Moody's Ratings has moved Twilio Inc.'s corporate family rating up to Ba1 from Ba2 and assigned a stable outlook, citing expectations that the cloud communications company will continue to grow revenue, EBITDA and free cash flow while preserving conservative financial policies.
The upgrade rests on a combination of factors Moody's identified as credit strengths: a strong market position in specific segments of the Communications Platform as a Service industry and a leading role in the wider Communications Experience as a Service market; robust growth potential; and substantial cash balances.
According to Moody's assessment, Twilio's revenue growth decelerated in 2023 and 2024 but returned to double-digit growth in 2025, though not matching earlier peak rates. Margins and free cash flow have been improving from negative levels that prevailed before 2023.
Share repurchases eased in 2025 relative to prior periods; however, Moody's notes that free cash flow after share buybacks remained negative over the twelve months ended September 2025. On a leverage basis, Moody's reported adjusted leverage of roughly 4x as of September 2025. When non-cash stock compensation is added back, the adjusted leverage measure is about 1x.
Twilio's net cash position is an important element of its credit profile. The company held peak cash balances in excess of $4.0 billion, but those reserves fell after more than $2.0 billion was returned to shareholders through buybacks in 2024. Moody's expects Twilio to retain cash levels above its debt over the next two years as repurchase activity moderates.
The company's debt consists of two unsecured note issuances, with the earliest maturity scheduled for 2029. Moody's projects Twilio will generate in excess of $900 million in free cash flow annually over the next two years.
Moody's also expects continued top-line momentum, forecasting high single-digit or greater growth for Twilio over the next two years. That outlook is tied to ongoing advances in digital communications software applications, rising usage of Twilio's platforms, and potential upside from recent and forthcoming artificial intelligence offerings.
Summary
Moody's upgrade of Twilio to Ba1 reflects anticipated improvements in revenue, EBITDA and free cash flow, a leadership position in communications software markets, and a sizable net cash cushion. The rating incorporates recent share buybacks and a period in which free cash flow after buybacks was negative through September 2025, and it recognizes that leverage metrics vary depending on the treatment of stock-based compensation.
- Key points
- Moody's raised Twilio's corporate family rating to Ba1 from Ba2 and assigned a stable outlook.
- Improved margins and a return to double-digit revenue growth in 2025 support the upgrade, alongside substantial cash balances.
- Sectors impacted include software/cloud communications and broader technology services, with potential implications for capital allocation and investor perceptions.
- Risks and uncertainties
- Free cash flow after share buybacks was negative for the twelve months ended September 2025 - a constraint on discretionary financial flexibility that affects equity returns and balance sheet policy.
- Adjusted leverage measured about 4x as of September 2025; leverage falls to around 1x when adding back non-cash stock compensation, illustrating sensitivity to accounting adjustments.
- Declines in cash balances following more than $2.0 billion in 2024 buybacks reduce the margin of safety, although Moody's expects cash to remain above debt levels as buybacks moderate.