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Why Twilio Stock Fell Today

By Demitri Kalogeropoulos – Updated Jan 4, 2022 at 3:39PM

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Shares fell on another down day for tech stocks.

What happened

Twilio (TWLO -2.50%) shareholders lost ground to the market on Tuesday, with the stock falling 5% by 3:30 p.m. ET. The S&P 500, in contrast, fell by less than 0.2%. The slump was likely due to wider declines among tech stocks, especially those that have increased in recent months. Twilio shares have more than doubled in the past year, easily surpassing the 28% increase in the S&P 500.

So what

Twilio is situated well in some attractive growth niches. Demand for cloud services is still booming as companies transition more of their operations to online channels.

Revenue was up 65% in the most recent quarter to $740 million. In late October, Twilio noted encouraging engagement metrics, too. Clients are renewing their contracts at much higher rates, which indicates that they're finding value in the growing suite of communication services.

A service representative talks to a customer.

Image source: Getty Images.

That growth news was better than expected, but Twillio's short-term outlook disappointed some investors. That factor helps explain why the stock isn't bucking the wider downtrend in the tech industry today.

Now what

Twilio told investors back in October that sales should land at roughly $770 million in Q4, equating to a 40% increase year over year. That's easily enough to qualify the company as a strong growth stock, but Wall Street was hoping that revenue gains would stay closer to last-quarter's 65% spike.

The company might beat that conservative target when it reports Q4 results in mid-February. Until then, though, investors should brace for continued volatility in the stock and occasional down days like today.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns and recommends Twilio. The Motley Fool has a disclosure policy.

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