Twilio's Q1 2025 Performance: Key Takeaways
Twilio continues its steady recovery, reporting $4.7 billion in annual recurring revenue (ARR) for Q1 2025. Double-digit growth has returned, net revenue retention (NRR) is up, and free cash flow remains strong. AI investments are showing promise, with voice agents emerging as a significant growth driver.
Twilio is now leaner and more focused on its core strengths. The company has embraced AI while reducing its headcount. Only time will tell if this renewed focus leads to long-term success.
Twilio slowly re-accelerating:
$4.8B ARR
12% YoY Growth, up from 7% last year
6% New Customer Growth, up to 335,000
107% NRR, up from 102% last year
But Segment only growing 1%
$700m+ Free Cash Flow annual run rate pic.twitter.com/AkaFqsCFyU— Jason Lemkin (@jasonlk) May 1, 2025
Key Learnings from Twilio's Q1 2025 Results
1. Reaccelerated Growth
Twilio's year-over-year revenue growth has increased from 7% to 12%. Communications revenue grew by 13%, while Segment remained almost flat at 1%. This reacceleration is notable, though still significantly lower than its 53% growth at $2B ARR.
2. Improved Profitability
Twilio continues to improve its non-GAAP margins and has achieved GAAP profitability for the first time.
3. Increased Net Revenue Retention (NRR)
Twilio's Dollar-Based Net Expansion Rate (DBNER), now referred to as NRR, has risen from 102% to 107%. Communications sits at 108%, while Segment has dropped to 94%. This is a positive trend, but still considerably lower than its peak of 140% at $2 billion ARR.
4. Segment Challenges
Segment's growth has slowed to just 1%, with NRR declining to 94%. Its negative operating margin of -2% further underscores its struggles. Twilio's past acquisitions, including Segment, have largely not yielded the desired results, leading the company back to its core offerings of phone, SMS, and messaging.
5. AI as a Growth Driver
Twilio is heavily investing in AI, with new products like Conversation Relay and generative custom operators. These tools empower customers to build AI-driven voice agents and automate tasks like call scoring and compliance monitoring. The partnership with Eleven Labs adds over 1,000 AI-generated voices in 40 languages, strengthening Twilio's voice capabilities.
Twilio's commitment to AI is crucial as AI reshapes the contact center and voice communications landscape.
