What happened
Twilio (TWLO 0.83%) reported its third-quarter results late Thursday, and on Friday morning, the stock fell hard. While the digital communication specialist beat analysts' consensus estimates on the top and bottom lines, management issued fourth-quarter revenue guidance that was below expectations and warned that the macroeconomic climate is hurting Twilio's business.
Lately, investors have been quick to dump technology companies that experience any slowdowns, and that appears to be what's happening here. Twilio's share price was down 35.3% as of 11:24 a.m. ET.
So what
Twilio reported a non-GAAP (adjusted) loss of $0.27 per share in the quarter, which was far worse than its earnings of $0.01 per share in the prior-year quarter, but still ahead of Wall Street's consensus estimate for a loss of $0.36 per share.
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The company's Q3 revenue of $983 million -- up 33% year over year -- was also better than analysts' consensus prediction of $972.2 million.
But investors were less focused on those results and more focused on the fact that Twilio's management issued fourth-quarter revenue guidance that was below expectations.
The company said Q4 sales will be in the range of $995 million to $1 billion. Wall Street's average estimate was $1.07 billion. Management further said its guidance implies that the company won't reach its previous goal of 30% annual revenue growth. The company is now targeting 15% to 25% growth.
"I recognize that this is below the 30% revenue target we laid out two years ago, but we're also facing a very different and rapidly evolving external environment today," Chief Operating Officer Khozema Shipchandler said in prepared remarks.
Shipchandler added that the company is seeing "negative impacts on our business from the macro environment" and that "We still believe we'll deliver attractive levels of growth going forward, but in the current market, we don't believe 30%+ is achievable."
NYSE: TWLO
Key Data Points
Now what
Investors clearly weren't happy with Twilio cutting its growth projections, and at least three analysts downgraded the stock following the earnings release. In addition, some investors are worried about the possibility of a U.S. recession as the Federal Reserve continues to raise interest rates in its effort to tamp down on high inflation.
Based on the combination of these factors, some investors simply are revising their views on Twilio right now.
