Company’s goodwill was $5.2 billion, of which $4.9 billion related to the Communications reportable segment and $306.1 million related to the Segment reportable segment. There was no goodwill activity during the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025.

Intangible assets

Intangible assets ~~consisted~~consist of the following:

	As of September 30, 2024
	As of March 31, 2025
	Cost		Accumulated Amortization		Net
Amortizable intangible assets:	(In thousands)
Developed technology	$	388,341	$	(~~292~~319,~~649~~476)	$	9568,~~692~~865
Customer relationships	348,314		(~~204~~226,~~186~~709)		~~144~~121,~~128~~605
Supplier relationships	49,756		(3337,~~092~~633)		1612,~~664~~123
Trade names	25,968		(2425,~~744~~284)		~~1,224~~684
Order backlog	10,000		(10,000)		—
Patent	3,968		(1,145)		2,823
Patent	3,968		(1,050)		2,918
Total amortizable intangible assets	816,347		(610,247)		206,100
Total amortizable intangible assets	826,347		(565,721)		260,626
Non-amortizable intangible assets:
Telecommunication licenses	4,920		—		4,920
Trademarks and other	295		—		295
Total	$	~~831~~821,562	$	(~~565~~610,~~721~~247)	$	~~265~~211,~~841~~315

	As of December 31, 2023
	Cost		Accumulated Amortization		Net
Amortizable intangible assets:	(In thousands)
Developed technology	$	397,473	$	(259,635)	$	137,838
Customer relationships	349,074		(170,511)		178,563
Supplier relationships	49,756		(26,316)		23,440
Trade names	25,968		(23,600)		2,368
Order backlog	10,000		(10,000)		—
Patent	3,968		(902)		3,066
Total amortizable intangible assets	836,239		(490,964)		345,275
Non-amortizable intangible assets:
Telecommunication licenses	4,920		—		4,920
Trademarks and other	295		—		295
Total	$	841,454	$	(490,964)	$	350,490

Amortization expense was $27.5 million and $48.9 million for the three months ended September 30, 2024 and 2023, respectively, and $84.7 million and $150.0 million for the nine months ended September 30, 2024 and 2023, respectively.

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	As of December 31, 2024
	Cost		Accumulated Amortization		Net
Amortizable intangible assets:	(In thousands)
Developed technology	$	388,341	$	(306,063)	$	82,278
Customer relationships	348,314		(215,523)		132,791
Supplier relationships	49,756		(35,363)		14,393
Trade names	25,968		(25,014)		954

Patent	3,968		(1,096)		2,872
Total amortizable intangible assets	816,347		(583,059)		233,288
Non-amortizable intangible assets:
Telecommunication licenses	4,920		—		4,920
Trademarks and other	295		—		295
Total	$	821,562	$	(583,059)	$	238,503

Amortization expense was $27.2 million and $29.0 million for the three months ended March 31, 2025 and 2024, respectively.

Total estimated future amortization expense is as follows:

	As of September 30, 2024
	As of March 31, 2025
Year Ended December 31,	(In thousands)
2024 (remaining three months)	$	27,393
2025 (remaining nine months)	$	80,674
2025	107,862
2026	42,149
2027	25,330
2028	19,055
Thereafter	38,837
2029	14,970
Total	$	260,626
Thereafter	23,922
Total	$	206,100

98. ~~Accrued~~Balance ~~Expenses~~Sheet ~~and Other Current Liabilities~~Components

Prepaid expenses and other current assets consist of the following:

Accrued expenses and other current liabilities consisted of the following:


	As of March 31,		As of	As of December 31,
	2025			2024
	(In thousands)
Prepaid expenses	$	321,312		$	333,911
Other current assets	120,843			140,449
Total prepaid expenses and other current assets	$	442,155		$	474,360

	As of September 30,		As of December 31,
	2024		2023
	(In thousands)
Accrued payroll and related	$	63,660	$	77,593
Corporate bonus program accrual	70,182		—
Accrued commission	18,024		17,345
Accrued cost of revenue	164,472		155,721
Sales and other taxes payable	73,408		70,913
ESPP contributions	11,205		6,130
Finance lease liability	2,678		8,489
Restructuring liability	1,606		29,086
Share repurchase costs payable	8,002		3,526
Accrued other expense	39,106		55,508
Total accrued expenses and other current liabilities	$	452,343	$	424,311

10. Long-Term Debt

Long-term debt, net, consisted of the following:

	As of September 30,		As of December 31,
	2024		2023
	(In thousands)
2029 Senior Notes
Principal	$	500,000	$	500,000
Unamortized discount	(3,710)		(4,274)
Unamortized issuance costs	(835)		(962)
Net carrying amount	495,455		494,764
2031 Senior Notes
Principal	500,000		500,000
Unamortized discount	(4,312)		(4,744)
Unamortized issuance costs	(970)		(1,067)
Net carrying amount	494,718		494,189
Total long-term debt, net	$	990,173	$	988,953

As of September 30, 2024, the Company was in compliance with all of its covenants under the related indentures.

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~~11.~~Accrued ~~Revenue~~expenses byand ~~Geographic~~other ~~Area~~current liabilities consist of the following:


	As of March 31,		As of December 31,
	2025		2024
	(In thousands)
Accrued payroll and related	$	56,733	$	76,708
Company-wide bonus program liability	25,386		109,776
Accrued sales bonus and commissions	22,265		21,585
Accrued cost of revenue	173,372		173,739
Sales and other taxes payable	81,047		79,731
ESPP contributions	16,935		5,745





Accrued other expense	56,562		63,402
Total accrued expenses and other current liabilities	$	432,300	$	530,686

9. Long-Term Debt

Long-term debt, net, consists of the following:


	As of March 31,		As of December 31,
	2025		2024
	(In thousands)
2029 Senior Notes
Principal	$	500,000	$	500,000
Unamortized discount	(3,325)		(3,518)
Unamortized issuance costs	(748)		(792)
Net carrying amount	495,927		495,690
2031 Senior Notes
Principal	500,000		500,000
Unamortized discount	(4,017)		(4,166)
Unamortized issuance costs	(904)		(937)
Net carrying amount	495,079		494,897
Total long-term debt, net	$	991,006	$	990,587

As of March 31, 2025, the Company was in compliance with all of its covenants under the related indentures.

10. Revenue by Geographic Area

Revenue by geographic area is based on the IP address or the mailing address of the customer at the time of registration. The following table sets forth revenue by geographic area:

	Three Months EndedSeptember 30,				Nine Months EndedSeptember 30,
	Three Months EndedMarch 31,
	2024		2023		2024		2023
	2025		2024
Revenue by geographic area:	(In thousands)
United States	$	~~734~~749,~~874~~440	$	~~688~~686,~~121~~527	$	~~2,127,852~~	$	~~2,042,857~~
International	~~398~~423,~~775~~023		~~345~~360,~~549~~523		~~1,135,349~~		~~1,035,138~~
Total	$	1,~~133~~172,~~649~~463	$	1,~~033~~047,~~670~~050	$	~~3,263,201~~	$	~~3,077,995~~

Percentage of revenue by geographic area:
United States	6564	%	6766	%	65	%	66	%
International	3536	%	3334	%	35	%	34	%

~~12. Commitments and Contingencies~~ 17

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11. Commitments and Contingencies

(a)Lease and Other Commitments

The Company ~~has~~leases ~~entered~~its ~~into~~facilities under various non-cancelable operating lease agreements ~~for its facilities~~. In the three ~~and nine~~ months ended ~~September~~March 3031, ~~2024~~2025, the Company did not enter into any significant new lease agreements.

The Company has non-cancelable contractual commitments with its cloud infrastructure provider, network service providers and other vendors. In the three ~~and nine~~ months ended ~~September~~March 3031, ~~2024~~2025, the Company entered into several ~~such~~new agreements with terms up to ~~four~~three years for a total purchase commitment of $1418.43 million ~~and $55~~.~~2 million, respectively.~~

(b)Legal Matters

From time to time, the Company may be subject to legal actions, claims, and government investigations or inquiries arising in the ordinary course of business. These matters may include, but are not limited to, matters involving privacy, data protection, data security, intellectual property, competition, telecommunications, consumer protection, taxation, securities, employment and contractual rights. While the Company currently believes that the final outcomes of these matters will not have a material adverse effect on its business, the results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

The Company accrues for contingencies when it believes that a loss is probable and that it can be reasonably estimated. To the extent there is a reasonable possibility that a loss may be incurred that is in excess of ~~the~~ amounts already recognized and such additional loss amount may be material, the Company either discloses the estimated additional loss amount or states that such an estimate cannot be made. Significant judgment is required to determine the probability of a loss and to estimate the amount of any probable loss.

Legal fees and other costs related to litigation and other legal proceedings are expensed as incurred and are included in general and administrative expenses in the accompanying condensed consolidated statements of operations.

(c)Indemnification Agreements

In the ordinary course of business and in connection with its financing and business combination transactions, the Company enters into contractual arrangements under which it agrees to provide indemnification of varying scope and terms to business partners, customers and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties and other liabilities relating to or arising from the Company’s products or its acts or omissions.

The Company has also signed indemnification agreements with all of its board members and executive officers and certain employees that may require the Company to indemnify them for certain events in connection with their services to the Company or its direct or indirect subsidiaries.

19As of March 31, 2025, and December 31, 2024, no amounts were accrued related to any outstanding indemnification agreements.

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As of September 30, 2024, and December 31, 2023, no amounts were accrued related to any outstanding indemnification agreements.

(d)Other Taxes

The Company conducts operations in ~~multiple~~many tax jurisdictions within and outside of the United States. In many of these jurisdictions, non-income-based taxes, such as sales, use, telecommunications and other local taxes are assessed on the Company’s operations. The Company carries reserves for certain of its non-income-based tax exposures in certain jurisdictions when it is both probable that a liability was incurred and the amount of the exposure can be reasonably estimated. These reserves are based on estimates which include several key assumptions including, but not limited to, the taxability of the Company’s services, the jurisdictions in which ~~its~~ management believes it had nexus and the sourcing of revenues to those jurisdictions.

The Company continues to remain in discussions with certain jurisdictions regarding its prior sales and other taxes that it may owe. In the event any of these jurisdictions disagree with management’s assumptions and analysis, the assessment of the Company’s tax exposure could differ materially from management’s current estimates.

~~As of September 30, 2024, the liabilities recorded for the non-income-based taxes were $~~18.5 million for domestic jurisdictions and $19.7 million for jurisdictions outside of the United States. As of December 31, 2023, these liabilities were $18.0 million and $22.2 million, respectively.

~~13.~~Table ~~Stockholders'~~of ~~Equity~~Contents

As of March 31, 2025, the liabilities accrued for non-income-based taxes were $19.4 million for domestic jurisdictions and $22.8 million for jurisdictions outside of the United States. As of December 31, 2024, these liabilities were $19.3 million and $22.0 million, respectively.

12. Stockholders' Equity

Preferred Stock

As of ~~September~~March 3031, ~~2024~~2025, and December 31, ~~2023~~2024, the Company had authorized 100,000,000 shares of preferred stock, par value $0.001, of which no shares were issued and outstanding in either period.

Common Stock

As of ~~September~~March 3031, 2025 and December 31, 2024, the Company had authorized 1,000,000,000 shares of Class A common stock and 3,170,181 shares of Class B common stock, each with a par value of $0.001 per share. As of ~~September~~March 3031, 2025 and December 31, 2024, ~~155~~153,~~386~~254,~~309~~342 and 152,610,697 shares of Class A common stock, respectively, and no shares of Class B common stock were issued and outstanding.

As of December 31, 2023, the Company had authorized 1,000,000,000 shares of Class A common stock and 3,170,181 shares of Class B common stock, each with a par value of $0.001 per share. As of December 31, 2023, 181,945,771 shares of Class A common stock and no shares of Class B common stock were issued and outstanding.

The Company had reserved shares of common stock for issuance as follows:

As of September 30,

As of December 31,

As of March 31,

As of December 31,

2024

2023

2025

2024

Stock options issued and outstanding

1,~~392~~190,~~697~~661

1,~~722~~322,~~861~~176

Unvested restricted stock units issued and outstanding

2015,~~265~~963,~~865~~772

18,~~755~~386,~~538~~271

Shares of Class A common stock reserved for Twilio.org

~~375~~331,~~735~~531

~~442~~353,~~041~~633

Stock-based awards available for grant under 2016 Plan

2331,~~045~~234,~~368~~619

1923,~~869~~292,~~260~~678

Shares of Class A common stock reserved for issuance pursuant to ESPP

911,~~947~~235,~~222~~432

89,~~541~~709,~~701~~326

Total

5559,~~026~~956,~~887~~015

4953,~~331~~064,~~401~~084

20Share Repurchase Program

In January 2025, the board of directors of the Company authorized a share repurchase program to repurchase up to $2.0 billion in aggregate value of the Company’s outstanding Class A common stock. Repurchases under this program can be made through open market, private transactions or other means, in compliance with applicable federal securities laws, and can include repurchases pursuant to Rule 10b5-1 trading plans. The Company has discretion in determining the conditions under which shares may be repurchased from time to time. The program expires on December 31, 2027. The Company’s previous share repurchase authorizations expired on December 31, 2024.

In the three months ended March 31, 2025 and 2024, the Company repurchased 1.2 million and 6.1 million shares of its Class A common stock, respectively, for an aggregate purchase price of $130.2 million and $384.3 million, respectively. As of March 31, 2025, approximately $1.9 billion of the amount originally authorized for share repurchases in January 2025 remained available for future repurchases.

13. Stock-Based Compensation

The Company’s 2016 Stock Option and Incentive Plan (the “2016 Plan”) provides for the grant of stock options, restricted stock units, restricted stock awards, stock appreciation rights, unrestricted stock awards, performance share awards, dividend equivalent rights and cash-based awards by the Company to its employees, directors and consultants. Certain of the Company’s outstanding equity awards were granted under equity incentive plans that are no longer active but continue to govern the outstanding equity awards granted thereunder.

In the first quarter of 2025, the Company granted to certain of its executive employees performance-based restricted stock units (“PSUs”) covering 185,899 shares of Class A common stock that had an aggregate grant date fair value of $27.1 million. The PSUs will vest if certain operational performance or market conditions, as defined in the grant agreements, are met during the performance achievement period, which expires on December 31, 2027. The fair value of the portion of the PSUs with an operational performance target equals the closing price of the Company’s Class A common stock on the date of grant. For this portion, the expense is recognized on a straight-line basis and only if it is probable that the performance target will be achieved during the performance period. The probability of achievement is assessed each reporting period and

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~~Share~~cumulative ~~Repurchase~~adjustments ~~Programs~~are recorded in the period in which the probability assessment changes. The fair value of the portion of the PSUs with market conditions was determined using a Monte-Carlo simulation model, and the expense is recognized on a straight-line basis over the performance achievement period. At the end of the vesting period, the number of shares actually issued may range from 0% to 200% of the target based on levels of performance.

In February 2023, the board of directors of the Company authorized a repurchase of up to $1.0 billion in aggregate value of its outstanding Class A common stock through a share repurchase program. In March 2024, the board of directors of the Company authorized a second share repurchase program for an additional $2.0 billion in aggregate value of its outstanding Class A common stock. Repurchases under these programs can be made through open market, private transactions or other means, in compliance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans. The Company has discretion in determining the conditions under which shares may be repurchased from time to time. Both programs expire on December 31, 2024.

In the three months ended September 30, 2024 and 2023, the Company repurchased 10.6 million and 0.9 million shares of its Class A common stock, respectively, for an aggregate purchase price of $633.0 million and $56.0 million, respectively. In the nine months ended September 30, 2024 and 2023, the Company repurchased 32.0 million and 9.2 million shares of its Class A common stock, respectively, for an aggregate purchase price of $1.9 billion and $551.0 million, respectively. As of September 30, 2024, approximately $412.0 million of the aggregate amount authorized under the stock repurchase programs remained available for future repurchases.

14. Stock-Based Compensation

The Company’s 2016 Stock Option and Incentive Plan (the “2016 Plan”) provides for granting stock options, restricted stock units, restricted stock awards, stock appreciation rights, unrestricted stock awards, performance share awards, dividend equivalent rights and cash-based awards to its employees, directors and consultants. Certain of the Company’s outstanding equity awards were granted under equity incentive plans that are no longer active but continue to govern the outstanding equity awards granted thereunder.

In the second quarter of 2024, the Company granted certain of its executive employees performance-based restricted stock units (“PSUs”) covering 516,626 shares of Class A common stock that had an aggregate grant date fair value of $34.5 million. The PSUs will vest if certain operational performance or market conditions, as defined in the grant agreements, are met during the performance achievement period, which expires on December 31, 2026. The fair value of the portion of the PSUs with an operational performance target equals the closing price of the Company’s Class A common stock on the date of grant. The expense is recognized on a straight-line basis and only if it is probable that the performance target will be achieved during the performance period. The probability of achievement is assessed each reporting period and adjustments are recorded accordingly. The fair value of the portion of the PSUs with market conditions was determined using a Monte-Carlo simulation model and the expense is recognized on a straight-line basis over the performance achievement period. At the end of the vesting period the number of shares actually issued may range from 0% to 200% of the target based on levels of performance.

In addition, pursuant to the Company’s 2016 Employee Stock Purchase Plan (“ESPP”), eligible employees may purchase shares of the Company’s Class A common stock at a discount of 15% through payroll deductions of their eligible compensation. The ESPP provides for separate six-month offering periods beginning in May and November of each year.

As of ~~September~~March 3031, ~~2024~~2025, total unrecognized compensation cost related to unvested restricted stock units (“RSUs”) was $1.41 billion which will be amortized over a weighted-average period of 2.74 years. As of ~~September~~March 3031, ~~2024~~2025, total unrecognized compensation cost related to unvested stock options and the ESPP was not significant.

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Stock-Based Compensation Expense

The Company recorded total stock-based compensation expense as follows:


	Three Months Ended March 31,
	2025		2024
	(In thousands)
Cost of revenue	$	4,271	$	5,891
Research and development	78,066		83,560
Sales and marketing	31,359		34,866
General and administrative	25,577		34,289

Total	$	139,273	$	158,606

	Three Months EndedSeptember 30,				Nine Months EndedSeptember 30,
	2024		2023		2024		2023
	(In thousands)
Cost of revenue	$	5,436	$	7,053	$	16,830	$	18,677
Research and development	84,787		94,085		246,926		246,754
Sales and marketing	33,560		51,345		101,664		142,343
General and administrative	30,048		32,524		92,226		90,497
Restructuring costs	730		467		3,178		11,096
Total	$	154,561	$	185,474	$	460,824	$	509,367

14. Net Income (Loss) Per Share Attributable to Common Stockholders

~~15.~~The ~~Net~~Company ~~Loss~~computes ~~Per~~net income (loss) per share in accordance with ASC 260 “Earnings per Share”. ~~Attributable~~Basic net income (loss) per share attributable to ~~Common~~common ~~Stockholders~~stockholders is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share gives effect to all dilutive potential common shares outstanding during the period, such as stock options, RSUs, including PSUs, and shares partially paid for under ESPP, using the treasury stock method; PSUs follow the contingently issuable shares guidance. Diluted net income (loss) per share excludes all dilutive potential common shares if their effect is anti-dilutive.

The following table sets forth the calculation of basic and diluted net income (loss) per share attributable to common stockholders during the periods presented:

	Three Months EndedSeptember 30,				Nine Months EndedSeptember 30,
	Three Months EndedMarch 31,
	2024		2023		2024		2023
	2025		2024
Net loss attributable to common stockholders (in thousands)	$	(9,726)	$	(141,707)	$	(96,933)	$	(650,033)
Numerator:
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted	159,091,110		181,749,309		170,063,452		183,854,526
Net income (loss) attributable to common stockholders (in thousands)	$	20,017	$	(55,349)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.06)	$	(0.78)	$	(0.57)	$	(3.54)
Denominator:
Weighted-average shares outstanding, basic	153,345,192		181,017,726
Dilutive effect of outstanding stock options, RSUs and stock committed under ESPP	8,449,095		—
Weighted-average shares outstanding, diluted	161,794,287		181,017,726
Net income (loss) per share attributable to common stockholders:
Basic	$	0.13	$	(0.31)
Diluted	$	0.12	$	(0.31)

The following outstanding shares of common stock equivalents were excluded from the calculation of the diluted net loss per share attributable to common stockholders because their effect would have been anti-dilutive:20

	As of September 30,
	2024	2023
Stock options issued and outstanding	1,392,697	1,778,852
Unvested restricted stock units issued and outstanding	20,265,865	20,263,588
Shares of Class A common stock reserved for Twilio.org	375,735	464,143
Shares of Class A common stock committed under ESPP	240,905	350,270
Shares of Class A common stock in escrow	—	31,503
Shares of Class A common stock in escrow and restricted stock awards subject to future vesting	—	3,771
Total	22,275,202	22,892,127

16. Income Taxes

The Company has historically computed its provision for income taxes for interim periods using a forecasted annual effective tax rate (“AETR”) based on anticipated annual pretax income or loss, which was adjusted for discrete items recorded in the period. However, due to the level of forecasted provision for income taxes relative to the forecasted pre-tax income used in computing the effective tax rate, the effective tax rate is highly sensitive to fluctuations in pre-tax income and does not provide a reasonable estimate for income taxes in the interim period. As such, the Company computed its provision for income taxes based on the year-to-date actual effective tax rate for the three and nine months ended September 30, 2024. The Company plans to revert to applying a forecasted annual effective tax rate to year-to-date earnings and adjusting for discrete items once that method produces more reasonable results. The primary difference between the Company’s effective tax rate and the federal statutory rate is the full valuation allowance the Company has established on its federal, state and certain foreign net operating losses and credits.

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The ~~provision~~following ~~for~~outstanding ~~income~~shares ~~taxes recorded in the three months ended September 30, 2024 consists primarily~~ of ~~federal,~~common ~~state~~stock ~~and~~equivalents ~~foreign~~were ~~income~~excluded ~~taxes~~from ~~and withholding taxes in foreign jurisdictions in which~~ the ~~Company~~calculation ~~conducts~~of ~~business. The provision for income taxes recorded in~~ the ~~nine~~diluted ~~months~~net ~~ended~~loss ~~September 30,~~per ~~2024~~share ~~consists~~attributable ~~primarily~~to ofcommon ~~the~~stockholders ~~same~~because ~~factors~~their ~~and~~effect ~~also~~would ~~income~~have ~~tax~~been ~~expense from a foreign audit settlement.~~anti-dilutive:

The provision for income taxes recorded in the three and nine months ended September 30, 2023 consists primarily of income taxes and withholding taxes, partially offset by an income tax benefit from the release of tax liabilities related to uncertain tax positions for which the statute of limitation had lapsed.


	As of March 31,
	2025	2024
Stock options issued and outstanding	145,350	1,584,426
Unvested restricted stock units issued and outstanding(1)	1,384,775	16,173,773
Shares of Class A common stock reserved for Twilio.org	—	419,939
Shares of Class A common stock committed under ESPP	—	396,611

Shares of Class A common stock in escrow subject to future vesting	—	3,771
Total	1,530,125	18,578,520

____________________________________

(1) A portion of these unvested restricted stock units are PSUs. The number of PSUs that will ultimately vest may increase or decrease the number of shares that will be issued at the end of the performance period.

15. Income Taxes

The Company computes its provision for income taxes for interim periods using an estimated annual effective tax rate based on anticipated annual pretax income or loss. The estimated annual effective tax rate is applied to the Company’s year-to-date income or loss, and is adjusted for discrete items recorded in the period. The primary difference between the Company’s effective tax rate and the federal statutory rate is the full valuation allowance the Company has established on its federal, state and certain foreign net operating losses and credits.

The provision for income taxes recorded in the three months ended March 31, 2025 and 2024 consist primarily of federal, state and foreign income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business. The provision for income taxes recorded in the three months ended March 31, 2024 also consists of income tax expense from a foreign audit settlement.

The Company is subject to taxation in the U.S. and various other state and foreign jurisdictions. Because the Company has net operating loss carryforwards for U.S. federal and state jurisdictions, the statute of limitations is open for all tax years.

1716. Related Party Transactions

In May 2022, the Company and Syniverse Corporation (“Syniverse”), an equity method investee, entered into a wholesale agreement pursuant to which Syniverse would process, route and deliver application-to-person messages originating and/or terminating between the Company’s customers and mobile network operators. For the three ~~and nine~~ months ended ~~September 30, 2024, the value of the transactions that occurred between the Company and Syniverse were $34.6~~March ~~million and $103.8 million~~31, ~~respectively.~~2025 ~~For the three~~ and ~~nine months ended September 30~~2024, ~~2023,~~ the value of the transactions that occurred between the Company and Syniverse were $4038.17 million and $~~110~~34.20 million, respectively. These transactions were recorded as cost of revenue in the accompanying condensed consolidated statements of operations.

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Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “can,” “will,” “would,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “forecasts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•the impact of ~~macroeconomic~~global ~~uncertainties~~economic and ~~significant~~political ~~market~~conditions ~~volatility~~and inuncertainty ~~the~~and ~~global~~significant ~~economy~~market volatility on our ~~customers~~business, ~~partners,~~customers ~~employees~~ and ~~business~~partners;

•our future financial performance, including expectations regarding our revenue, revenue growth, cost of revenue, gross profit, gross margin and operating expenses, our ability to generate positive cash flow and ability to achieve and sustain profitability on GAAP and non-GAAP bases, the factors affecting our results of operations, the timing of future expenses, the end dates for certain types of expenses, and the assumptions underlying such expectations;

•the ~~benefits~~realignment ~~and~~of ~~efficiencies~~our webusiness ~~expect~~unit tostructure, ~~derive~~including ~~from~~its ~~workforce~~expected ~~reductions~~costs and ~~other~~benefits ~~cost-saving initiatives,~~ and ~~from~~the ~~our~~related ~~cash~~accounting ~~bonus program~~determinations;

•our ~~business~~ability ~~unit~~to ~~reorganization,~~execute ~~including~~on ~~its~~our ~~expected~~vision ~~costs~~for ~~and~~our ~~benefits~~platform, ~~related~~including ~~accounting~~delivering ~~determinations~~new ~~and~~product ~~the~~releases ~~shift~~and inenhancements, ~~our~~reducing ~~segment~~friction ~~reporting~~across ~~structure,~~our platform and ~~changes~~streamlining tocross-channel ~~our leadership structure~~orchestration;

•~~the~~our ~~impact~~ability onto ~~our~~successfully ~~business,~~deliver ~~corporate~~an ~~culture,~~interoperable ~~and~~platform ~~employees~~that asallows abusinesses ~~result~~to harness the power of ~~our~~customer ~~leadership~~data ~~transition~~and consumer insights to improve customer engagement;

•our ~~expectations~~ability ~~regarding~~to ~~our~~leverage ~~Communications~~artificial ~~business~~intelligence and machine learning, including ~~anticipated~~to ~~efficiencies~~develop and ~~strategy~~commercialize products and features for ~~streamlining~~our ~~the~~customers ~~customer~~and ~~experience,~~deploy ~~including~~internal ~~increased~~applications ~~focus~~for onour ~~self-service~~own ~~capabilities~~operational efficiency;

•our ~~expectations~~ability ~~regarding~~to ~~our~~drive ~~Segment~~revenue ~~business~~growth, ~~including~~improve ~~the~~profitability ~~targets~~and ~~set~~increase ~~as a result of~~ our ~~operational~~market ~~review of Segment~~share, ~~new~~including ~~product~~by ~~releases,~~forming ~~the expected benefits~~ and ~~timeline~~expanding ofpartnerships ~~the~~with ~~migration~~independent tosoftware avendors ~~new~~and ~~infrastructure~~other ~~provider~~partners, ~~increased~~improving ~~investment~~our ~~and go~~self-~~to-market~~service ~~focus~~capabilities, tocross-selling ~~capture~~our ~~market~~products ~~share,~~ and ~~increased~~expanding ~~revenue growth~~internationally;

•our ability to ~~retain~~simplify and ~~increase~~modernize ~~revenue~~our ~~from~~business ~~existing~~processes ~~customers~~ and ~~attract~~improve ~~new~~our ~~customers,~~overall ~~including~~operating ~~enterprises and international organizations~~efficiency;

•our ability to ~~maintain~~compete ~~reliable~~effectively ~~service~~in ~~levels~~an intensely competitive market, including our ability to set optimal prices for our ~~customers~~products and adapt and respond effectively to rising costs, competing offerings, rapidly changing technology and technology trends, and evolving customer needs and preferences;

•our anticipated investments in sales and marketing, research and development and additional systems and processes to support our growth;

•~~the~~our ~~anticipated~~ability ~~results~~to ofmaintain ~~our~~reliable ~~foreign~~service ~~currency~~levels ~~hedging~~for ~~activities~~our customers;

•our ability to ~~compete effectively in an intensely competitive market~~maintain, ~~including~~protect ~~our~~and ~~ability~~enhance ~~to set optimal prices for~~ our ~~products~~intellectual ~~and adapt and respond effectively to rising costs, rapidly changing technology and evolving customer needs, requirements, and preferences~~property;

•potential harm caused by compromises in security, data and infrastructure, including cybersecurity protections;

•our ability to comply with modified or new industry standards, laws and regulations applying to our business;

•our ability to make progress on our environmental, social and governance (“ESG”) programs, goals and commitments;

•our ability to manage changes in network service provider fees that we pay in connection with the delivery of communications on our platform;

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•investments and costs required to prevent, detect and remediate potential cybersecurity threats, incidents and breaches of ours or our customers’ systems or information;

•our ability to optimize our network service provider coverage and connectivity;

•our ability to work closely with email inbox service providers to maintain deliverability rates;

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•the impact and expected results from changes in our relationships with our larger customers;

•our ability to form and expand partnerships with technology partners and consulting partners;

•anticipated technology trends, such as the use of and demand for cloud communications and customer engagement tools;

•our ability to leverage artificial intelligence (“AI”) and machine learning (“ML”) and develop and deliver products that incorporate AI and ML and our expectations about CustomerAI and its potential;

•our ability to successfully enter into new markets and manage our international expansion;

•the sufficiency of our cash and cash equivalents to meet our liquidity needs;

•our expectations regarding ~~our~~ share ~~repurchase programs~~repurchases;

•our ability to maintain, protect and enhance our intellectual property;

•our ability to successfully defend litigation brought against us;

•the anticipated results of our foreign currency hedging activities;

•our ability to service the interest on our 3.625% senior notes due 2029 (“2029 Notes”) and on our 3.875% notes due 2031 (“2031 Notes,” and together with the 2029 Notes, the “Notes”), and repay such Notes;

•our customers’ and other platform users’ violation of our policies or other misuse of our platform; and

•our ability to successfully integrate acquired businesses and realize the benefits of our past or future strategic acquisitions, divestitures or investments.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, results of operations and financial condition. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described below in Part II, Item 1A, “Risk Factors,” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2023, filed with the SEC on February 27,~~ 2024. In addition to historical financial information, the following discussion contains forward-looking statements that are based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q.

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Overview

We envision a world in which every digital interaction between businesses and their customers is amazing. By combining our leading communications capabilities, plus rich contextual data, plus generative and predictive AI, we enable businesses of all sizes to revolutionize how they engage with their customers by delivering seamless, trusted and personalized customer experiences at scale. ~~Our~~We ~~leading~~offer ~~customer engagement platform comprises~~ communications APIs that enable developers to embed numerous forms of messaging, voice, email and ~~email~~video interactions into their customer-facing applications, as well as software products that target specific engagement needs, including our customer data platform, digital engagement centers, marketing campaigns, and ~~advanced~~user ~~account~~authentication ~~security~~and identity solutions. This combination of flexible APIs and software solutions helps businesses of all sizes and across numerous industries to benefit from smarter and more streamlined engagement at every step of the customer journey, including reduced customer acquisition costs, lasting loyalty and increased customer value. Our platform, which combines our highly customizable communications APIs with customer data management capabilities and AI-powered predictions and recommendations, allows businesses to break down data silos and build a comprehensive single source for their customer data that is organized into unique profiles that are easily accessible by all their business teams. Empowered with this information and the insights it enables, businesses using our platform can provide robust, personalized and effective communications to their customers at every stage of their customer relationships at scale. The value proposition of our offerings has become stronger and our products have become more strategic to our customers as ~~more and more~~ businesses ~~have~~are ~~prioritized~~increasingly prioritizing building more personalized and ~~more~~ differentiated customer engagement experiences through digital channels.

WeOn ~~operate~~January 1, 2025, we realigned our business inunit ~~two~~structure ~~business~~into ~~units:~~a ~~Communications~~functional support model under one organization. We believe that operating as one organization best positions us as we seek to deliver one trusted, smart and ~~Segment~~integrated platform that enables more personalized communications and engagements for customers. Despite realigning our organizational structure, we continue to have two reportable segments. Our Communications ~~business~~reportable segment consists of a variety of APIs and software solutions to optimize communications between our customers and their end users. Our key offerings in our Communications ~~offerings~~reportable segment include Messaging, Voice, ~~Flex,~~ Email ~~and~~(which includes Marketing Campaigns), Flex, and User ~~Identity~~Authentication and ~~Authentication~~Identity. Our Segment ~~business~~reportable segment consists of software products that enable businesses to leverage their ~~first-party~~contextual data to create unique customer profiles and achieve more effective customer engagement. ~~Together,~~Our ~~our~~key ~~Communications~~offering ~~and~~in ~~Segment products power~~ our ~~customer~~Segment ~~engagement~~reportable ~~platform.~~segment ~~Our goal~~ is toour ~~create a flywheel for effective customer engagement by combining~~ Segment’s ~~user profiles with our rich Communications data to drive more personalized and intelligent customer interactions~~product.

In ~~2023,~~the wethree ~~revealed~~months ~~CustomerAI~~ended March 31, ~~our~~2025 ~~predictive~~ and ~~generative AI layer~~2024, ~~which~~our ~~couples~~revenue ~~the~~was ~~power~~$1.17 ofbillion ~~large~~and ~~language~~$1.05 ~~models~~billion, ~~with~~respectively, ~~the~~and ~~rich customer data that flows through~~ our ~~Customer~~net ~~Engagement~~income ~~Platform~~(loss) towas ~~help~~$20.0 ~~brands~~million ~~unlock~~and ~~enhanced~~$(55.3) ~~consumer~~million, ~~experiences~~respectively. WeIn ~~believe that our CustomerAI capabilities and initiatives have~~ the ~~potential~~three tomonths ~~increase~~ended ~~the~~March 31, ~~power~~2025 and ~~reach~~2024, of our ~~platform,~~10 ~~make~~largest ~~every~~Active ~~interaction~~Customer ~~between~~Accounts ~~our~~generated ~~customers~~an ~~and~~aggregate ~~their~~of ~~end~~9% ~~users more personalized~~ and ~~intelligent,~~10% ~~and~~of ~~accelerate~~ our ~~data~~total ~~and communications flywheel described above~~revenue, ~~benefiting both our Communications and Segment products~~respectively.

In the three months ended September 30, 2024 and 2023, our revenue was $1.13 billion and $1.03 billion, respectively, and our net loss was $9.7 million and $141.7 million, respectively. In both the three months ended September 30, 2024 and 2023, our 10 largest Active Customer Accounts generated an aggregate of 10% of our total quarterly revenue.

Factors Affecting Our Results of Operations

We are focused on ~~profitable~~innovation, profit, and growth. To increase revenue and grow market share, we intend to drive product innovation, leverage predictive and generative AI, further enhance our independent software vendor (“ISV”), reseller and other partner relationships, improve our self-service capabilities, cross-sell our products, expand internationally, enhance Segment data warehouse interoperability, and reduce time to value for Segment. We also intend to optimize our business and take measures to reduce costs, including simplifying and further automating our business processes, modernizing our infrastructure, focusing on self-service, leveraging AI, enacting certain workforce planning initiatives, optimizing utilization of our distributed workforce and implementing other initiatives targeted at improving efficiencies in our business.

Our revenue is primarily derived from usage-based fees, which can lead to variability in our results of operations and at times create differences between our forecasts and actual results. Our usage-based revenue is also more immediately impacted by changes in consumer spending and macroeconomic conditions than our subscription-based revenue. We also experience seasonal trends due to increased consumer activity in the fourth quarter, which may result in lower sequential revenue in the first quarter.

26Our gross profit and gross margin are impacted by a number of factors, including our product mix; our ability to manage our cloud infrastructure‑related and network service provider fees, including A2P SMS fees; changes in foreign exchange rates; the timing of amortization of capitalized software development costs and acquired intangibles; the extent to which we periodically choose to adjust prices of our products; and the timing and extent of our investments in our operations. Our gross margin is also impacted by the mix of U.S. messaging termination compared to international messaging termination, as international messaging has lower gross margins.

Our results of operations have in the past been, and could in the future be, impacted by adverse macroeconomic conditions. We are continuing to monitor actual and potential effects of recent macroeconomic and political conditions and uncertainty on our business. For additional details, see Part II, Item 1A, “Risk Factors.”

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Our gross margin is impacted by a number of factors, including the timing and extent of our investments in our operations; our product mix; our ability to manage our cloud infrastructure‑related and network service provider fees, including A2P SMS fees; the mix of U.S. messaging termination compared to international messaging termination (which has lower gross margins); changes in foreign exchange rates; the timing of amortization of capitalized software development costs and acquired intangibles; and the extent to which we periodically choose to adjust prices of our products.

Our gross profit is impacted by our product mix. Our cost of revenue and gross profit are also impacted by changes in hosting fees and network service providers’ fees and our ability to pass these costs through to our customers. We also experience seasonal trends due to increased consumer activity in the fourth quarter, which may result in lower sequential revenue in the first quarter.

We are migrating part of Segment’s architecture to a new infrastructure provider, which we expect will allow us to recognize greater operational efficiency and scale up new AI-driven products and features. This migration will result in overlapping expenses with our original and new vendors for the fourth quarter of 2024, which we expect to negatively impact Segment gross margins in such quarter. We expect to complete the migration by the end of 2024.

We also expect that the wind-down of the software component of our Zipwhip business will negatively impact our revenue growth rates in the fourth quarter of 2024.

In 2024, we introduced a company-wide annual cash bonus program to reduce our use of equity compensation. The bonus payout amount for each eligible participant is determined based on Company and individual full year performance metrics. In the three and nine months ended September 30, 2024, we recorded $45.8 million and $94.4 million of expense related to the program, respectively. The third quarter of 2024 included an additional $17.9 million of expense due to a higher anticipated bonus payout as a result of an increased outlook for the Company’s full year performance metrics. The program also provided for a 25% mid-year bonus cash payment in its initial year only, which resulted in a $24.3 million payment in July 2024. As of September 30, 2024, the accrued bonus liability was $70.2 million recorded in the accrued expenses and other current liabilities in our condensed consolidated balance sheet included elsewhere in this Quarterly Report on Form 10-Q.

We expect our prior workforce restructurings to reduce our operating expenses in future periods. We also expect the new cash bonus program as described above to continue to increase our expenses in future periods.

In February 2023, one of our customers, Oi SA, a Brazilian telecom company, initiated reorganization proceedings in a Brazilian bankruptcy court and exposed us to risks on collections of pre-petition receivables and ongoing revenue. In April 2024, the creditors of Oi SA approved a Judicial Reorganization Plan (the “Oi Reorganization Plan”) that aims to ensure Oi SA’s operational feasibility and continuity of activities and further provides extended and discounted payment terms for pre-petition receivables. The Oi Reorganization Plan was subsequently ratified by the Brazilian bankruptcy court and contains various contingencies. As of September 30, 2024, we have $6.4 million in pre-petition receivables recorded in other long-term assets (net of $8.8 million in reserves) and $10.8 million in post-petition accounts receivable due from Oi SA. The customer has been making regular payments on post-petition receivables. If Oi SA fails to comply with its obligations under the Oi Reorganization Plan, if the contingencies contained in the Oi Reorganization Plan are not timely resolved, or if the customer ceases to make payment on post-petition receivables, we may incur additional bad debt expense or reductions in revenue in future periods.

Key Business Metrics

We review a number of operational and financial metrics, including Active Customer Accounts and Dollar-Based Net Expansion Rate, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.

The following table summarizes our year-over-year revenue growth and Dollar-Based Net Expansion Rate for the three months ended ~~September~~March 3031, ~~2024~~2025 and ~~2023~~2024, and the number of Active Customer Accounts as of ~~September~~March 3031, ~~2024~~2025 and ~~2023~~2024.


	Three Months Ended
	March 31,
	2025			2024
Active Customer Accounts	335,000			313,000
Total Revenue (in thousands)	$	1,172,463		$	1,047,050
Total Revenue Growth Rate	12		%	4		%
Dollar-Based Net Expansion Rate	107		%	102		%

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	Three Months Ended
	September 30,
	2024			2023
Active Customer Accounts	320,000			306,000
Total Revenue (in thousands)	$	1,133,649		$	1,033,670
Total Revenue Growth Rate	10		%	5		%
Dollar-Based Net Expansion Rate	105		%	101		%

Active Customer Accounts

We define an Active Customer Account at the end of any period as an individual account, as identified by a unique account identifier, for which we have recognized at least $5 of revenue in the last month of the period. A single organization may constitute multiple unique Active Customer Accounts if it has multiple account identifiers, each of which is treated as a separate Active Customer Account. Active Customer Accounts excludes customer accounts from Zipwhip, Inc. (“Zipwhip”). Communications Active Customer Accounts and Segment Active Customer Accounts are calculated using the same methodology, but using only revenue recognized from accounts in the respective segment. When presented in this Quarterly Report on Form 10-Q, (i) the number of Active Customer Accounts is rounded down to the nearest thousand, (ii) the number of Communications Active Customer Accounts is rounded down to the nearest thousand, and (iii) the number of Segment Active Customer Accounts is rounded down to the nearest hundred.

Our business and customer relationships have grown since we began reporting the number of Active Customer Accounts using the above definition, which is anchored to a minimum $5 monthly revenue figure. We have a large number of Active Customer Accounts with relatively low individual spend that in the aggregate do not drive a significant portion of our revenue. Due to this dynamic, we believe that the number of Active Customer Accounts, as currently defined, is less informative now as an indicator of the growth of our business and future revenue trends than it has been in prior periods. In the three months ended ~~September~~March 3031, ~~2024~~2025 and ~~2023~~2024, revenue from Active Customer Accounts represented over 99% of total revenue in each period.

Dollar‑Based Net Expansion Rate

Our Dollar-Based Net Expansion Rate compares the total revenue from all Active Customer Accounts and customer accounts from Zipwhip in a quarter to the same quarter in the prior year. To calculate the Dollar-Based Net Expansion Rate, we first identify the cohort of Active Customer Accounts and customer accounts from Zipwhip that were Active Customer Accounts or customer accounts from Zipwhip in the same quarter of the prior year. The Dollar-Based Net Expansion Rate is the quotient obtained by dividing the revenue generated from that cohort in a quarter, by the revenue generated from that same cohort in the corresponding quarter in the prior year. When we calculate Dollar-Based Net Expansion Rate for periods longer than one quarter, we use the average of the applicable quarterly Dollar-Based Net Expansion Rates for each of the quarters in such period. Revenue from acquisitions does not impact the Dollar-Based Net Expansion Rate calculation until the quarter following the one-year anniversary of the applicable acquisition, unless the acquisition closing date is the first day of a quarter. ~~As a result, for the quarter ended September 30, 2024, our Dollar-Based Net Expansion Rate excludes the contributions from any acquisitions made after July 1, 2023.~~ Revenue from divestitures does not impact the Dollar-Based Net Expansion Rate calculation beginning in the quarter the divestiture closed, unless the divestiture closing date is the last day of a quarter. ~~As a result, for the quarter ended September 30, 2024, our Dollar-Based Net Expansion Rate excludes the contributions from any divestitures made after September 30, 2023.~~ Communications Dollar-Based Net Expansion Rate and Segment Dollar-Based Net Expansion Rate are calculated using the same methodology, but using only revenue attributable to the respective segment and Active Customer Accounts and customer accounts from Zipwhip ~~for that respective segment~~.

28We believe that measuring Dollar-Based Net Expansion Rate, on an aggregate basis and at the segment level, provides an important indication of the performance of our efforts to increase revenue from existing customers. Our ability to drive growth and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with existing Active Customer Accounts and to increase their use of the platform. An important way in which we have historically tracked performance in this area is by measuring the Dollar-Based Net Expansion Rate for Active Customer Accounts. Our Dollar-

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~~We believe that measuring Dollar-~~Based Net Expansion Rate, on an aggregate basis and at the segment level, provides an important indication of the performance of our efforts to increase revenue from existing customers. Our ability to drive growth and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with existing Active Customer Accounts and to increase their use of the platform. An important way in which we have historically tracked performance in this area is by measuring the Dollar-Based Net Expansion Rate for Active Customer Accounts. Our Dollar-Based Net Expansion Rate increases when such Active Customer Accounts increase their usage of a product, extend their usage of a product to new applications or adopt a new product. Our Dollar-Based Net Expansion Rate decreases when such Active Customer Accounts cease or reduce their usage of a product or when we lower usage prices on a product. As our customers grow their businesses and extend the use of our platform, they sometimes create multiple customer accounts with us for operational or other reasons. As such, when we identify a significant customer organization (defined as a single customer organization generating more than 1% of revenue in a quarterly reporting period) that has created a new Active Customer Account, this new Active Customer Account is tied to, and revenue from this new Active Customer Account is included with, the original Active Customer Account for the purposes of calculating this metric.

Key Components of Statements of Operations

Revenue

Revenue. We recognize revenue from our products on either a usage basis or a subscription basis, depending on the nature of the product and the type of customer contract. ~~Our reportable segments contain products that may follow either revenue recognition model.~~

The majority of our Communications reportable segment revenue is derived from usage-based fees. The usage-based fees are earned when customers access our cloud-based platform and start using ~~the~~our products. ~~Some~~Examples ~~examples~~ of our primarily usage-based Communications products are Messaging and Voice. For Messaging products, we primarily charge fees related to the number of text messages sent or received. For Voice products, we primarily charge fees for minutes of call duration. ~~Some~~Examples ~~examples~~ of ~~the~~our primarily subscription-based Communications products are Email, ~~Marketing Campaigns~~ and Flex. For these products, we recognize revenue evenly over the contract term.

Our Segment reportable segment revenue is derived from Segment products that are subscription-based. For these products we recognize revenue evenly over the contract term. When our usage-based products are embedded into our subscription-based products, we charge for each product separately on a usage or subscription basis, respectively, and record the revenue in the reportable segment in which each product resides.

~~Most~~When of our usage-based ~~customers gain access to our~~ products ~~and~~are ~~solutions~~embedded ~~through~~into our esubscription-~~commerce~~based ~~self-service sign-up format~~products, ~~which~~we ~~requires~~charge anfor ~~upfront~~each ~~prepayment~~product ~~via~~separately ~~credit card that is drawn down as they use our products. Pricing is generally based~~ on a ~~publicly available, self-serve pricing matrix that generally allows customers to receive tiered discounts as their~~ usage ofor ~~our~~subscription ~~products~~basis, ~~increases.~~respectively, ~~Many of our larger usage-based customers enter into contractual arrangements with us for a period of at least 12 months. These contracts may include negotiated terms~~ and ~~typically~~record ~~include~~the ~~minimum~~ revenue ~~commitments of varying durations. Usage-based customers subject to such contracts are typically invoiced monthly~~ in ~~arrears for~~ the ~~products~~reportable ~~used.~~segment Inin ~~the~~which ~~three~~each ~~months~~product ~~ended September 30, 2024 and 2023, we generated 72% and 71% of our revenue, respectively, from usage-based fees~~resides.

~~Subscription~~Most of our usage-based ~~fees~~customers ~~are~~gain ~~earned~~access into ~~accordance~~our ~~with~~platform ~~subscription~~through ~~pricing~~our ~~terms.~~self-service ~~For~~sign-up format, which requires an upfront prepayment via credit card that is drawn down as they use our ~~subscription-~~products. Pricing is generally based ~~products~~on a publicly available, ~~customers~~self-serve pricing matrix that generally allows customers to receive tiered discounts as their usage of our products increases. Many of our larger usage-based customers enter into ~~negotiated~~contractual arrangements with us for a period of at least 12 months. These contracts, ~~which~~may ~~are~~include negotiated terms and typically ~~one~~include tominimum ~~three~~revenue ~~years~~commitments inof ~~duration~~varying durations. ~~Subscription~~Usage-based customers ~~are~~subject ~~generally~~to ~~invoiced~~such incontracts ~~advance~~are attypically ~~the~~invoiced ~~start~~monthly ofin ~~the~~arrears ~~contract~~for ~~term~~products used. In the three months ended ~~September 30~~March 31, ~~2024~~2025 and ~~2023~~2024, we generated 2873% and 2971% of our revenue, respectively, from ~~non-~~usage‑-based fees.

Subscription-based fees are earned in accordance with subscription pricing terms. For our subscription-based products, customers generally enter into negotiated contracts, which are typically one to three years in duration. Subscription customers are generally invoiced in advance at the start of the contract term. In the three months ended March 31, 2025 and 2024, we generated 27% and 29% of our revenue, respectively, from non-usage‑based fees.

Amounts that have been charged via credit card or invoiced are recorded in revenue, deferred revenue or customer deposits, depending on whether the revenue recognition criteria have been met. Our deferred revenue and customer deposits liability balance is not a meaningful indicator of our future revenue at any point in time because the number of contracts with our invoiced customers that contain terms requiring any form of prepayment is not significant.

We define U.S. revenue as revenue from customers with IP addresses or mailing addresses at the time of registration in the United States. We define international revenue as revenue from customers with IP addresses or mailing addresses at the time of registration outside of the United States.

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Cost of Revenue and Gross Profit

Cost of Revenue. Cost of revenue consists primarily of fees paid to network service providers. Cost of revenue also includes cloud infrastructure fees, direct costs of personnel, such as salaries and stock‑based compensation for our customer support employees, and other non‑personnel costs, such as depreciation and amortization expense related to data centers and hosting equipment, and amortization of capitalized internal-use software development costs and acquired intangible assets. Costs of revenue are generally directly attributable to each segment. Certain costs of revenue are allocated to segments based on methodologies that best reflect the patterns of consumption of these costs.

Our arrangements with network service providers require us to pay fees based on the volume of phone calls initiated or text messages sent, as well as the number of telephone numbers acquired by us to service our customers. Our arrangements with our cloud infrastructure providers require us to pay fees based on our server capacity consumption.

Gross Profit. Gross profit represents revenue less cost of revenue.

Operating Expenses

The most significant components of operating expenses are personnel costs, which consist of salaries, benefits, sales commissions, bonuses and stock‑based compensation. We also incur other non‑personnel costs related to our general overhead expenses.

Research and Development. Research and development expenses consist primarily of personnel costs, outsourced engineering services, cloud infrastructure fees for staging and development of our products, depreciation, amortization of capitalized internal-use software development costs and an allocation of our general overhead expenses. We capitalize the portion of our software development costs that meets the criteria for capitalization. Research and development expenses are generally directly attributable to each segment. Certain research and development expenses are allocated to segments based on methodologies that best reflect the patterns of consumption of these costs. A small percentage of research and development costs, such as costs related to digital architecture and information security, are not allocated to segments because they support company-wide processes and are managed on a company-wide level.

We are focusing our research and development investment in the highest impact product areas for our future. We are investing strategically in alignment with our focus on building a trusted, leading customer engagement platform.

Sales and Marketing. Sales and marketing expenses consist primarily of personnel costs, including commissions and bonuses to our sales employees. Sales and marketing expenses also include expenditures related to advertising, marketing, brand awareness activities, costs related to our SIGNAL customer and developer conferences, credit card processing fees, professional services fees, depreciation, amortization of acquired intangible assets and an allocation of our general overhead expenses. Sales and marketing expenses are generally directly attributable to each segment. Certain sales and marketing expenses are allocated to segments based on methodologies that best reflect the patterns of consumption of these costs. A small percentage of sales and marketing costs, such as costs related to corporate communications and global brand awareness, are not allocated to segments because they support company-wide processes and are managed on a company-wide level.

We focus our sales and marketing efforts on generating awareness of our company, platform and products, creating sales leads, expanding relationships with existing customers and establishing and promoting our brand, both domestically and internationally.

General and Administrative. General and administrative expenses consist primarily of personnel costs for our accounting, finance, legal, human resources and administrative support personnel. General and administrative expenses also include costs related to business acquisitions and dispositions, legal and other professional services fees, certain taxes, depreciation and amortization, charitable contributions and an allocation of our general overhead expenses. General and administrative expenses are allocated to each segment when they are directly attributable to each segment or are allocated to segments based on methodologies that best reflect the patterns of consumption of these costs. A significant portion of general and administrative costs, such as costs related to corporate governance, and certain costs related to legal, human resources, finance and accounting functions, are not allocated to segments because they support company-wide processes and are managed on a company-wide level ~~and, therefore, are considered corporate costs and are not allocated to segments~~.

We expect that we will incur costs associated with supporting the growth of our business. We may also incur higher than usual losses related to deterioration of quality of certain financial assets caused by macroeconomic conditions. 27

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Restructuring Costs. Restructuring costs consist primarily of personnel costs, such as employee severance payments, benefits and certain facilitation costs, associated with our workforce reductions. Restructuring costs also include stock-based compensation expense related to vesting of stock-based awards of the impacted employees.

Impairment of Long-Lived Assets. Impairment of long-lived assets consists of impairment of intangible assets and certain operating right-of-use assets and the associated leasehold improvements and property and equipment when the carrying amounts exceed their respective fair values.

Other Income (Expenses), Net

Our other income (expenses), net, consist primarily of our share of losses from our equity method investment, impairment charges and gains and losses related to our strategic investments, realized gains and losses from marketable securities, ~~including~~ interest income; and expense and debt-related costs~~, including interest expense~~.

Provision for Income Taxes

Our provision for income taxes consists primarily of federal, state and foreign income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business.

The primary difference between our effective tax rate and the federal statutory rate relates to the valuation allowance the Company established on the federal, state and certain foreign net operating losses and credits.

Non-GAAP Financial Measures

We use the following non‑GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that ~~this~~ non‑GAAP financial information may be helpful to investors because it provides consistency and comparability with past financial performance, facilitates period‑to‑period comparisons of results of operations and assists in comparisons with other companies, many of which use similar non‑GAAP financial information to supplement their results of operations reported in accordance with generally accepted accounting principles (“GAAP”). We believe free cash flow and free cash flow margin provide useful supplemental information to help investors understand underlying trends in our business and our liquidity. Non‑GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP and may be different from similarly‑titled non‑GAAP measures used by other companies. Whenever we use a non‑GAAP financial measure, a reconciliation is provided to the most closely applicable financial measure stated in accordance with GAAP. The users of our consolidated financial statements are encouraged to review the related GAAP financial measures and the reconciliation of these non‑GAAP financial measures to their most directly comparable GAAP financial measures.

Non‑GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly‑titled non‑GAAP measures used by other companies. Whenever we use a non‑GAAP financial measure, a reconciliation is provided to the most closely applicable financial measure stated in accordance with GAAP. The users of our consolidated financial statements are encouraged to review the related GAAP financial measures and the reconciliation of these non‑GAAP financial measures to their most directly comparable GAAP financial measures.

Non‑GAAP Gross Profit and Non‑GAAP Gross Margin

For the periods presented, we define non‑GAAP gross profit and non‑GAAP gross margin as GAAP gross profit and GAAP gross margin, respectively, adjusted to exclude, as applicable, certain expenses as presented in the table below:

	Three Months Ended
	September 30,
	March 31,
	2024			2023
	2025			2024
Reconciliation:	(In thousands)
GAAP gross profit	$	~~578~~581,~~629~~567		$	~~516~~544,~~319~~041
GAAP gross margin	5150		%	5052		%
Non-GAAP adjustments:
Stock-based compensation	54,~~436~~271			75,~~053~~891
Amortization of acquired intangibles	15,682			2915,~~045~~682
Payroll taxes related to stock-based compensation	~~257~~482			~~181~~345
Non-GAAP gross profit	$	~~600~~602,~~004~~002		$	~~552~~565,~~598~~959
Non-GAAP gross margin	5351		%	5354		%

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Non‑GAAP Operating Expenses

For the periods presented, we define non‑GAAP operating expenses (including categories of operating expenses) as GAAP operating expenses (and categories of operating expenses) adjusted to exclude, as applicable, certain expenses as presented in the table below:

	Three Months Ended
	September 30,
	March 31,
	2024		2023
	2025		2024
Reconciliation:	(In thousands)
GAAP operating expenses	$	~~583~~558,~~523~~485	$	~~625~~587,~~222~~545
Non-GAAP adjustments:
Stock-based compensation	(~~148~~133,~~395~~249)		(~~177~~150,~~954~~267)
Amortization of acquired intangibles	(11,~~755~~457)		(1913,~~827~~257)
Acquisition and divestiture related expenses	—		(183)
Payroll taxes related to stock-based compensation	(10,718)		(6,431)
Payroll taxes related to stock-based compensation	(792)		(3,156)
Charitable contributions	(2,776)		(1,295)
Charitable contributions	(1,301)		(1,339)
Restructuring costs	(11,691)		(9,946)
Restructuring costs	(3,694)		(3,437)
Non-GAAP operating expenses	$	388,594	$	406,349
Impairment of long-lived assets	—		(3,162)
Non-GAAP operating expenses	$	417,586	$	416,164

Non‑GAAP Income from Operations and Non‑GAAP Operating Margin

For the periods presented, we define non‑GAAP income from operations and non‑GAAP operating margin as GAAP income (loss) from operations and GAAP operating margin, respectively, adjusted to exclude, as applicable, certain expenses as presented in the table below:

	Three Months Ended
	September 30,
	March 31,
	2024			2023
	2025			2024
Reconciliation:	(In thousands)
GAAP loss from operations	$	(4,894)		$	(108,903)
GAAP income (loss) from operations	$	23,082		$	(43,504)
GAAP operating margin	—2		%	(114)		%
Non-GAAP adjustments:
Stock-based compensation	~~153~~137,~~831~~520			~~185~~156,~~007~~158
Amortization of acquired intangibles	27,~~437~~139			4828,~~872~~939
Acquisition and divestiture related expenses	—			183
Payroll taxes related to stock-based compensation	11,200			6,776
Payroll taxes related to stock-based compensation	1,049			3,337
Charitable contributions	2,776			1,295
Charitable contributions	1,301			1,339
Restructuring costs	11,691			9,946
Restructuring costs	3,694			3,437
Non-GAAP income from operations	$	213,408		$	159,610
Impairment of long-lived assets	—			3,162
Non-GAAP operating margin	18		%	15		%
Non-GAAP income from operations	$	182,418		$	136,434
Non-GAAP operating margin	16		%	13		%

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Free Cash Flow and Free Cash Flow Margin

For the periods presented, we define free cash flow ~~and free cash flow margin~~ as net cash provided by operating activities ~~and operating cash flow margin, respectively,~~ less capitalized software development costs and purchases of long-lived and intangible assets, and we define free cash flow margin as free cash flow divided by revenue, as presented in the table below:

	Three Months Ended
	September 30,
	March 31,
	2024			2023
	2025			2024
Reconciliation:	(In thousands)
Net cash provided by operating activities	$	~~204~~191,~~329~~042		$	~~206~~190,~~427~~123
Operating cash flow margin	1816		%	2018		%
Non-GAAP adjustments:
Capitalized software development costs	(1411,~~424~~564)			(1011,~~451~~154)
Purchases of long-lived and intangible assets	(~~792~~1,163)			(~~765~~1,671)
Free cash flow	$	~~189~~178,~~113~~315		$	~~195~~177,~~211~~298
Free cash flow margin	1715		%	1917		%
Net cash provided by (used in) investing activities	$	267,355		$	(144,032)
Net cash (used in) provided by investing activities	$	(19,140)		$	189,770
Net cash used in financing activities	$	(~~642~~125,~~780~~794)		$	(66363,~~865~~229)

~~Results of Operations~~30

The following table sets forth our results of operations for the periods presented. The period-to-period comparison of our historical results are not indicative of the results that may be expected in the future.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Condensed Consolidated Statements of Operations Data:	(In thousands, except share and per share amounts)
Revenue	$	1,133,649	$	1,033,670	$	3,263,201	$	3,077,995
Cost of revenue (1) (2)	555,020		517,351		1,584,686		1,565,231
Gross profit	578,629		516,319		1,678,515		1,512,764
Operating expenses:
Research and development (1) (2)	260,903		241,654		756,170		707,145
Sales and marketing (1) (2)	212,576		262,898		644,150		784,383
General and administrative (1) (2)	106,350		114,071		332,300		361,491
Restructuring costs (1)	3,694		3,437		13,330		140,281
Impairment of long-lived assets	—		3,162		—		34,278
Total operating expenses	583,523		625,222		1,745,950		2,027,578
Loss from operations	(4,894)		(108,903)		(67,435)		(514,814)
Other income (expenses), net:
Share of losses from equity method investment	(25,279)		(31,058)		(78,794)		(93,838)
Impairment of strategic investments	(803)		—		(1,470)		(46,154)
Other income, net	27,325		1		72,644		17,731
Total other income (expenses), net	1,243		(31,057)		(7,620)		(122,261)
Loss before provision for income taxes	(3,651)		(139,960)		(75,055)		(637,075)
Provision for income taxes	(6,075)		(1,747)		(21,878)		(12,958)
Net loss attributable to common stockholders	$	(9,726)	$	(141,707)	$	(96,933)	$	(650,033)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.06)	$	(0.78)	$	(0.57)	$	(3.54)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	159,091,110		181,749,309		170,063,452		183,854,526

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Results of Operations

The following table sets forth our results of operations for the periods presented. The period-to-period comparisons of our historical results are not indicative of the results that may be expected in the future.


	Three Months Ended
	March 31,
	2025		2024
Condensed Consolidated Statements of Operations Data:	(In thousands, except share and per share amounts)
Revenue	$	1,172,463	$	1,047,050
Cost of revenue (1) (2)	590,896		503,009
Gross profit	581,567		544,041
Operating expenses:
Research and development (1) (2)	254,295		260,457
Sales and marketing (1) (2)	212,113		214,503
General and administrative (1) (2)	92,077		112,585


Total operating expenses	558,485		587,545
Income (loss) from operations	23,082		(43,504)
Other income (expenses), net:
Share of losses from equity method investment	(19,471)		(29,575)

Other income, net	22,973		27,918
Total other income (expenses), net	3,502		(1,657)
Income (loss) before provision for income taxes	26,584		(45,161)
Provision for income taxes	(6,567)		(10,188)
Net income (loss) attributable to common stockholders	$	20,017	$	(55,349)
Net income (loss) per share:
Basic	$	0.13	$	(0.31)
Diluted	$	0.12	$	(0.31)
Weighted-average shares used to compute net income (loss) per share:
Basic	153,345,192		181,017,726
Diluted	161,794,287		181,017,726

__________________________________
(1) Includes stock-based compensation expense as follows:

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2024		2023		2024		2023
	2025		2024
	(In thousands)
Cost of revenue	$	54,~~436~~271	$	75,~~053~~891	$	~~16,830~~	$	~~18,677~~
Research and development	8478,~~787~~066		9483,~~085~~560		~~246,926~~		~~246,754~~
Sales and marketing	3331,~~560~~359		5134,~~345~~866		~~101,664~~		~~142,343~~
General and administrative	3025,~~048~~577		3234,~~524~~289		~~92,226~~		~~90,497~~
Restructuring costs	730		467		3,178		11,096
Total	$	139,273	$	158,606
Total	$	154,561	$	185,474	$	460,824	$	509,367

____________________________________
(2) Includes amortization of acquired intangibles as follows:

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2024		2023		2024		2023
	2025		2024
	(In thousands)
Cost of revenue	$	15,682	$	2915,~~045~~682	$	~~47,046~~	$	~~88,675~~
Research and development	—		~~420~~1,120		~~1,867~~		~~1,260~~
Sales and marketing	11,~~755~~457		1912,~~407~~137		~~35,647~~		~~59,901~~
Total	$	27,~~437~~139	$	4828,~~872~~939	$	~~84,560~~	$	~~149,836~~

~~The following table sets forth our results of operations for each of the periods presented as a percentage of our total revenue:~~31

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Condensed Consolidated Statements of Operations, as a percentage of revenue: **
Revenue	100	%	100	%	100	%	100	%
Cost of revenue	49		50		49		51
Gross profit	51		50		51		49
Operating expenses:
Research and development	23		23		23		23
Sales and marketing	19		25		20		25
General and administrative	9		11		10		12
Restructuring costs	*		*		*		5
Impairment of long-lived assets	—		*		—		1
Total operating expenses	51		60		54		66
Loss from operations	*		(11)		(2)		(17)
Other income (expenses), net
Share of losses from equity method investment	(2)		(3)		(2)		(3)
Impairment of strategic investments	*		—		*		(1)
Other income, net	2		*		2		1
Total other income (expenses), net	*		(3)		*		(4)
Loss before provision for income taxes	*		(14)		(2)		(21)
Provision for income taxes	(1)		*		(1)		*
Net loss attributable to common stockholders	(1	%)	(14	%)	(3	%)	(21	%)

____________________________________

* Less than 0.5% of revenue.

** Columns may not add up to 100% due to rounding.

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~~Comparison~~The following table sets forth our results of ~~Three~~operations ~~Months~~for ~~Ended~~each ~~September 30,~~of ~~2024~~the ~~and~~periods ~~2023~~presented as a percentage of our total revenue:


	Three Months Ended
	March 31,
	2025		2024
Condensed Consolidated Statements of Operations, as a percentage of revenue: **
Revenue	100	%	100	%
Cost of revenue	50		48
Gross profit	50		52
Operating expenses:
Research and development	22		25
Sales and marketing	18		20
General and administrative	8		11


Total operating expenses	48		56
Income (loss) from operations	2		(4)
Other income (expenses), net
Share of losses from equity method investment	(2)		(3)

Other income, net	2		3
Total other income (expenses), net	*		*
Income (loss) before provision for income taxes	2		(4)
Provision for income taxes	(1)		(1)
Net income (loss) attributable to common stockholders	2	%	(5	%)

____________________________________
* Less than 0.5% of revenue.

** Columns may not sum due to rounding.

Comparison of the Three Months Ended March 31, 2025 and 2024

Revenue

	Three Months Ended
	September 30,
	March 31,
	2024		2023		Change
	2025		2024		Change
	(Dollars in thousands)
Twilio Communications	$	1,~~060~~096,~~250~~806	$	~~960~~972,~~289~~005	$	99124,~~961~~801	1013	%
Twilio Segment	7375,~~399~~657		7375,~~381~~045		18612		—1	%
Consolidated total revenue	$	1,~~133~~172,~~649~~463	$	1,~~033~~047,~~670~~050	$	99125,~~979~~413	1012	%

In the three months ended ~~September~~March 3031, ~~2024~~2025, Communications revenue increased by $~~100~~124.08 million, or 1013%, compared to the same period last year. This increase was primarily attributable to the increased usage of our Communications products by our existing customers, as reflected in our Communications Dollar‑Based Net Expansion Rate of ~~106~~108%, as well as an increase of $5150.1 9 million in revenue derived from our new Communications Active Customer Accounts.

In the three months ended ~~September~~March 3031, ~~2024~~2025, Segment revenue ~~remained~~increased ~~unchanged~~by $0.6 million, or 1%, compared to the same period last year. WeThis ~~recognized~~increase was primarily attributable to an increase of $65.90 million in revenue derived from our new Segment Active Customer Accounts, partially offset by the decreased usage of our Segment products due to churn and contraction affecting our existing customers, as reflected in our Segment Dollar‑-Based Net Expansion Rate of 9194%.

~~Cost of Revenue and Gross Profit~~32

	Three Months Ended
	September 30,
	2024		2023		Change
	(Dollars in thousands)
Cost of revenue	$	555,020	$	517,351	$	37,669	7	%
Gross profit	$	578,629	$	516,319	$	62,310	12	%

In the three months ended September 30, 2024, cost of revenue increased by $37.7 million, or 7%, compared to the same period last year. The increase was primarily attributable to a $43.9 million increase in network service providers’ costs, net of the impact of hedging instruments, and a $9.1 million increase in hosting fees. These increases were partially offset by a $13.4 million decrease in amortization of intangible assets.

In the three months ended September 30, 2024, gross profit increased by $62.3 million, or 12%, compared to the same period last year. This increase was attributable to the factors impacting our revenue and cost of revenue, as described above.

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Operating Expenses

	Three Months Ended
	September 30,
	2024		2023		Change
	(Dollars in thousands)
Research and development	$	260,903	$	241,654	$	19,249	8	%
Sales and marketing	212,576		262,898		(50,322)		(19)	%
General and administrative	106,350		114,071		(7,721)		(7)	%
Restructuring costs	3,694		3,437		257		7	%
Impairment of long-lived assets	—		3,162		(3,162)		(100)	%
Total operating expenses	$	583,523	$	625,222	$	(41,699)	(7)	%

In the three months ended September 30, 2024, research and development expenses increased by $19.2 million, or 8%, compared to the same period last year. The increase was primarily attributable to a $14.6 million increase in total personnel costs, net of capitalized costs, despite a 6% decrease in average research and development headcount compared to the same period last year. The increase in personnel costs was primarily driven by a $27.2 million increase in bonus expenses as a result of the introduction of our new cash bonus program, partially offset by a $5.3 million increase in capitalized costs and an $8.0 million decrease in stock-based compensation expense. The increase in research and development expenses was also attributable to a $4.6 million increase in hosting fees to support development and staging of our products.

In the three months ended September 30, 2024, sales and marketing expenses decreased by $50.3 million, or 19%, compared to the same period last year. The decrease was primarily attributable to a $20.6 million decrease in total personnel costs, which was primarily driven by a 16% decrease in average sales and marketing headcount compared to the same period last year. The decrease in headcount was primarily due to the restructuring of our workforce in December 2023. Sales and marketing expenses also decreased due to an $8.1 million decrease in advertising expenses, a $7.7 million decrease in amortization of intangible assets and a $6.7 million decrease in expenses related to corporate events.

In the three months ended September 30, 2024, general and administrative expenses decreased by $7.7 million, or 7%, compared to the same period last year. The decrease was primarily attributable to a $15.8 million decrease in the provision for doubtful accounts, partially offset by a $7.0 million increase in professional services fees.

In the three months ended September 30, 2024, restructuring costs increased by $0.3 million, or 7%, compared to the same period last year. Restructuring costs and related fluctuations were not significant.

In the three months ended September 30, 2024, impairment of long-lived assets decreased by $3.2 million, or 100%, compared to the same period last year. The prior year charges were related to the impairment of certain of our operating leases and other long-lived assets as a result of permanent office closures in 2023. There were no such impairments in the current period.

Other (Income) Expenses, net

	Three Months Ended
	September 30,
	2024		2023		Change
	(Dollars in thousands)
Share of losses from equity method investment	$	25,279	$	31,058	$	(5,779)	(19)	%
Impairment of strategic investments	803		—		803		100	%
Other income, net	(27,325)		(1)		(27,324)		(100)	%
Total other (income) expenses, net	$	(1,243)	$	31,057	$	(32,300)	(104)	%

In the three months ended September 30, 2024, other (income) expenses, net, increased by $32.3 million, or 104%, compared to the same period last year. The decrease was primarily attributable to a $27.3 million increase in other income, net, primarily related to the income earned on our securities in the current period and unrealized gains related to fluctuations in foreign currency exchange rates, and a $5.8 million decrease in our share of losses from our equity method investment.

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Results of Operations by Segment

The following table presents the results for non-GAAP income (loss) from operations, as reviewed by our CODM, for each of our Communications and Segment reportable segments for the three months ended September 30, 2024 and 2023:

	Three Months Ended
	September 30,
	2024		2023		Change
	(Dollars in thousands)
Twilio Communications non-GAAP income from operations	$	267,773	$	220,610	$	47,163	21	%
Twilio Segment non-GAAP loss from operations	$	(15,805)	$	(17,740)	$	1,935	(11)	%

In the three months ended September 30, 2024, Communications non-GAAP income from operations increased by $47.2 million, or 21%, compared to the same period last year. The increase was primarily driven by an increase in Communications revenue of $100.0 million, as described in the Revenue section above, and a $15.6 million decrease in the provision for doubtful accounts. This increase was partially offset by a $43.9 million increase in network service providers’ costs, net of the impact of hedging instruments, and a $22.5 million increase in total Communications personnel costs, despite a 9% decrease in average Communications headcount during the period. The $22.5 million increase in total Communications personnel costs was primarily driven by a $26.8 million increase in bonus expenses as a result of the introduction of our new cash bonus program.

In the three months ended September 30, 2024, Segment non-GAAP loss from operations decreased by $1.9 million, or 11%, compared to the same period last year. The decrease was driven by a decrease in Segment operating expenses of $5.8 million, partially offset by an increase in hosting fees of $3.0 million.

Comparison of Nine Months Ended September 30, 2024 and 2023

Revenue

	Nine Months Ended
	September 30,
	2024		2023		Change
	(Dollars in thousands)
Twilio Communications	$	3,039,558	$	2,857,772	$	181,786	6	%
Twilio Segment	223,643		220,223		3,420		2	%
Consolidated total revenue	$	3,263,201	$	3,077,995	$	185,206	6	%

In the nine months ended September 30, 2024, Communications revenue increased by $181.8 million, or 6%, compared to the same period last year. This increase was primarily attributable to the increased usage of our products by our existing customers, as reflected in our Communications Dollar‑Based Net Expansion Rate of 104%, as well as $148.6 million in revenue derived from our new Communications Active Customer Accounts and new customer accounts from Zipwhip. These increases were partially offset by a decrease of $52.8 million related to revenue from our Internet of Things and ValueFirst businesses which we divested during the second and third quarters of 2023, respectively.

In the nine months ended September 30, 2024, Segment revenue increased by $3.4 million, or 2%, compared to the same period last year. This change was primarily attributable to $23.5 million in revenue derived from our new Segment Active Customer Accounts, partially offset by the decreased usage of our products due to churn and contraction affecting our existing customers, as reflected in our Segment Dollar‑Based Net Expansion Rate of 92%.

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Cost of Revenue and Gross Profit

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2024		2023				Change
	2025		2024		Change
	(Dollars in thousands)
Cost of revenue	$	1590,~~584,686~~896	$	1503,~~565,231~~009	$	87,887	$17	~~19,455~~	%	1	%
Gross profit	$	1581,~~678,515~~567	$	1544,~~512,764~~041	$	37,526	$7	~~165,751~~	%	11	%

In the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025, cost of revenue increased by $1987.5 9 million, or 117%, compared to the same period last year. The increase was primarily attributable to a $3076.27 million increase in network service ~~providers’~~provider costs, net of the impact of hedging instruments~~, and a $30~~.~~0 million increase in hosting fees. These increases were partially offset by a $41.6 million decrease in amortization of intangible assets.~~

In the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025, gross profit increased by $~~165~~37.8 5 million, or 117%, compared to the same period last year. This increase was attributable to the factors impacting our revenue and cost of revenue, as described above.

Operating Expenses

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2024		2023		Change
	2025		2024		Change
	(Dollars in thousands)
Research and development	$	~~756~~254,~~170~~295	$	~~707~~260,~~145~~457	$	49(6,~~025~~162)	7(2)	%
Sales and marketing	~~644~~212,~~150~~113		~~784~~214,~~383~~503		(~~140~~2,~~233~~390)		(181)	%
General and administrative	~~332~~92,~~300~~077		~~361~~112,~~491~~585		(2920,~~191~~508)		(818)	%
Restructuring costs	13,330		140,281		(126,951)		(90)	%
Total operating expenses	$	558,485	$	587,545	$	(29,060)	(5)	%
Impairment of long-lived assets	—		34,278		(34,278)		(100)	%
Total operating expenses	$	1,745,950	$	2,027,578	$	(281,628)	(14)	%

In the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025, research and development expenses ~~increased~~decreased by $496.02 million, or 72%, compared to the same period last year. ~~The~~Fluctuations ~~increase was primarily attributable to a $30.7 million increase~~ in total personnel costs, net of capitalized costs, which was primarily driven by a $55.6 million increase in bonus expenses as a result of our new cash bonus program, partially offset by a $20.3 million decrease in salaries expense due to a 17% decrease in average research and development headcount compared to the ~~same~~various ~~period last year as a result of the restructuring of our workforce in February 2023 and December 2023. The increase in~~ research and development ~~expenses~~expense ~~was~~categories ~~also~~were ~~attributable~~not tosignificant aeither ~~$10.7 million~~individually ~~increase~~or in ~~hosting~~the ~~fees to support development and staging of our products and an $8~~aggregate.~~8 million increase in software subscription expenses.~~

In the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025, sales and marketing expenses decreased by $~~140.~~2.4 million, or 181%, compared to the same period last year. ~~The~~Fluctuations ~~decrease was primarily attributable to a $79.4 million decrease~~ in ~~total~~the ~~personnel~~various ~~costs, which was primarily driven by a 21% decrease in average~~ sales and marketing ~~headcount~~expense ~~compared~~categories towere ~~the~~not ~~same~~significant ~~period~~either ~~last~~individually ~~year.~~or ~~The decrease~~ in ~~headcount was primarily driven by~~ the ~~restructuring of our workforce in February 2023 and December 2023~~aggregate. Sales and marketing expenses also decreased due to a $24.0 million decrease in amortization of intangible assets, a $13.4 million decrease in advertising expenses and an $8.5 million decrease in expenses related to corporate events.

In the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025, general and administrative expenses decreased by $2920.25 million, or 818%, compared to the same period last year. The decrease was primarily attributable to ~~the~~an $328.~~3 million loss on divested net assets recorded in the 2023 period related to the sale of our ValueFirst and Internet of Things businesses and a $22.~~7 million decrease in ~~the~~stock-based ~~provision~~compensation ~~for~~expense, ~~doubtful accounts. The decrease in general and administrative expenses was partially offset by~~ a $146.03 million ~~increase~~decrease in professional services fees and a $133.98 million ~~increase~~decrease in ~~charitable contributions that we made through Twilio.org during~~ the ~~first~~provision ~~nine~~for ~~months~~doubtful ~~of 2024~~accounts.

InOther ~~the~~Income ~~nine months ended September 30~~(Expenses), 2024, restructuring costs decreased by $127.0 million, or 90%, compared to the same period last year. The decrease was primarily attributable to the significant restructuring costs incurred in the 2023 period related to our February 2023 restructuring activities.net


	Three Months Ended
	March 31,
	2025		2024		Change
	(Dollars in thousands)
Share of losses from equity method investment	$	(19,471)	$	(29,575)	$	10,104	(34)	%

Other income, net	22,973		27,918		(4,945)		(18)	%
Total other income (expenses), net	$	3,502	$	(1,657)	$	5,159	(311)	%

In the three months ended March 31, 2025, other income (expenses), net, increased by $5.2 million, or 311%, compared to the same period last year. The increase was primarily attributable to a $10.1 million decrease in our share of losses from our equity method investment, partially offset by a $4.9 million decrease in other income, net, primarily related to the income earned on our debt securities.

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InSegment ~~the~~Results ~~nine months ended September 30, 2024, impairment~~ of long-lived assets decreased by $34.3 million, or 100%, compared to the same period last year. The prior year charges were related to the impairment of certain of our operating leases and other long-lived assets as a result of permanent office closures in the first half of 2023. There were no such impairments in the current period.Operations

~~Other~~The ~~Expenses~~following table presents the results for non-GAAP income (loss) from operations, ~~net~~as reviewed by our CODM, for each of our Communications and Segment reportable segments for the three months ended March 31, 2025 and 2024:

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2024		2023				Change
	2025		2024		Change
	(Dollars in thousands)
Share of losses from equity method investment	$	78,794	$	93,838			$	(15,044)		(16)	%
Twilio Communications	$	277,462	$	249,010	$	28,452	11		%
Impairment of strategic investments	1,470		46,154				(44,684)			(97)	%
Twilio Segment	$	(1,518)	$	(20,994)	19,476		(93)		%
Other income, net	(72,644)		(17,731)				(54,913)			(310)	%
Total other expenses, net	$	7,620	$	122,261			$	(114,641)		(94)	%

In the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025, ~~other~~Communications ~~expenses,~~non-GAAP ~~net,~~income ~~decreased~~from operations increased by $~~114~~28.65 million, or 9411%, compared to the same period last year. The ~~decrease~~increase was ~~primarily~~driven ~~attributable~~by toan aincrease in Communications revenue of $46124.28 million, ~~impairment~~as ofdescribed ain ~~strategic~~the ~~investment~~Revenue ~~that~~section ~~occurred~~above, ~~during~~and ~~the~~was ~~nine~~partially ~~months~~offset ~~ended~~by ~~September 30, 2023,~~ a $5476.97 million increase in ~~other~~network ~~income~~service provider costs, net, ~~primarily~~of ~~related~~the toimpact anof ~~increase~~hedging ininstruments, ~~income~~a ~~earned~~$13.4 million onincrease ~~our~~in ~~debt~~hosting ~~securities~~fees, and aan $158.01 million ~~decrease~~increase in ~~our~~total ~~share~~personnel ~~of losses from our equity method investment~~costs.

~~Results~~In ofthe ~~Operations~~three months ended March 31, 2025, Segment non-GAAP loss from operations decreased by $19.5 million, or 93%, compared to the same period last year. The decrease was driven by a decrease in Segment operating expenses of $21.8 million primarily attributable to a decrease in total personnel costs and an increase in Segment revenue of $0.6 million, as described in the Revenue section above, partially offset by a $3.0 million increase in hosting fees.

	Nine Months Ended
	September 30,
	2024		2023		Change
	(Dollars in thousands)
Twilio Communications non-GAAP income from operations	$	766,713	$	593,599	$	173,114	29	%
Twilio Segment non-GAAP loss from operations	$	(52,613)	$	(53,937)	$	1,324	(2)	%

In the nine months ended September 30, 2024, Communications non-GAAP income from operations increased by $173.1 million, or 29%, compared to the same period last year. The increase was primarily driven by an increase in Communications revenue of $181.8 million, as described in the Revenue section above, a $24.8 million decrease in the provision for doubtful accounts and a $10.9 million decrease in total Communications personnel costs, which was mainly due to the restructuring of our workforce in February 2023 and December 2023. These restructurings contributed to a 21% decrease in average Communications headcount compared to the same period last year. These drivers were partially offset by a $30.2 million increase in network service providers’ costs, net of the impact of hedging instruments, and a $23.1 million increase in hosting fees.

In the nine months ended September 30, 2024, Segment non-GAAP loss from operations decreased by $1.3 million, or 2%, compared to the same period last year. The decrease was driven by a decrease in Segment operating expenses of $7.6 million and an increase in Segment revenue of $3.4 million, as described in the Revenue section above, partially offset by a $9.7 million increase in cost of revenue.

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Liquidity and Capital Resources

As of ~~September~~March 3031, ~~2024~~2025, we had cash and cash equivalents of $~~584~~467.01 million and short-term marketable securities of $2.10 billion. Cash equivalents consist of money market funds, ~~and~~ commercial paper and U.S. treasury bills. Short-term marketable securities consist primarily of U.S. treasury securities, non-U.S. government securities, high credit quality corporate debt securities and commercial paper. The cash and cash equivalents and short-term marketable securities are held for working capital purposes.

Our principal sources of liquidity have been (i) the ~~net~~payments ~~proceeds~~received offrom ~~$979.0~~customers ~~million,~~using ~~$1.4~~our ~~billion~~products; ~~and~~(ii) ~~$1.8 billion, net of underwriting discounts and offering expenses paid by us, from our~~ public equity offerings ~~in June 2019~~, ~~August~~most ~~2020~~recently ~~and~~in February 2021~~, respectively~~; and (iiiii) ~~the aggregate net proceeds of approximately $984.7 million, after deducting purchaser discounts and~~ debt ~~issuance costs paid by us~~financings, ~~from~~most recently the issuance of our 2029 Notes and 2031 Notes ~~in March 2021~~ (each, as defined below); ~~(iii) the net proceeds of $228.4 million, after deducting transaction costs paid by us, from settlement of our capped call arrangements~~ in ~~June~~March 2021~~; and (iv) the payments received from customers using our products~~.

Our primary uses of cash include operating costs, such as personnel-related costs, network service provider costs, cloud infrastructure costs, facility-related spending, asacquisitions ~~well~~and ~~as,~~investments we may make from time to time, ~~acquisitions,~~and ~~investments~~repurchases ~~and~~of common stock under our share ~~repurchases~~repurchase program. Our principal contractual and other commitments consist of obligations under our 2029 Notes and 2031 Notes, our operating leases for office space that we occupy, sublease or hold to sublease, and contractual commitments to our cloud infrastructure and network service providers. Refer to Note 109 and Note 1211(a) to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for discussions of our obligations and commitments related to leases, debt and other purchase obligations.

We may, from time to time, consider acquisitions of, or investments in, complementary businesses, products, services, capital infrastructure or technologies which might affect our liquidity requirements or cause us to secure additional financing or issue additional equity or debt securities. There can be no assurance that additional credit lines or financing instruments will be available in amounts or on terms acceptable to us, if at all.

We believe that our cash, cash equivalents and marketable securities balances, as well as the cash flows generated by our operations, will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditure needs, including authorized share repurchases, for the next 12 months and beyond. However, our belief may prove to be incorrect, and we could utilize our available financial resources sooner than we currently expect. We may be required to seek additional equity or debt financing in order to meet our future capital requirements. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital when desired, our business, results of operations and financial condition would be adversely affected. Our future capital requirements, the adequacy of our available funds and our cash from operations depend on many factors and are affected by various risks and uncertainties, including those set forth in Part II, Item 1A, “Risk Factors.”

~~Share Repurchase Programs~~34

In February 2023, our board of directors authorized a share repurchase program pursuant to which we may repurchase up to $1.0 billion in aggregate value of our common stock. In March 2024, our board of directors authorized a second share repurchase program for an additional $2.0 billion in aggregate value of our common stock. As of September 30, 2024, we have repurchased approximately $2.6 billion of our common stock in the open market under these programs, and approximately $412.0 million of the aggregate authorized amount remained available for future repurchases. Repurchases under these programs will be made through open market, private transactions or other means in compliance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans. We have discretion in determining the conditions under which shares may be repurchased from time to time. The programs expire on December 31, 2024.

In the three and nine months ended September 30, 2024, we repurchased $633.0 million in aggregate value, or 10.6 million shares, and $1.9 billion in aggregate value, or 32.0 million shares, respectively, of our common stock on the open market under these programs.

2029 Notes and 2031 Notes

In March 2021, we issued and sold $1.0 billion aggregate principal amount of senior notes, consisting of $500.0 million principal amount of 3.625% notes due 2029 (the “2029 Notes”) and $500.0 million principal amount of 3.875% notes due 2031 (the “2031 Notes,” and together with the 2029 Notes, the “Notes”). These Notes are described in detail in Note 14 to our Annual Report on Form 10-K filed with the SEC on February 27, 2024.

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Share Repurchase Program

In January 2025, our board of directors authorized a share repurchase program to repurchase up to $2.0 billion in aggregate value of our Class A common stock. Repurchases under this program can be made through open market, private transactions or other means, in compliance with applicable federal securities laws, and can include repurchases pursuant to Rule 10b5-1 trading plans. We have discretion in determining the conditions under which shares may be repurchased from time to time. The program expires on December 31, 2027.

In the three months ended March 31, 2025, we purchased $130.2 million in aggregate value, or 1.2 million shares, of our Class A common stock on the open market.

2029 Notes and 2031 Notes

In March 2021, we issued and sold $1.0 billion in aggregate principal amount of senior notes, consisting of $500.0 million principal amount of 3.625% notes due 2029 (the “2029 Notes”) and $500.0 million principal amount of 3.875% notes due 2031 (the “2031 Notes,” and together with the 2029 Notes, the “Notes”). The Notes are described in detail in Note 14 to our Annual Report on Form 10-K filed with the SEC on February 26, 2025.

Cash Flows

The following table summarizes our cash flows:

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2024		2023
	2025		2024
	(In thousands)
Cash provided by operating activities	$	~~607~~191,~~795~~042	$	~~192~~190,~~207~~123
Cash provided by investing activities	1,241,739		365,745
Cash (used in) provided by investing activities	(19,140)		189,770
Cash used in financing activities	(1125,~~903,802~~794)		(~~536~~363,~~221~~229)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—		108
Net increase in cash, cash equivalents and restricted cash	$	46,108	$	16,664
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(54,268)	$	21,839

Cash Flows from Operating Activities

In the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025, cash provided by operating activities consisted primarily of our net ~~loss~~income of $9620.90 million adjusted for non-cash items, including $~~460~~139.83 million of stock-based compensation expense, $~~156~~49.26 million of depreciation and amortization expense, $5719.05 million of our share of losses from an equity method investment, $19.3 million of amortization of deferred commissions, $785.82 million of ~~share~~non-cash ofreduction ~~losses~~in ~~from~~our ~~equity~~operating ~~method~~right-of-use ~~investments~~asset, and $7465.07 million of cumulative changes in operating assets and liabilities. With respect to changes in operating assets and liabilities, accounts receivable and prepaid expenses decreased $2042.90 million primarily due to timing of cash receipts and ~~pre-payments~~prepayments of certain operating expenses. Accounts payable and other current liabilities decreased $3386.24 million, primarily driven by ~~timing~~the payment of ~~payments~~the to2024 ~~vendors~~company-wide bonus in the three months ended March 31, 2025. Operating lease liabilities decreased $3510.43 million due to payments made against our operating lease obligations.

In the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, cash provided by operating activities consisted primarily of our net loss of $~~650~~55.03 million adjusted for non-cash items, including $~~509~~158.46 million of stock-based compensation expense ~~which included the impact of our February 2023 restructuring activities~~, $~~219~~53.03 million of depreciation and amortization expense, $9318.8 million of ~~our share of losses from an equity method investment, $54.4 million of~~ amortization of deferred commissions, $4629.26 million of ~~impairment~~share of anlosses ~~investment~~from ~~that~~equity wemethod ~~acquired~~investments ~~in 2021, $34.3 million of impairment of operating lease assets~~ and ~~other long-lived assets,~~ $3225.31 million ~~loss on net assets divested, $21.8 million~~ of ~~non-cash reduction in our operating right-of-use asset, and $240.3 million of~~ cumulative changes in operating assets and liabilities. With respect to changes in operating assets and liabilities, accounts receivable and prepaid expenses ~~increased~~decreased $~~125~~32.65 million primarily due to ~~revenue growth,~~ timing of cash receipts and ~~prepayments~~pre-payments ~~and~~of certain operating expenses. Accounts payable and other current liabilities decreased $6250.32 million, primarily driven by atiming ~~$22.3 million decrease in the sabbatical benefit accrual as a result~~ of ~~lower headcount and sunsetting of the program and a decrease in personnel-related accruals due to lower headcount. Operating lease liabilities decreased $41.4 million due to~~ payments ~~made against our operating lease obligations. Other long-term assets increased $15.4 million primarily due~~ to ~~an increase in the sales commissions balances related to the growth of our business~~vendors.

Cash Flows from Investing Activities

In the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025, cash ~~provided~~used byin investing activities was $119.21 ~~billion,~~million ~~primarily~~ consisting of $111.36 ~~billion~~million ofrelated ~~maturities~~to ~~and~~capitalized ~~sales~~software development costs, $6.4 million of purchases of marketable securities, ~~net~~and ofother ~~purchases~~investments, ~~partially~~net ~~offset~~of byproceeds ~~$40.3~~from ~~million~~sales ~~related~~and tomaturities ~~capitalized~~of ~~software~~marketable ~~development~~securities, ~~costs~~ and $31.52 million related to purchases of long-lived assets.

In the nine months ended September 30, 2023, cash provided by investing activities was $365.7 million primarily consisting of $372.9 million of proceeds from sales and maturities of marketable securities, net of purchases of marketable securities and other investments, and $38.2 million of proceeds from divestitures, net of cash divested, partially offset by $30.5 million related to capitalized software development costs and $9.0 million related to purchases of long-lived assets.35

Cash Flows from Financing Activities

In the nine months ended September 30, 2024, cash used in financing activities was $1.9 billion, primarily consisting of $1.9 billion of cash paid to repurchase 10.6 million shares of our common stock in the open market, including related costs.

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In the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, cash ~~used~~provided inby ~~financing~~investing activities was $~~536~~189.28 million, primarily consisting of $~~548~~202.96 million of ~~cash~~maturities ~~paid~~and tosales ~~repurchase 9.2 million shares~~ of ~~our~~marketable ~~Class A common stock in the open market~~securities, ~~including~~net ~~related~~of ~~costs~~purchases, ~~and~~partially ~~$13.8 million in principal payments on debt and finance leases,~~ offset by $2811.92 million inrelated ~~proceeds~~to ~~from~~capitalized ~~stock~~software ~~options~~development ~~exercised~~costs ~~by our employees~~ and ~~shares~~$1.7 ~~issued~~million ~~under~~related ~~our~~to ~~employee~~purchases ~~stock~~of ~~purchase~~long-lived ~~plan~~assets.

Cash Flows from Financing Activities

In the three months ended March 31, 2025, cash used in financing activities was $125.8 million primarily consisting of $126.3 million of cash paid to repurchase 1.2 million shares of our Class A common stock in the open market, including related costs.

In the three months ended March 31, 2024, cash used in financing activities was $363.2 million, primarily consisting of $356.9 million of cash paid to repurchase 6.1 million shares of our Class A common stock in the open market, including related costs.

Critical Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

There have been no changes to our critical accounting policies as described in our Annual Report on Form 10-K filed with the SEC on February 2726, ~~2024~~2025.

Recent Accounting Pronouncements Not Yet Adopted

Refer to Note 2 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements not yet adopted.

Available Information

Our filings are available to be viewed and downloaded free of charge through our investor relations website after we file them with the SEC. Our filings include our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, our Proxy Statement for our annual meeting of stockholders, Current Reports on Form 8-K and other filings with the SEC. Our investor relations website is located at http://investors.twilio.com. The SEC also maintains a website that contains periodic and current reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.

We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs as part of our investor relations website. Further corporate governance information, including our corporate governance guidelines and code of business conduct and ethics, is also available on our investor relations website under the heading “Governance.” The contents of our websites are not intended to be incorporated by reference into this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to certain market risks in the ordinary course of our business, including sensitivities as follows:

Interest Rate Risk

We had cash and cash equivalents of $~~584~~467.01 million and marketable securities of $2.10 billion as of ~~September~~March 3031, ~~2024~~2025. In any given period, cash, cash equivalents and restricted cash may consist of bank deposits, money market funds, reverse repurchase agreements, ~~and~~ commercial paper and U.S. Treasury bills. Marketable securities consist primarily of U.S. treasury securities, non-U.S. government securities, high credit quality corporate debt securities and commercial paper. The cash and cash equivalents and marketable securities are held for working capital purposes. Such interest‑earning instruments carry a degree of interest rate risk. To date, fluctuations in interest income have not been significant. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. In March 2021, we issued $1.0 billion aggregate principal amount of our 2029 Notes and 2031 Notes carrying fixed interest rates of 3.625% and 3.875%, respectively. Due to the short‑term nature of our investments and fixed rate nature of our debt, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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Currency Exchange Risks

The functional currency of most of our foreign subsidiaries is the U.S. dollar. The local currencies of our foreign subsidiaries are the Australian dollar, the ~~Bermuda dollar, the~~ Brazilian real, the British pound, the Canadian dollar, the Colombian peso, the ~~Czech Republic koruna, the~~ Euro, the Hong Kong dollar, the Indian rupee, the Japanese yen, the Mexican peso, the Polish zloty, the ~~Serbian dinar, the~~ Singapore dollar and the Swedish krona.

The majority of our subsidiaries remeasure monetary assets and liabilities at period-end exchange rates, while non-monetary items are remeasured at historical rates. Revenue and expense accounts are remeasured at the average exchange rate in effect during the month in which a transaction occurs. If there is a change in foreign currency exchange rates, the conversion of our foreign subsidiaries’ financial statements into U.S. dollars would result in a realized gain or loss which is recorded in our condensed consolidated statements of operations included elsewhere in this Quarterly Report on Form 10-Q.

We enter into foreign currency derivative hedging transactions to mitigate our exposure to market risks that may result from changes in foreign currency exchange rates. For further information, refer to Note 76 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

A hypothetical 10% change in foreign exchange rates during any of the periods presented would not have had a material impact on our unaudited condensed consolidated financial statements.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September~~March 3031, ~~2024~~2025, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

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(b) Changes in Internal Control

There were no changes in our internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended ~~September~~March 3031, ~~2024~~2025, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the organization have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost‑effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Refer to Note 1211(b) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a description of our current material legal proceedings.

Item 1A. Risk Factors

Investing in our Class A common stock (“common stock”) involves a high degree of risk. A description of the risks and uncertainties associated with our business is set forth below. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our ~~condensed~~ consolidated financial statements and related notes, before making a decision to invest in our common stock. The risks and uncertainties described below may not be the only ones we face. If any of the risks actually occur, our business, results of operations and financial condition could be adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.

Risk Factor Summary

Our business operations are subject to numerous risks and uncertainties, including those outside of our control, that could cause our business, results of operations, and financial condition to be harmed, including risks regarding the following:

Risks Related to Our Business and Industry

•the impact of global economic and political conditions, including macroeconomic and political uncertainties;

•fluctuations in our quarterly results and our ability to meet securities analysts’ and investors’ expectations;

•fluctuations in the ~~effectiveness~~levels of ~~actions taken to restructure~~ our ~~business~~customers’ inusage ~~alignment~~of ~~with~~ our ~~strategic priorities~~platform;

•our ~~business~~ability ~~unit~~to ~~reorganization~~attract new customers and ~~further~~increase ~~changes~~usage toof our ~~business~~products ~~organization~~by existing customers effectively and ~~reporting~~in ~~segments~~a cost-efficient manner;

•our ability to ~~maintain~~develop ~~and~~new ~~grow~~products ~~our~~and ~~relationships~~enhancements ~~with~~that ~~existing~~achieve ~~customers~~market ~~such~~acceptance ~~that~~and ~~they~~adapt ~~increase~~to ~~their~~changing ~~usage~~technology, ofregulations, ~~our~~and ~~platform~~industry standards;

•our ability to ~~attract~~integrate ~~new~~our ~~customers~~products inwith ~~a cost~~third-~~effective~~party ~~manner~~products and ensure they operate effectively;

•our ability to ~~increase~~effectively ~~adoption~~manage of our ~~products~~growth byand ~~enterprises~~strategic changes to our business;

•our ability to develop new products and enhancements that achieve market acceptance and adapt to changing technology and regulations, industry standards and interoperability requirements;

•the evolution of the markets for our products;

•our ability to effectively manage our growth;

•our ability to compete effectively in intensely competitive markets;

•the evolution of the markets for our products;

•our history of losses and uncertainty about our future profitability;

•our ability to hire, integrate and retain highly skilled personnel;

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•our ability to maintain and enhance our brand and increase market awareness of our company and products;

•disruptions or deterioration in quality of service and connectivity by third-party service providers;

•failure to set optimal prices for our products;

•our international operations;

•our reliance on our largest customers to generate a significant amount of our revenue;

•our ability to integrate and achieve the expected benefits of acquisitions, partnerships and investments;

Risks Related to Cybersecurity, Data Privacy and Intellectual Property

•any breaches of or incidents impacting our networks or systems, or those of our third-party service providers;

•our actual or perceived failure to comply with increasingly stringent laws, regulations and obligations relating to privacy, data protection and ~~data security~~cybersecurity;

•our ability to protect our intellectual property rights;

•our use of open source software;

•our reliance on third-party technology and intellectual property;

•our use of AI technologies in our platform and business;

Risks Related to Legal and Regulatory Matters

•our ability to comply with telecommunications-related regulations, and the impact of future legislative or regulatory actions;

•our ability to obtain, assign or retain geographical, mobile, regional, local or toll-free numbers and to effectively process requests to port such numbers in a timely manner due to industry regulations;

•federal and state legislation and international laws imposing obligations on the senders of commercial emails;

•unwanted, fraudulent or illegal usage of or activity relating to our products;

•changes in laws and regulations related to the ~~Internet~~internet or its infrastructure;

•compliance with applicable laws and regulations, including export ~~control~~controls, economic ~~trade~~ sanctions, customs and anti-corruption regulations;

•standards imposed by private entities and inbox service providers that interfere with the effectiveness of our platform;

•any legal proceedings or claims against us;

Risks Related to Financial and Accounting Matters

•exposure to foreign currency exchange rate fluctuations;

•our substantial indebtedness that may decrease our business flexibility;

•our ability to obtain additional capital to support our business and its availability on acceptable terms;

•the accuracy of our metrics, and assumptions and estimates used to calculate them;

•the accuracy of our estimates and judgments related to our critical accounting policies;

•changes in accounting standards that may cause adverse financial reporting fluctuations;

•the possibility that our goodwill or intangible assets could become impaired;

•our failure to maintain an effective system of disclosure controls and internal control over financial reporting;

Risks Related to Tax Matters

•our ability to use our net operating losses and certain other tax attributes to offset future taxable income and taxes;

•additional tax liabilities or potentially adverse tax consequences onof our global operations and structure;

•changes in tax rules and regulations;

Risks Related to Ownership of Our Common Stock

•volatility of the trading price of our common stock;

•potential decline in the market price of our common stock due to substantial future sales of shares;

•the possibility that we may not realize the anticipated long-term stockholder value of our share repurchase programs;

•securities or industry analysts changing their recommendations regarding our common stock;

•anti-takeover provisions contained in our governing documents and the exclusive forum provision in our bylaws;

General Risks

•the occurrence of natural catastrophic events and other events beyond our control; and

•~~our initiatives~~environmental, ~~goals,~~social ~~commitments,~~ and ~~disclosures~~governance ~~related to~~ (“ESG”) matters.

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Risks Related to Our Business and Our Industry

Global economic and political conditions, including macroeconomic and political uncertainties, have had, and may continue to ~~adversely~~have, an adverse impact on our business, results of operations and financial condition.

Global economic and business activities continue to face widespread macroeconomic uncertainties, including market volatility, changes in ~~the~~international ~~labor~~economic ~~market~~ and trade relations, supply chain disruptions, ~~inflation~~changes ~~and~~in ~~monetary~~the ~~supply~~labor ~~shifts~~market, ~~volatility~~elevated ininterest ~~the~~rates ~~banking~~ and ~~financial~~potential ~~services~~increases ~~sectors~~in inflation, foreign currency exchange rate fluctuations and recession risks, which may continue for an extended period. Additionally, the instability in the ~~geopolitical~~political environment in many parts of the world, including ~~from the war~~ in ~~Ukraine and conflict in~~ the ~~Middle~~United ~~East~~States, ~~may~~and ~~continue~~changes ~~to cause or exacerbate uncertain economic conditions. These macroeconomic conditions have resulted in,~~ and ~~may~~uncertainty ~~continue~~with respect to ~~result~~trade inpolicies, ~~decreased~~actual ~~business~~or ~~spending~~threatened ~~by our current and prospective customers and business partners~~tariffs, ~~reduced demand for or usage of our products~~treaties, ~~lower~~government ~~renewal rates by our customers~~regulations, ~~longer~~executive ~~or delayed sales cycles~~orders, ~~including~~directives ~~current~~ and ~~prospective~~enforcement ~~customers~~priorities ~~delaying~~could ~~contract~~have ~~signing~~an oradverse ~~contract~~effect ~~renewals,~~on ~~reduced budgets or minimum commitments related to~~ the ~~products~~global ~~that~~economy ~~we offer,~~ and/or ~~delays in customer payments or~~ our ~~ability~~business. toGiven ~~collect~~that ~~accounts~~a ~~receivable,~~majority ~~all~~ of ~~which~~our ~~could~~revenue ~~have~~is anusage-based ~~adverse~~and ~~impact~~therefore onimpacted ~~our~~by ~~business,~~general ~~results~~consumer ofsentiment ~~operations~~ and ~~financial condition. Additionally~~activity, ~~the~~our ~~results~~business ofmay ~~the~~be ~~2024~~more ~~U.S.~~immediately ~~presidential~~and ~~election~~severely ~~could~~impacted ~~lead~~by toadverse ~~changes in~~ macroeconomic conditions ~~and~~than tothose ~~the~~that ~~legal~~rely ~~and~~primarily ~~regulatory~~on ~~environment~~subscription inrevenue. ~~the United States and globally~~Additionally, ~~including~~increased ~~changes~~prices toresulting ~~international~~from ~~trade~~the ~~relations,~~effects ~~economic~~of ~~and~~tariffs ~~monetary policies or other legislation~~ and ~~regulations,~~inflation ~~any of which~~ could ~~have~~increase ~~an adverse impact on the global economy and/or~~ our ~~business~~operating expenses.

~~The~~Adverse ~~current~~ macroeconomic ~~environment~~conditions ~~has~~have ~~constrained~~in the ~~budgets~~past ~~and~~resulted ~~financial~~in, ~~resources~~and ofmay ~~some~~in ofthe ~~our~~future ~~current~~result ~~and prospective customers~~in, ~~which~~decreased ~~has caused them to become more budget-conscious and to delay and/~~or ~~reduce~~delayed business spending. ~~Given~~by ~~that a majority of~~ our ~~revenue~~current ~~is usage-based~~ and ~~impacted~~prospective bycustomers ~~general consumer sentiment~~ and ~~activity, our~~ business ~~may~~partners, bereduced ~~more~~demand ~~immediately~~for and severely impacted by adverse macroeconomic conditions than those that rely primarily on software-as-a-service (“SaaS”) subscription revenue. The current macroeconomic environment has caused certain of our usage-based customers to reduce or ~~terminate their~~ usage of our products ~~without notice or termination charges~~, ~~which~~lower ~~has~~renewal ~~negatively~~rates ~~impacted,~~by ~~and,~~our ~~despite recent stabilization in usage volumes~~customers, ~~may~~longer inor ~~the~~delayed ~~future~~sales ~~negatively impact~~cycles, ~~our~~including ~~usage-based revenue. Similarly, the~~ current ~~macroeconomic~~and ~~environment~~prospective ~~has~~customers ~~caused~~delaying ~~certain~~contract ofsigning ~~our~~or ~~subscription-based~~contract ~~customers~~renewals, toreduced ~~renegotiate~~budgets ~~existing~~or ~~contracts~~minimum oncommitments ~~less~~related ~~advantageous terms~~ to usthe ~~than~~products ~~those~~that ~~currently~~we ~~in place~~offer, ~~reduce~~ or ~~limit~~delays ~~their~~in ~~contract~~customer ~~value, default on~~ payments ~~due on existing contracts,~~ or ~~fail~~our ability to ~~renew~~collect ataccounts ~~the~~receivable, ~~end~~all of ~~their current contract term,~~ which ~~has had, and may continue to have, a negative impact on our subscription-based revenue. A prolonged economic slowdown~~ could ~~exacerbate~~negatively ~~these~~affect ~~negative effects on~~ revenue and revenue growth ~~in both our Communications and Segment business units~~. Additionally, ~~when~~our customers ~~fail to pay us or reduce their spending with us, we~~ may be ~~adversely~~ affected by anchanges ~~inability~~and touncertainty ~~collect~~in ~~amounts due,~~ the ~~costs~~global ofpolitical ~~enforcing~~environment ~~the~~with ~~terms~~respect ofto ~~our~~trade ~~contracts, including through litigation,~~ and~~/or~~ aother ~~reduction in revenue~~policies. For example, inuncertainty ~~February~~regarding ~~2023,~~the ~~one~~impact of ~~our~~tariffs ~~customers,~~on Oicertain ~~SA,~~countries aby ~~Brazilian~~the ~~telecom~~U.S. ~~company~~administration, ~~initiated reorganization proceedings in a Brazilian bankruptcy court~~ as well as apotential ~~secondary~~or ~~proceeding~~actual ~~under~~retaliatory ~~Chapter~~measures 15taken inby ~~the~~trade ~~United~~partners, ~~States~~have ~~and~~adversely ~~exposed~~affected ustrade torelations, ~~risks~~put onincreased ~~collections~~pressure ofon ~~pre-petition~~supply ~~receivables~~chains, and ~~ongoing~~led ~~revenue,~~to asincreased ~~detailed~~market ~~in Part I~~volatility, ~~Item 2, “Management’s Discussion~~ and ~~Analysis~~such ofeffects ~~Financial~~may ~~Condition and Results of Operations—Factors Affecting Our Results of Operations~~continue.” IfAny ~~the~~resulting ~~effects~~harm ~~of the current macroeconomic environment continue~~ to ~~adversely affect~~ our ~~business~~customers’ ~~and~~businesses ~~the~~could ~~businesses~~depress oftheir ~~our~~usage ~~current~~levels and/or ~~prospective~~purchasing ~~customers,~~power ~~our results of operations~~ and ~~financial~~lead ~~condition~~them ~~may continue~~ to bereduce ~~harmed,~~their ~~and~~spending ~~many~~with ~~of the other risks described in this “Risk Factors” section will be exacerbated~~us.

If customers fail to pay us as a result of adverse macroeconomic or geopolitical conditions or otherwise, we may be required to take steps to enforce the terms of our contracts and collect amounts due, which may not succeed. For example, in 2023, one of our customers in Brazil initiated reorganization proceedings exposing us to risks on collections of pre-petition receivables and ongoing revenue, and in 2024 its creditors approved a reorganization plan providing extended and discounted payment terms for pre-petition receivables. As a result of a reduction in ongoing payment activity from this customer, as of December 31, 2024, we fully reserved accounts receivable balances for this customer.

Macroeconomic and political conditions and uncertainties have in the past and may in the future adversely affect our business, results of operations and financial condition, and exacerbate many of the other risks described in this “Risk Factors” section.

Our quarterly and annual results of operations have fluctuated in the past and may continue to do so in the future. As a result, we may fail to meet securities analysts’ and investors’ expectations, which could cause the price of our common stock to decline.

Our quarterly and annual results of operations have fluctuated in the past and may continue to do so in the future due to a variety of factors, many of which are outside of our control. These fluctuations and the related impacts to any earnings guidance we may issue from time to time could cause the price of our common stock to change significantly or ~~experience declines~~decline. In addition to the other risks described in this “Risk Factors” section, some of the factors that may result in fluctuations to our results of operations include:

•fluctuations in demand for, pricing of, or usage of, our products, including due to the effects of global macroeconomic conditions, competition, and differing levels of demand for our products based on changing customer priorities, resources, financial conditions and economic outlook;

•~~general~~our ~~economic~~ability ~~conditions,~~to ~~including~~introduce anew ~~downturn or recession~~products, ~~heightened~~features ~~inflation~~ and ~~interest rates, and geopolitical uncertainty and instability~~enhancements;

•changes in the organization of our business units;

•the amount and timing of costs, and any adverse effects associated with, our workforce reductions;

•our ability to attract and retain new customers, obtain renewals from existing customers and cross-sell or otherwise increase revenue from existing customers;

•our ability to ~~introduce~~improve, ~~new~~automate, ~~products~~ and ~~enhance~~leverage ~~existing~~more ~~products~~of our self-service capabilities for customers;

•our ability to ~~leverage~~maintain ~~more~~and ofexpand ~~our~~relationships ~~self-service~~with ~~capabilities~~resellers, ~~for~~distributors, ~~customers~~and strategic partners, including ISVs, technology partners, and systems integrators;

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•our ability to expand our customer base and the markets that our products address;

•our ability to combine our communications products with contextual data and AI and introduce compelling new products and enhancements that address the changing nature of our markets and customer needs and preferences;

•competition and the actions of our competitors, including pricing changes and the introduction of new technologies, products, services and geographies;

•significant security breaches or incidents impacting our platform, or interruptions to the delivery and use of our products;

•changes in cloud infrastructure, network services and other third-party technology, including the fees charged by their providers;

•the effectiveness of our sales and marketing efforts and the productivity of our sales force;

•the length and complexity of the sales cycle for certain of our products or customers;

•changes in the mix of products that our customers use during a particular period;

•seasonal trends, inincluding due to increased consumer activity; in the fourth quarter;

•changes in the mix or amount of products sold in the United States versus internationally;

•the amount and timing of operating costs and capital expenditures related to the operations and expansion of our business;

•expenses in connection with mergers, acquisitions, dispositions, or other strategic transactions;

•the timing of customer payments and our ability to collect accounts receivable from customers;

•our ability to control costs, including our operating expenses;

•the timing of customer payments and our ability to collect accounts receivable from customers;

•the amount and timing of costs associated with recruiting, training and integrating new employees, and retaining existing employees;

•expenses in connection with mergers, acquisitions, dispositions, or other strategic transactions;

•changes in foreign currency exchange rates and our ability to effectively hedge our foreign currency exposure;

•extraordinary expenses such as litigation or other dispute-related settlement payments;

•changes in laws, industry standards and regulations that affect our business;

•sales tax and other tax determinations by authorities in the jurisdictions in which we conduct business;

•the impact of new accounting pronouncements; ~~and~~

•fluctuations in stock-based compensation expenses.; and

~~The~~•general ~~occurrence~~economic ~~of one or more of the foregoing and other factors may cause our results of operations to vary significantly. As such~~conditions, ~~comparing~~including ~~our~~heightened ~~operating~~inflation ~~results~~or oninterest ~~a period-to-period basis may not be meaningful and should not be relied upon as an indication of future performance. In addition~~rates, ~~a significant percentage of our operating expenses is fixed in nature~~ and isgeopolitical ~~based~~uncertainty on forecasted revenue trends. Accordingly, in the event of a revenue shortfall, we may not be able to mitigate the negative impact on our net income (loss) and margins in the short term. If we fail to meet or ~~exceed the expectations of investors or securities analysts, then the trading price of our common stock could fall substantially, and we~~ instability.

47The occurrence of one or more of the foregoing and other factors may cause our results of operations to vary significantly. As such, comparing our operating results on a period-to-period basis may not be meaningful and should not be relied upon as an indication of future performance. In addition, a significant percentage of our operating expenses is fixed in nature and is based on forecasted revenue trends. Accordingly, in the event of a revenue shortfall, we may not be able to mitigate the negative impact on our net income (loss) and margins in the short term. If we fail to meet or exceed the expectations of investors or securities analysts, then the trading price of our common stock could fall substantially, and we could face costly lawsuits, including securities class action suits, which, in turn, could harm our business, results of operations and financial condition.

~~could face costly lawsuits, including securities class action suits, which, in turn, could harm our business, results of operations and financial condition.~~41

~~Actions~~Table ~~that~~of ~~we are taking to restructure our business in alignment with our strategic priorities may not be as effective as anticipated.~~Contents

WeIf ~~have reduced~~ our ~~workforce~~customers byterminate ~~approximately~~or ~~35% since September 2022. While our reductions in force and other efforts to restructure our business were designed to streamline operations,~~ reduce ~~operating~~their ~~costs,~~usage ~~improve~~of ~~operating margins, and realign~~ our ~~selling capacity~~products, ~~we may encounter challenges in the execution of these efforts that could prevent us from recognizing the intended benefits of such efforts or otherwise adversely affect~~ our business, results of operations and financial condition. would be adversely affected.

AsOur arevenue ~~result~~grows of the reductions in force, we have incurred, and may continue to incur, additional costs in the short term, including cash expenditures for employee transitions, notice period and severance payments, employee benefits and related facilitation costs, as ~~well~~customers asincrease ~~non-cash~~their ~~expenditures~~usage ~~related to vesting~~ of ~~share-based~~a ~~awards. These additional cash and non-cash expenditures could have the effect of reducing our operating margins. Our reductions in force may result in unintended consequences~~product, ~~including~~extend ~~employee~~their ~~attrition~~usage ~~beyond our intended reduction in force; damage to our corporate culture and decreased employee morale among our remaining employees; diversion~~ of ~~management~~a ~~attention;~~product ~~damage~~ to ~~our~~new ~~reputation~~applications asor anadopt ~~employer,~~a ~~which could make it more difficult for us to hire~~ new ~~employees~~product inthat ~~the~~we ~~future; and the loss of institutional knowledge and expertise of departing employees~~offer. IfThe wemajority ~~experience any~~ of ~~these adverse consequences,~~ our ~~reductions~~revenue inis ~~force~~usage-based, and ~~other~~if ~~restructuring~~our ~~efforts~~customers ~~may~~do not ~~achieve~~increase ~~or sustain~~ their ~~intended~~use ~~benefits, or the benefits, even if achieved, may not be adequate to meet our profitability and operational expectations, which could adversely affect our business, results~~ of ~~operations and financial condition. In addition,~~ our ~~reductions~~products ~~in force and other restructuring efforts could lead us to fail to meet,~~ or ~~cause~~maintain ~~delays~~their inusage ~~meeting,~~of our ~~operational~~products ~~and~~at ~~growth~~existing ~~targets. While positions have been eliminated~~levels, ~~functions~~then ~~that they performed remain necessary to~~ our ~~operations,~~revenue ~~and we~~ may bedecline unsuccessful in effectively and efficiently distributing the duties and obligations of departed employees among our remaining employees. The reduction in our workforce could also prevent us from pursuing new opportunities and initiatives or ~~require~~grow usat torates ~~adjust~~lower ~~our~~than ~~growth strategy~~expected. AsMost ~~part~~ of our ~~reductions~~usage-based incustomers ~~force,~~do wenot have ~~reduced~~long-term ~~the~~contractual ~~size~~financial ofcommitments ~~our sales force~~ to ~~drive~~us ~~further~~and, ~~efficiencies in our sales operations. With a smaller workforce~~therefore, wemay ~~are~~reduce ~~relying~~or ~~more~~cease ~~heavily~~their onuse ~~our self-service model to drive sales~~ of our ~~Communications~~ products toat ~~customers~~any ~~that~~time dowithout ~~not~~penalty ~~require~~or ~~direct~~termination ~~account coverage~~charges. Our ~~self~~subscription-~~service~~based ~~capabilities~~customers ~~may~~generally ~~not~~base betheir ascontract ~~successful~~value ason weanticipated ~~anticipate~~usage, and ~~similarly,~~if ~~our~~their ~~efforts~~anticipated tolevels ~~accelerate~~of ~~Segment~~usage ~~sales~~are ~~may~~ not ~~be effective or may take longer than we expect to drive growth. If we experience any of these adverse consequences~~met, ~~our~~they ~~reductions in force and other restructuring efforts~~ may ~~not~~reduce ~~achieve or sustain~~ their ~~intended~~contract ~~benefits,~~value or ~~the~~choose ~~benefits, even if achieved, may~~ not ~~be adequate~~ to ~~meet~~renew ~~our~~their ~~profitability~~contract ~~and~~upon ~~operational~~its ~~expectations, which could adversely affect our business, results of operations and financial condition~~expiration.

AsCustomers may terminate or reduce their use of our products, or we ~~continue~~may fail to ~~identify~~attract ~~areas~~new ofcustomers, ~~cost~~for ~~savings~~any ~~and~~number ~~operating~~of ~~efficiencies~~reasons, weincluding ~~may~~dissatisfaction ~~consider~~with ~~implementing~~our ~~further~~products ~~measures~~or with the value proposition of our products, our inability to ~~reduce~~meet ~~operating~~their ~~costs~~needs and ~~improve~~expectations, ~~operating~~our ~~margins.~~failure Weto ~~may~~maintain ~~not~~performance, bereliability, ~~successful~~security, inintegrity ~~implementing~~or ~~such~~availability ~~initiatives~~of our products and infrastructure to the satisfaction of our customers, ~~including~~or ascustomers’ ause ~~result~~of competitors’ products. For example, prior instances of ~~factors~~disruptions ~~beyond~~in our ~~control.~~cloud Ifcommunications weplatform ~~are~~have ~~unable~~impacted our customers’ ability to ~~realize~~use ~~the~~products ~~anticipated~~on ~~savings~~our ~~and~~platform ~~efficiencies~~for ~~from~~up to several hours at a time. Issues with our ~~reductions~~products have had, and in ~~force~~the future may have, ~~other~~an ~~restructuring~~adverse ~~efforts~~impact on customer satisfaction and ~~future~~our ~~strategic~~ability ~~initiatives~~to retain or attract customers and have caused, ~~our~~and ~~business~~may in the future cause, ~~results~~us ofto ~~operations~~incur ~~and~~certain ~~financial~~costs ~~condition~~associated ~~could~~with beoffering ~~harmed~~credits to our affected customers.

InAdditionally, ~~the~~we ~~first~~believe ~~quarter~~our ability to provide customers with high-quality, effective customer support services is a crucial component of ~~2023~~maintaining customer satisfaction, wegenerating ~~reorganized~~increased customer usage of our ~~business~~products ~~into~~and ~~business~~ultimately ~~units~~retaining customers. If we are unable to effectively assist our customers, it could adversely affect our ability to retain existing customers and could disincentivize prospective customers from adopting our products. The resources we ~~have~~dedicate ~~since~~to ~~adopted~~customer service at a ~~two-segment~~particular ~~reporting~~time ~~structure~~may ~~and~~prove ~~further~~insufficient, ~~modified~~such ~~our~~as ~~business~~in ~~units~~the ~~and~~event ~~reporting~~we ~~segments~~are unable to respond quickly enough to accommodate short-term increases in demand for customer support. ~~These~~We ~~changes~~also may be ~~disruptive~~unable to modify the nature, scope and delivery of our customer support in order to compete with changes in the support services provided by our competitors. Our sales are highly dependent on our business reputation and ~~may~~on positive recommendations from our customers. If we are unable to provide high-quality customer support, or if there is a market perception that we do not ~~have~~maintain high-quality customer support, it could erode the ~~desired~~trust ~~effects~~of current and potential customers and adversely affect our reputation. Moreover, even if we succeed in providing and maintaining high-quality customer support, there is no guarantee that it will generate increased customer usage of our products or lead to long-term or meaningful customer retention.

InCustomer ~~the~~usage ~~first~~of ~~quarter~~our products depends on factors generally outside of ~~2023~~our control, weso ~~reorganized~~it ~~our~~is ~~business~~difficult ~~into~~to ~~two~~accurately ~~business~~predict ~~units—Communications~~customers’ ~~and~~usage ~~Data~~levels. &Our ~~Applications~~Dollar-Based ~~(subsequently~~Net ~~renamed~~Expansion ~~Segment).~~Rate ~~Beginning~~may ~~with~~decline ~~the~~for ~~quarter~~a ~~ended~~number ~~June~~of 30reasons, ~~2023,~~including weif ~~changed~~customers are not satisfied with our ~~operating~~products and ~~reporting~~related ~~segment~~customer ~~structure~~service ~~from~~experience, ~~one~~the ~~reportable~~value ~~segment~~proposition toof ~~two~~our ~~reportable~~products ~~segments~~or ~~and~~our ~~revised~~ability ~~our~~to ~~prior~~meet ~~period~~their ~~presentation~~needs toand ~~conform~~expectations, due to ~~the~~reductions ~~new~~in ~~segments.~~customers’ Inbudgets ~~the~~or ~~fourth~~as ~~quarter~~a result of ~~2023,~~adverse macroeconomic conditions. If we ~~further~~lose ~~modified~~customers, ~~the~~or ~~organization~~if our customers reduce their usage levels of our ~~business~~products, ~~units~~our bybusiness, ~~moving~~results ~~Flex~~of operations and ~~Marketing~~financial ~~Campaigns~~condition ~~from~~could ~~Segment~~be toadversely ~~Communications~~affected.

~~Our~~If ~~business~~we ~~unit~~are ~~reorganization~~unable ~~and changes in our segment reporting structure have required, and will continue~~ to ~~require,~~attract ~~significant~~new ~~expenditures,~~customers ~~allocation of valuable management resources, and significant demands on our operational and financial infrastructure. This could lead to a number of risks, including: actual~~ or ~~perceived~~increase ~~disruption~~usage of ~~service~~our orproducts ~~reduction~~by inexisting ~~service standards to our~~ customers; ~~the~~effectively ~~failure~~and toin ~~preserve~~a ~~adequate~~cost-efficient ~~internal controls as we reorganize our general and administrative functions~~manner, ~~including~~ our ~~information technology and financial reporting infrastructure; the failure to preserve partnership~~business, ~~sales~~results ~~and other important relationships and to resolve conflicts that may arise; loss~~ of ~~sales~~operations ~~as we eliminate certain sales positions, reorganize our sales teams,~~ and ~~improve~~financial ~~and~~condition ~~expand~~would ~~our~~be ~~use~~adversely ~~of self-service capabilities; failure to develop effective cross-selling motions between the businesses; failure of the business units to drive efficiencies and leverage; diversion~~ affected.

48To grow our business, we must continue to attract new customers, increase usage of our existing products and new product adoption by existing customers, and successfully market new products, including products with higher gross margins, in a cost-effective manner. Our sales and marketing teams work closely together to drive awareness and adoption of our platform. We leverage our brand, marketing programs, developer network and conferences, such as SIGNAL, to expand our go-to-market motions. Our go-to-market model has three motions: our self-service platform, primarily aimed at developers, marketers, and other technical users; our direct sales motion, primarily aimed at enterprise and commercial customers; and our partner-led motion, including resellers, distributors, and strategic partners, such as ISVs, technology partners and systems integrators, which is primarily aimed at customers who do not have the available developer resources to build their own applications.

ofOur ~~management~~sales ~~attention~~and ~~from~~marketing ~~ongoing~~strategies, ~~business activities~~ and ~~core~~their ~~business~~effectiveness, ~~objectives~~are ininfluenced ~~order~~by tonumerous ~~manage~~factors. ~~operational~~We ~~changes;~~have made, and may in the ~~failure~~future make, changes to ~~maintain~~the ~~our~~organization ~~corporate~~of ~~culture,~~our ~~employee~~sales ~~morale~~force and ~~productivity,~~sales ~~and~~motions in response to ~~retain~~changes ~~highly~~in ~~skilled~~company ~~employees~~strategy, ~~due~~new tomarket ~~reductions~~opportunities, innew ~~our~~products ~~workforce~~or ~~and~~features, sales performance or effectiveness, changes in ~~leadership~~sales ~~structure.~~headcount, ~~Because~~changes to the compensation structure of ~~these~~our ~~and~~sales organization, or other factors,. weSuch ~~cannot~~changes ~~predict~~may ~~whether~~not welead ~~will~~to ~~realize~~wider ~~the~~adoption ~~purpose~~of ~~and~~our ~~anticipated~~products ~~benefits~~or to the cost-effective acquisition of ~~our~~additional ~~business~~customers ~~reorganizations~~or ~~and~~increased ~~segment~~revenue ~~reporting~~from ~~changes~~existing customers as quickly or to the extent we expect, or at all, and ~~any~~have ~~similar~~resulted, ~~changes~~and may in the future result, ~~and~~in ifa wereduction doof ~~not~~productivity, which could negatively impact our ~~business,~~growth rate and results of operations. ~~and~~For ~~financial~~example, ~~condition~~in ~~could~~recent beyears, ~~adversely~~we ~~affected.~~have reduced the size of our sales

In the first quarter of 2024, we conducted an operational review of Segment and developed a plan that we believe will deliver a more effective Segment business. As we announced in March 2024, we are targeting break-even non-GAAP income from operations for Segment by the second quarter of 2025. There is no guarantee that we will achieve our announced operational and financial targets, and if we do not, it could negatively impact the trust of investors or securities analysts, and our results of operations and stock price could be adversely affected.42

~~There~~Table is no guarantee that investors, analysts or the market will understand or favorably view the changes we make to our financial reporting in connection with the shift from one to two segments or that any such changes will have the desired effect. Failure of investors or analysts to understand our revised segment reporting structure may negatively affect their ability to understand our business and operating results, which could adversely affect our stock price. In addition, we test for goodwill impairment at the reporting unit level and consider the difference between the fair value of a reporting unit and its carrying value when determining whether any impairment exists. There can be no assurance that changes to our segment reporting structure and business units will not result in impairment charges in future periods, which could harm our operating results.Contents

~~Our~~force ~~business~~to ~~depends~~drive onfurther ~~customers~~efficiencies ~~increasing~~in ~~their~~our sales operations and are continuing to improve and rely more heavily on our use of self-service capabilities to drive sales of our products, to customers that do not require direct account coverage. We are also introducing AI and aautomation ~~loss~~in ofour ~~customers~~self-service orplatform ~~decline~~aimed at improving sales and customer support. These efforts may not continue to be as effective as we anticipate in ~~their~~driving ~~use~~adoption or increased usage of our products, ~~could~~or ~~adversely~~may ~~affect~~take ~~our~~longer ~~business~~than we expect to drive growth. In addition, ~~results~~if the costs of ~~operations~~the ~~and~~marketing ~~financial~~channels ~~condition.~~we use increase, then we may choose to use alternative or less expensive channels, which may not be as effective as the channels we currently use.

~~Our~~New ~~revenue~~products ~~grows~~that aswe ~~customers~~develop ~~increase~~or ~~their~~markets ~~usage~~that ofwe apursue ~~product,~~may ~~extend~~require ~~their~~increasingly ~~usage~~sophisticated ofand amore ~~product~~costly tosales ~~new~~efforts ~~applications~~and orresult ~~adopt~~in alonger ~~new~~sales ~~product~~cycles. ~~that~~For example, we ~~offer.~~are ~~The~~focusing ~~majority~~increasingly ofon ~~our~~sales ~~revenue~~to isenterprises, ~~usage-based~~such ~~and~~as through our ~~ability~~Segment toproduct, ~~grow~~which ~~and~~is ~~generate~~primarily ~~incremental~~aimed ~~revenue~~at ~~depends,~~complex incustomer ~~part,~~data onplatform ~~our~~implementations ~~ability~~at tolarger ~~maintain~~companies, and ~~grow~~additional product innovations combining our ~~relationships~~communications products with ~~existing~~contextual ~~customers~~data and toAI. ~~have~~As ~~them~~we seek to increase ~~their~~the ~~usage~~adoption of our products. Ifby ~~our~~enterprises, we expect to encounter higher costs and more complex sales efforts for these customers. doFor ~~not~~enterprises, ~~increase~~the ~~their~~decision ~~use~~to ofadopt our products may require the approval of multiple technical and business decision makers, ~~then~~and ~~our~~enterprise ~~revenue~~customers may ~~decline~~require orextensive ~~grow~~education about our products and significant customer support before they will commit to deploying our products at ~~rates~~scale, ~~lower~~which ~~than~~may ~~expected.~~place ~~Most~~additional ofstrain on our ~~usage-based~~product ~~customers~~and doengineering ~~not~~resources. ~~have~~Enterprises ~~long-term~~may ~~contractual~~also ~~financial~~engage ~~commitments~~in toprotracted uspricing and, ~~therefore~~contract negotiations, ~~may~~leading ~~reduce~~to orhigher ~~cease~~costs ~~their~~and ~~use~~longer ofsales cycles. Enterprise customers may not use our products atenough ~~any~~for ~~time~~us ~~without~~to ~~penalty~~generate orrevenue ~~termination~~that ~~charges.~~justifies ~~Our~~our ~~subscription-based~~cost to obtain such customers, ~~generally~~or ~~base~~may choose to develop their ~~contract~~own ~~value~~solutions onthat ~~anticipated~~do ~~usage,~~not ~~and~~include ifour ~~their~~products. ~~anticipated~~They ~~levels~~may ofalso demand reductions in pricing as their usage ~~are~~of ~~not~~our ~~met~~products increases, ~~they~~notwithstanding ~~may~~increased ~~reduce~~costs ~~their~~incurred ~~contract~~by ~~value~~us orto ~~choose~~provide ~~not~~such toproducts, ~~renew~~which ~~their~~could ~~contract~~have ~~upon~~an ~~its~~adverse ~~expiration.~~impact on our gross margin.

~~Customers~~If ~~may~~our ~~terminate~~efforts orto ~~reduce~~increase ~~their~~the ~~use~~adoption ofand ~~our~~usage ~~products for any number~~ of ~~reasons, including dissatisfaction with~~ our products or ~~with~~sell ~~the~~additional ~~value proposition of our~~ products, ~~our inability~~ to ~~meet~~existing ~~their~~customers ~~needs~~are ~~and~~more ~~expectations,~~expensive ~~their use of competitors’ products, macroeconomic conditions,~~ or reductions in their budgets. Additionally, prior instances of disruptions in our cloud communications platform impacted our customers’ ability to use products on our platform for up to several hours at a time.-consuming ~~Issues~~than ~~with~~we ~~our~~expect ~~products~~or ~~have~~are ~~caused,~~otherwise ~~and may in the future cause~~ineffective, usthen ~~to incur certain costs associated with offering credits to~~ our ~~affected customers~~business, ~~which~~results ~~have~~of ~~had,~~operations and infinancial ~~the~~condition ~~future~~would ~~may~~be ~~have,~~adversely ~~an adverse impact on customer satisfaction and our ability to retain or attract customers~~affected.

~~Additionally,~~We wemay ~~believe~~not ~~our~~be ~~ability~~able to ~~provide~~develop ~~customers~~new ~~with~~products ~~high-quality,~~or ~~effective~~product ~~customer~~enhancements ~~support~~that ~~services~~achieve atmarket ~~all stages of the process is a crucial component of maintaining customer satisfaction~~acceptance, ~~generating~~or ~~increased~~adapt ~~customer usage of our products~~ and ~~ultimately~~respond ~~retaining customers. If we are unable to~~ effectively ~~assist our customers, it could adversely affect our ability~~ to ~~retain~~rapidly ~~existing~~changing ~~customers and could disincentivize prospective customers from adopting our products. The resources we dedicate to customer service at a particular time may prove insufficient~~technology, ~~such as in the event we are unable to respond quickly enough to accommodate short-term increases in demand for customer support. We also may be unable to modify the nature~~regulations, ~~scope~~industry and delivery of our customer support in order to compete with changes in the support services provided by our competitors. Our sales are highly dependent on our business reputation and on positive recommendations from our customers. If we are unable to provide high-quality customer supportstandards, or ~~if there is a market perception that we do not maintain high-quality~~ customer ~~support,~~needs ~~it could erode the trust of current~~ and ~~potential customers and adversely affect our reputation~~preferences.

~~Customer~~Our ~~usage~~ability ofto ~~our~~attract ~~products~~new customers and increase revenue from existing customers depends in large part on ~~factors~~our ~~generally~~ability ~~outside~~to enhance and improve our existing products and to introduce compelling new products and enhancements that reflect the changing nature of our ~~control~~markets, ~~including~~technology, ~~macroeconomic~~industry ~~conditions~~standards, soand itcustomer isneeds ~~difficult~~and topreferences. ~~accurately~~Anticipating ~~predict~~these ~~customers’~~factors ~~usage~~requires ~~levels.~~that ~~The~~we ~~loss~~allocate significant resources without any guarantee that our investments of ~~customers~~these orresources ~~reductions~~will result in ~~their~~increased ~~usage~~adoption ~~levels~~ of our products ~~may~~by ~~each~~current and prospective customers. For example, we have acommitted, ~~negative~~and ~~impact~~expect onto ~~our~~continue ~~business~~to commit, ~~results~~significant ofresources ~~operations~~towards developing new products and ~~financial~~enhancements ~~condition.~~by ~~Our~~combining ~~Dollar-Based~~our ~~Net~~communications ~~Expansion~~products ~~Rate~~with ~~has~~contextual ~~recently~~data ~~stabilized~~and asAI ~~compared~~in order to ~~prior~~address ~~periods~~evolving customer needs and expectations. The success of any enhancements or new products depends on several factors, ~~but~~including ittimely ~~may~~completion, ~~decline~~adequate inquality testing, actual performance quality, market-accepted pricing levels, customer value and the ~~future~~ability ifto provide rapid time-to-value for our customers, ~~are~~and ~~not~~the ~~satisfied~~emergence ~~with~~of ~~our~~competing products and ~~related~~services ~~customer~~that ~~service~~may ~~experience~~be delivered at lower prices, ~~the~~more ~~value~~efficiently, ~~proposition~~conveniently ofor securely, or render our products obsolete. For example, if user authentication practices evolve to reduce or eliminate the use of one-time passwords, our ~~ability~~revenue tocould ~~meet~~be ~~their~~adversely ~~needs~~affected. Enhancements and ~~expectations~~new products that we develop may not be introduced in a timely or cost-effective manner, may contain errors or ~~due~~defects, may require reworking features and capabilities, may have interoperability difficulties with our platform or other products or may not achieve the broad market acceptance necessary to ~~macroeconomic~~generate ~~conditions~~significant revenue or ~~reductions~~increase inour ~~customers’~~gross ~~budgets~~profits. IfFurthermore, aour ~~significant~~ability ~~number~~to increase the usage of ~~customers~~our ~~cease~~products ~~using~~depends, orin ~~reduce~~part, ~~their~~on ~~usage~~the development of new use cases for our products, ~~then~~which weis at times driven by our developer community and may be ~~required~~outside toof ~~spend~~our control.

49If we are unable to successfully and cost-effectively develop and drive adoption of new products, anticipate and keep pace with changes in technology, customers’ needs and expectations, and industry standards, or provide rapid time-to-value to our current and prospective customers, our business, results of operations and financial condition would be adversely affected.

~~significantly~~The ~~more~~success onof ~~sales~~our ~~and~~products ~~marketing~~depends, ~~than~~in wepart, ~~currently~~on ~~expect~~our inability ~~order~~ to ~~maintain~~integrate orthem ~~increase~~with ~~revenue~~third-party ~~from~~products ~~customers.~~used ~~Such~~by ~~additional~~us ~~sales~~or ~~and~~our ~~marketing~~customers ~~expenditures~~and ~~could~~to ~~adversely~~ensure ~~affect~~that ~~our~~they ~~business,~~operate ~~results~~effectively ofwith ~~operations~~evolving platforms and ~~financial condition~~technologies.

The providers of third-party products with which our products are integrated may modify the features, functionality, pricing, and other terms and conditions with respect to such products in a manner adverse to us and to our customers. If we are unable to ~~attract~~maintain ~~new~~the ~~customers~~integrations orbetween ~~sell~~our ~~additional~~products and such third-party products, our ability to ~~our~~meet ~~existing~~the needs and expectations of our customers incould abe ~~cost-effective~~adversely ~~manner~~affected, which could adversely affect our business,. ~~results~~Our platform must integrate with and leverage a variety of ~~operations~~infrastructure, network, hardware, mobile and ~~financial~~software ~~condition~~platforms ~~would~~and betechnologies, ~~adversely~~and ~~affected~~we need to continuously modify and enhance our products and platform to adapt to changes and innovation in these technologies. For example, last year we launched a new channel using Rich Communication Services (“RCS”) and we are

To grow our business, we must continue to attract new customers in a cost-effective manner, increase revenue from existing customers, and increase gross profits, each of which depends in part on our ability to increase adoption and usage of our products, and successfully market new products, including products with higher gross margins, in a cost-effective manner. We use a variety of marketing channels to promote our products and platform, such as developer events and developer evangelism, search engine marketing and optimization, regional customer events, email campaigns, billboard advertising and public relations initiatives. If the costs of the marketing channels we use increase, then we may choose to use alternative and less expensive channels, which may not be as effective as the channels we currently use. We have made in the past, and may make in the future, significant expenditures and investments of time and resources in new marketing campaigns and sales motions, and we cannot guarantee that any such investments will lead to wider adoption of our products or to the cost-effective acquisition of additional customers. In addition, new products that we develop may require increasingly sophisticated and more costly sales efforts and result in a longer sales cycle. If we are unable to maintain effective marketing programs, our ability to efficiently attract new customers could be adversely affected, and we may not be able to attract the number and types of new customers we are seeking. In addition, we are continuing to improve and expand our use of self-service capabilities, particularly for our Communications API customers, which may not be as effective as we anticipate in driving adoption or increased usage of our products. If we are unable to successfully increase adoption and usage of our existing and new products, or if our efforts to increase the usage of our products are more expensive or time-consuming than we expect, then our business, results of operations and financial condition would be adversely affected.43

IfTable ~~we are unable to increase adoption~~ of ~~our products by enterprises, our business, results of operations and financial condition may be adversely affected.~~Contents

~~Historically,~~working on a ~~majority~~channel offor ~~our~~Apple ~~revenue~~Messages ~~has~~for ~~been~~Business. ~~generated~~We asare aalso ~~result~~focused ofon ~~software~~Segment’s ~~developers~~interoperability ~~adopting~~across ~~our~~the ~~Communications~~data ~~API~~ecosystem. ~~products~~Third-party ~~through~~platforms ~~our~~may ~~self-service~~also ~~model.~~implement ~~Our~~changes ~~ability~~ to ~~increase~~their ~~our~~policies ~~customer~~or ~~base,~~practices ~~especially~~regarding ~~among~~privacy ~~enterprises,~~or ~~and~~other ~~achieve~~matters ~~broader~~that ~~market~~may ~~acceptance~~adversely ofimpact us or our ~~products~~customers. ~~will~~In ~~depend~~addition, inour ~~part~~network service providers, onmobile ~~our~~device ~~ability~~operating tosystem ~~effectively~~providers ~~organize,~~or ~~focus~~inbox ~~and~~service ~~train~~providers ~~our~~may ~~sales,~~adopt ~~marketing~~new ~~and~~filtering ~~other~~technologies ~~employees.~~in ~~Our~~an ~~ability~~effort to ~~convince~~combat ~~enterprises~~spam toor ~~adopt~~robocalling. ~~our~~For ~~products~~example, ~~will depend~~Apple, ~~in part~~Google, onYahoo ~~our~~and ~~ability~~other tomobile ~~attract~~device ~~and~~operating ~~retain~~system ~~sales~~providers ~~employees~~or ~~with~~inbox ~~experience~~service ~~selling~~providers tohave ~~enterprises.~~developed, Weand ~~believe~~may ~~that~~in ~~there~~the isfuture ~~significant~~develop, ~~competition~~new ~~for~~applications ~~experienced~~or ~~sales~~functions ~~professionals~~intended ~~with~~to ~~the~~filter ~~skills~~spam and ~~technical~~unwanted ~~knowledge~~phone ~~that~~calls, wemessages ~~require~~or emails. ~~Even~~Such iftechnologies wemay ~~are~~inadvertently ~~successful~~filter indesired ~~hiring~~messages ~~qualified~~or ~~sales~~calls ~~employees,~~to ~~new~~or ~~hires~~from ~~require~~our ~~significant~~customers. ~~training~~If ~~and~~mobile ~~experience~~device ~~before~~operating ~~they~~system ~~achieve~~providers, ~~full~~inbox ~~productivity,~~service ~~particularly~~providers ~~for~~or ~~sales~~network ~~efforts~~service ~~targeted~~providers, atour ~~enterprises~~customers ~~and~~or ~~new~~their ~~territories.~~end ~~Our~~users ~~recent~~adopt ~~hires~~new ~~and~~software ~~planned~~platforms ~~hires~~or infrastructure, we may ~~not~~be ~~become~~required asto ~~productive~~develop asnew ~~quickly~~versions asof weour ~~expect,~~products ~~and~~to wework ~~may~~with ~~encounter~~those ~~difficulties~~new platforms or beinfrastructure. ~~unable~~This todevelopment ~~hire~~effort ormay ~~retain~~require ~~sufficient~~significant ~~numbers~~resources, which would adversely affect our business, results of ~~qualified~~operations ~~individuals~~and infinancial ~~the~~condition. ~~future~~Any infailure ~~the~~of ~~markets~~our ~~where~~products weand doplatform ~~business.~~to ~~Because~~operate weeffectively dowith ~~not~~evolving ~~have~~or anew ~~long~~platforms ~~history~~and oftechnologies ~~targeting~~could ~~our~~reduce ~~sales~~the ~~efforts~~demand atfor ~~enterprises,~~our products. If we ~~cannot~~are ~~predict~~unable ~~whether,~~to orrespond to ~~what~~these ~~extent~~changes in a cost-effective manner, our ~~sales~~products ~~will~~may ~~increase~~become asless wemarketable ~~organize~~ and ~~train~~less ~~our~~competitive ~~sales~~or ~~force~~obsolete, orand ~~how~~our ~~long~~business, itresults ~~will~~of ~~take~~operations ~~for~~and ~~sales~~financial ~~employees~~condition tocould ~~become~~be ~~productive~~adversely affected.

AsIf we ~~seek~~fail to ~~increase~~effectively ~~the~~manage ~~adoption of~~ our ~~products~~growth ~~by enterprises, including our Segment product, which is primarily aimed at complex customer data platform implementations at larger companies, we expect to incur higher costs~~ and ~~longer~~strategic ~~sales~~changes ~~cycles. In the enterprise market segment, the decision~~ to ~~adopt~~ our ~~products may require the approval of multiple technical and~~ business ~~decision makers~~, ~~including~~then ~~legal,~~our ~~security~~business, ~~compliance,~~results ~~procurement,~~of operations and ~~information~~financial ~~technology~~condition ~~(“IT”).~~could In addition, while enterprise customers may quickly deploy our products on a limited basis, before they will commit to deploying our products at scale, they often require extensive education about our products and significant customer support time and also engage in protracted pricing and contract negotiations, which may be ~~exacerbated~~adversely ~~by changing inflationary pressure and reduced IT budgets and may result in higher costs and longer sales cycles~~affected. In addition, sales cycles for enterprises are inherently more complex and less predictable than the sales through our self-service model, and some enterprise customers may not use our products enough to generate revenue that justifies the cost to obtain such customers. These complex and resource-intensive sales efforts could place additional strain on our product and engineering resources. Further, enterprises, including some of our existing customers, may choose to develop their own solutions that do not include our products. They may also demand reductions in pricing as their usage of our products increases, notwithstanding increased costs incurred by us to provide such products, which could have an adverse impact on our gross margin. Additionally, we have experienced, and may continue to experience, certain of our customers failing to renew their contracts with us, reducing or limiting their contract values, and engaging in longer sales cycles as these customers focus on general cost reductions in the face of macroeconomic uncertainty. As a result of our limited experience selling and marketing to enterprises, our efforts to sell to these potential customers may

50We have experienced substantial growth in our business and operations, which has placed, and may continue to place, significant demands on our management, operational and financial resources and systems, especially as we continue to focus on improving our operating efficiency. Although we have conducted workforce reductions in the past, we may experience employee growth in the future. We have also experienced significant growth in the number of customers, usage and amount of data that our platform and associated infrastructure support. To manage our current and anticipated future growth effectively, we must continue to improve our operational, financial and management controls as well as our reporting systems and procedures, which has required, and will continue to require, us to commit substantial financial, operational, and technical resources.

not be successful. If we are unable to increase the revenue that we derive from enterprises, then our business, results of operations and financial condition may be adversely affected.

Our future success depends, in part, on our ability to develop new products and product enhancements that achieve market acceptance, as well as adapt and respond effectively to rapidly changing technology and regulations, dynamic industry standards, and evolving interoperability requirements.

Our ability to attract new customers and increase revenue from existing customers depends in large part on our ability to enhance and improve our existing products and to introduce compelling new products that reflect the changing nature of our markets, technology, industry standards, and customer needs and preferences. The success of any enhancements or new products we introduce depends on several factors, including timely completion, adequate quality testing, actual performance quality, market-accepted pricing levels and overall market acceptance. Enhancements and new products that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, may require reworking features and capabilities, may have interoperability difficulties with our platform or other products or may not achieve the broad market acceptance necessary to generate significant revenue or increase our gross profits. Furthermore, our ability to increase the usage of our products depends, in part, on the development of new use cases for our products, which is typically driven by our developer community and may be outside of our control.

The markets for our products, including the market for communications in general and cloud communications in particular, are subject to rapid technological change, evolving industry standards, and changing regulations, as well as changing customer needs, requirements and preferences. These are all uncertain and we cannot predict the consequences, effects, or introduction of new, disruptive, emerging technologies or the manner and pace at which our markets develop over time, and our ability to compete in these markets depends on predicting and adapting to these changing circumstances. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis, and anticipating these factors requires that we allocate significant resources without any guarantee that any such investments and efforts will result in initial or enhanced adoption of our products in the marketplace. For example, with the development of next-generation solutions that utilize new and advanced features, including AI and ML, we expect to commit significant resources to developing new products and enhancements and there is no guarantee that our investments and efforts will result in wider adoption of our products in the marketplace. If new technologies emerge that are able to deliver competitive products and services at lower prices, more efficiently, more conveniently or more securely or if new products are introduced into the market that could render our existing products obsolete, such technologies and products could adversely impact our ability to compete effectively and may lead to customers reducing or terminating their usage of our products. For example, if user authentication practices evolve to reduce or eliminate the use of one-time passwords, our revenue could be adversely affected.

Additionally, the success of our existing products and any new products we introduce depends, in part, on our ability to integrate them with third-party products used by us or our customers. The providers of such third-party products may modify the features, functionality, pricing, and other terms and conditions with respect to such products in a manner adverse to us and to our customers that use such third-party products in connection with our products. If we are unable to maintain the integrations between our products and such third-party products, our ability to meet the needs and expectations of our current and prospective customers could be adversely affected, which could adversely affect our business. Our platform must integrate with and leverage a variety of infrastructure, network, hardware, mobile and software platforms and technologies, and we need to continuously modify and enhance our products and platform to adapt to changes and innovation in these technologies. For example, Apple, Google, Yahoo and other cell-phone operating system providers or inbox service providers have developed, and may in the future develop, new applications or functions intended to filter spam and unwanted phone calls, messages or emails. Third-party platforms may also implement changes to their privacy policies or practices that may adversely impact us or our customers. In addition, our network service providers may adopt new filtering technologies in an effort to combat spam or robocalling. Such technologies may inadvertently filter desired messages or calls to or from our customers. If cell-phone operating system providers, network service providers, our customers or their end users adopt new software platforms or infrastructure, we may be required to develop new versions of our products to work with those new platforms or infrastructure. This development effort may require significant resources, which would adversely affect our business, results of operations and financial condition. Any failure of our products and platform to operate effectively with evolving or new platforms and technologies could reduce the demand for our products. If we are unable to respond to these changes in a cost-effective manner, our products may become less marketable and less competitive or obsolete, and our business, results of operations and financial condition could be adversely affected.

If we are unable to successfully and cost-effectively increase adoption and usage of our existing products, develop and drive adoption of new products, maintain integrations with third-party products, or anticipate and keep pace with changes in technology, customers’ needs and expectations, and industry standards, our business, results of operations and financial condition would be adversely affected.

The markets for our products continue to evolve and may decline or experience limited growth.

The markets for our products continue to evolve, which makes our business and future prospects difficult to evaluate. If current and prospective customers do not recognize the need for and benefits of our products and platform, they may decide to adopt alternative products and services to satisfy some portion of their business needs. In order to grow our business and extend our market position, we intend to focus on educating developers and enterprises about the benefits of our products and platform, expanding and improving the functionality of our products and bringing new technologies to market to increase market acceptance and use of our platform. Our growth will depend, in part, on our ability to expand the markets that our products address. Our ability to do so depends upon a number of factors, including the cost, performance and perceived value associated with such products and platform. The markets for our products and platform could fail to grow significantly, or at all, or there could be a reduction in demand for our products as a result of any number of factors, including a lack of customer acceptance, technological challenges, competing products and services, decreases in spending by current and prospective customers, weakening macroeconomic conditions, and other causes. If these markets do not experience significant growth or demand for our products decreases, then our business, results of operations and financial condition could be adversely affected

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