What happened
Shares of Twilio (TWLO 5.75%) were taking a dive after the software-as-a-service (SaaS) company issued a disappointing earnings report, adding to concerns that it was losing its momentum.
According to data from S&P Global Market Intelligence, the stock finished the month down 34%. As you can see from the chart below, the stock fell sharply after the earnings report came out early in November, and never made much of a recovery.
So what
Twilio stock fell 35% on Nov. 4 after the communications software company posted disappointing third-quarter earnings results and stepped back from its long-term growth target of 30% or higher revenue growth.
Revenue in the third quarter increased 33% to $983 million, which topped estimates at $972.2 million, and the company reported a net expansion rate of 122%, showing that existing customers increased their spending with Twilio by 22% over the last four quarters.
Organic revenue rose 32%, while Zipwhip, an SMS marketing platform it recently acquired, contributed $34.8 million. On the bottom line, Twilio's adjusted loss per share of $0.27 was down significantly from a per-share profit of $0.01, but it was better than estimates at a per-share loss of $0.36.
While those numbers were better than expected, Twilio's fourth-quarter guidance set off alarm bells as the company said revenue growth would slow to just 18% to 19%, to $1 billion at the midpoint, which was worse than the consensus at $1.07 billion. The company blamed macro headwinds for the slowdown in growth. The guidance cut comes after the company said it was laying off 11% of its staff in September, as part of a push to profitability. For the fourth quarter, it sees an adjusted loss per share of $0.06 to $0.11.
Twilio was greeted by a chorus of downgrades in the aftermath as the story around the stock seems to be changing from that of top-line growth to bottom-line profits, which have yet to materialize.
NYSE: TWLO
Key Data Points
Now what
Twilio stock is now down roughly 90% from its peak during the pandemic as its rapid growth has faded -- much like other cloud software stocks -- as demand has waned with the economic reopening.
CEO Jeff Lawson has said the company is heading toward profitability in 2023, but the company will likely need to reaccelerate revenue growth if the stock is going to make a comeback. With macro headwinds mounting and analysts calling for just 16.5% revenue growth in 2023, next year could be another rough one for Twilio.
