What happened

Shares of Twilio (NYSE:TWLO) soared as much as 36.5% on Wednesday, following the release of strong third-quarter results. The stock closed today's trading 35.4% above Tuesday's final quote.

So what

The provider of cloud-based communications solutions saw its total revenue rise 68% year over year, landing at $169 million. The analyst consensus had been pointing to roughly $150 million. On the bottom line, Twilio swung from an adjusted net loss of $0.08 per share in the year-ago quarter to $0.07 per share in adjusted earnings this time. Here, the Street would have settled for $0.05 per share.

On top of that, smaller sector peer SendGrid (NYSE:SEND) also crushed Wall Street's estimates in its own second-quarter report. That's good news for Twilio and its investors because Twilio is in the process of acquiring SendGrid for a cool $2 billion.

Two female office workers shout their support for a hard-working male colleague, who works with his necktie around his temples.

Image source: Getty Images.

Now what

Twilio investors have now seen their holdings triple in value during 2018. With negative trailing earnings and free cash flows, value investors can't rely on P/E ratios or discounted cash flows to pin a fair value on Twilio's stock yet. That's why it's no surprise to see the stock make a sharp move on this solid report. Twilio's volatility should continue to run high for the foreseeable future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.