Twilio Inc. (TWLO) Cash Flow Statement

The 2026Q2 net income of $1.1B far exceeded operating cash flow of $525.6M, yielding an OCF/NI ratio of 0.49, which suggests that the reported profit is not fully cash-backed. Excluding the one-time gain, the underlying earnings power appears more aligned with cash generation, as seen in prior quarters where OCF exceeded net income. Investors should monitor whether this gap persists, as it may indicate that reported profitability is overstated by non-cash items.

The FCF margin trajectory shows a clear upward trend, with 2026Q2 FCF of $518.4M representing a significant jump from $93.5M in 2024Q4. This improvement appears driven by revenue growth and disciplined capex, as capital expenditures remain minimal at 0.5% of revenue. The sustained margin expansion suggests that Twilio is converting its revenue growth into cash more efficiently, though the 2026Q2 figure may be temporarily boosted by the one-time gain in net income.

Capex has remained consistently low, ranging from 0.1% to 1.7% of revenue, with 2026Q2 at 0.5%. This suggests that Twilio's growth is not capital-intensive, allowing most operating cash flow to convert directly into free cash flow. The low capital intensity implies that the company can scale without significant reinvestment, but investors should consider whether this underinvestment could eventually limit capacity or innovation.

The persistent negative working capital changes, particularly the -$175.0M in 2026Q2, suggest that Twilio is investing in receivables or inventory to support its accelerating revenue growth. This trend may indicate that collections are lagging behind sales, which could pressure future cash flow if not managed. However, the overall cash flow remains strong, so the working capital drag appears manageable, but it warrants monitoring as growth continues.

Buybacks have been substantial, with 2026Q2 alone seeing $323.0M, and cumulative buybacks exceeding $3.8B over the period. This aggressive repurchase activity suggests management believes the stock is undervalued, but it also consumes cash that could be used for other purposes. The absence of dividends indicates a preference for buybacks, which may be dilutive to shareholders if not executed at favorable prices.

The cumulative gap between operating cash flow and net income is positive, suggesting that Twilio's earnings quality is high, with cash generation exceeding reported profits. This divergence is largely due to non-cash charges like depreciation and stock-based compensation, which reduce net income but do not impact cash. The trend implies that the company's underlying cash-generating ability is robust, even as accounting profits fluctuate with one-time items.