Insights

Why Twilio Stock Fell Hard Today

What happened 

Despite Twilio (NYSE: TWLO) reporting second-quarter results that outpaced Wall Street’s expectations, shares of the cloud-based communications platform were tumbling today. Investors appeared to be disappointed with Twilio’s third-quarter guidance, which fell below consensus estimates. 

The tech stock was down by 13.6% as of 12:18 p.m. ET on Friday.

So what 

The company reported second-quarter revenue of $943.4 million, up 41% from the year-ago quarter and ahead of analysts’ consensus estimate of $919.4 million. Twilio’s adjusted loss per share of $0.11, which was flat on a year-over-year basis, was better than Wall Street’s average estimate of a loss of $0.20 per share. 

Image source: Getty Images.

Two highlights from the quarter include organic revenue growth of 33% to $862 million and Twilio ending the quarter with 275,000 active customers, up from 240,000 a year ago. 

“Based on our results and what we’re currently seeing, we remain confident in our growth trajectory and our profitability goals for 2023 and beyond,” CEO Jeff Lawson said in a news release.

But investors appeared to focus on third-quarter revenue guidance, which management put in the range of $965 million to $975 million, an increase of 31% at the midpoint. But that was below Wall Street’s consensus estimate of $977.8 million for the quarter. 

And the company expects an adjusted loss per share of $0.40 in the third quarter at the midpoint of guidance, which is significantly worse than analysts’ average estimate of a loss of $0.10. 

Now what 

Twilio’s price drop today shows just how cautious some investors are right now. 

Typically a tech stock beating top- and bottom-line estimates would send a company’s share price higher. But many investors are looking much closer at company financials and guidance today than in the recent past as they consider that the economy could significantly slow down amid soaring inflation and rising interest rates.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Twilio. The Motley Fool has a disclosure policy.

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