The News: Twilio released its fourth quarter (Q4) 2023 earnings for the period ending December 31, 2023, as well as full year results. The company exceeded its guidance with a record quarter of revenue, non-GAAP income from operations, and free cash flow. Twilio’s Q4 2023 revenues reached $1.08 billion, reflecting a 5% year-over-year (YoY) increase. Read the entire Q4 2023 earnings release on Twilio’s website for more information.
By the numbers for Q4 2023:
- Twilio Q4 2023 revenue was up 5% YoY to reach $1.08 billion. Full year (FY) 2023 revenue reached $4.15 billion, a 9% increase from the previous year.
- Twilio Q4 2023 non-GAAP income from operations was $172.6 million compared with non-GAAP income from operations of $32.9 million for Q4 2022. Full year non-GAAP income from operations was $533.0 million.
- Communications revenue was $1.0 billion for Q4 2023.
- Segment (formerly Data & Applications) revenue reached $75.0 million for Q4 2023.
- As of the end of 2023, Twilio had over 305,000 active customer accounts, compared with 290,00 active customer accounts at the end of 2022.
Guidance for first quarter (Q1) FY 2024:
- Total revenue in the range of $1.025 billion to $1.035 billion, up 2%-3% YoY
- Non-GAAP income from operations in the range of $120 million to $130 million
- Non-GAAP diluted earnings per share (EPS) are expected to be in the range of $0.56-$0.60
During Q4, the company moved its Flex and Marketing Campaign products from its Data & Applications business unit into its Communications unit. All segment-level reporting and results have been reformulated accordingly. The company also renamed the Data & Applications business unit to Twilio Segment, a unit that now encompasses Segment and Engage products.
At this time, Twilio is not providing FY 2024 guidance, but an update will be given in March after the company completes a review of its Segment operations. However, the company expects, at a minimum, to exceed its 2023 non-GAAP income from operations.
Twilio Q4 2023 Revenue Grows 5% YoY, Beating Targets
Analyst Take: In the company’s first earnings call with Khozema Shipchandler as CEO, Twilio laid out solid Q4 2023 results and reiterated its message of focusing on becoming the leading customer engagement platform through its combination of communications, data, and AI. Twilio once again exceeded its guidance and had a record quarter of revenue, non-GAAP income from operations, and free cash flow. Twilio revenue reached $1.08 billion in 4Q 2023, while full year revenue was $4.15 billion.
Twilio Communications Drives Company Revenue
In Q4, Twilio moved both Flex and Marketing Campaigns into the Communications business unit, which helps streamline its go-to-market strategy, as the company reports it will better align with how its customers want to buy its products. Twilio Communications’ revenue reached $1.0 billion in Q4, up 5% YoY. Revenue for the full year reached $3.86 billion, up 9% from 2022. The Communications business unit is the driver of Twilio’s revenue, accounting for 93% of the company’s revenue in 2023. The Communications segment had over 297,000 active customer accounts this past quarter.
Communications signed its largest messaging deal to date with a leading cloud communications company, bringing in a nine-figure commitment for the business unit. Twilio also mentioned a deal with a company that will be using Twilio APIs to communicate to their 50 million-plus users via messaging, email, and voice channels as well as a messaging deal with an APAC-based online fashion retailer. There was also deal momentum for Flex, with the solution being chosen by a leading healthcare company.
Twilio continues to deliver on its CustomerAI rollout, notably its Q4 beta release of Twilio Voice Intelligence. This solution will be an important one to watch as it allows customers to extract data and turn it into actionable insights from call recordings. These insights can provide the fuel to support essential functions such as quality management in addition to giving customers a more seamless and personalized experience—two big factors in supporting a positive customer experience. Beta customers have already been using Voice Intelligence to analyze over 42 million minutes of calls.
Twilio Segment Revenue Showed Growth
Shipchandler pulled no punches when discussing Segment, saying the division was underperforming and the company was undergoing a strategic and operational review to determine the best path forward. This review is expected to be complete in early March 2024.
However, even with this news, Segment had a good quarter, with 4% YoY revenue growth to reach $75 million in Q4. The business unit had FY 2023 revenue of $295.3 million, up 7% YoY. Segment had over 8,000 active customer accounts at the end of the quarter. Segment also had solid deals come through this quarter, with a multi-year deal with Weber Grills and another win with a leading international music experience platform.
On the product and innovation front, CustomerAI Predictions, a capability that can help better understand customers so that a better experience can be enabled, is now being used by more than 150 customers. CustomerAI Recommendations went into a private beta in Q4 with Staples Canada.
Looking Ahead
The past two quarters saw positive momentum for Twilio as the company shored up operational efficiencies, improved its financial position, tweaked its go-to-market strategies, and worked on its partner channel. The company saw a small improvement in win rates in Q4 and highlighted deals that span both Communications and Segment, demonstrating the ability to upsell, cross sell, and communicate the combined value proposition.
Twilio has seen a lot of change over the past few months as the company faced investor pressures and a leadership transition. The news about reassessing Segment from an operations and strategic viewpoint should come as a surprise to no one, and that review process will be in good hands with Shipchandler who formerly led the Communications business unit. The chatter about Segment has been a distraction that will likely be put to rest, one way or the other, on the other side of this evaluation. With the innovations rolling out from CustomerAI powered solutions, sustained work on internal efficiencies, and continued focus on the strategy of combining communications and data for both customer and operational benefit, the company should have a strong path forward.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other Insights from The Futurum Group:
Twilio Announces Management Change to Quell Investor Discontent
Twilio Drops Video Service: The End of an Era in CPaaS
Twilio Unveils a Robust Lineup of CustomerAI-Powered Solutions
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
As a detail-oriented researcher, Sherril is expert at discovering, gathering and compiling industry and market data to create clear, actionable market and competitive intelligence. With deep experience in market analysis and segmentation she is a consummate collaborator with strong communication skills adept at supporting and forming relationships with cross-functional teams in all levels of organizations.
She brings more than 20 years of experience in technology research and marketing; prior to her current role, she was a Research Analyst at Omdia, authoring market and ecosystem reports on Artificial Intelligence, Robotics, and User Interface technologies. Sherril was previously Manager of Market Research at Intrado Life and Safety, providing competitive analysis and intelligence, business development support, and analyst relations.
Sherril holds a Master of Business Administration in Marketing from University of Colorado, Boulder and a Bachelor of Arts in Psychology from Rutgers University.
