What Happened?
Shares of cloud communications infrastructure company Twilio (NYSE:TWLO) jumped 17.3% in the morning session after the company reported impressive third-quarter earnings and provided an optimistic EPS forecast for the next quarter, which blew past analysts' expectations. Its billings also outperformed Wall Street's estimates. Notably, revenue accelerated sequentially, while top line growth improved as the net retention rate rose to 105%. This shows that the business is getting better at retaining and upselling its customers. Zooming out, we think this was a solid quarter.
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What The Market Is Telling Us
Twilio’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. But moves this big are rare even for Twilio and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock dropped 15.5% on the news that the company reported fourth-quarter results and provided revenue guidance for the next quarter, which missed analysts' expectations. Twilio observed headwinds to revenue growth in Q4'2023 from customers in the crypto industry and expects similar headwinds in Q1'2024. Also, the company expects a sequential revenue decline in Q1'2024 partly driven by "elevated seasonal activity on our platform in Q4, which we do not expect to recur in Q1." In addition, its customer growth decelerated during the quarter.
On the other hand, revenue and EPS came in ahead of consensus estimates. Overall, this was a mediocre quarter for Twilio. Following the results, Northland Capital Markets downgraded the stock's rating from Outperform (Buy) to Market Perform (Hold).
Twilio is up 15.1% since the beginning of the year, and at $81.85 per share, has set a new 52-week high. Investors who bought $1,000 worth of Twilio’s shares 5 years ago would now be looking at an investment worth $847.69.
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