Investors got the good news that they wanted on the inflation front, as the Consumer Price Index rose by 0.4% in April. The resulting 4.9% rise in the CPI over the past 12 months was slightly lower than expected, and stock index futures pushed higher in premarket trading early Wednesday as a result.
However, earnings season continued to deliver some disappointments for investors. Airbnb (ABNB 1.17%) and Twilio (TWLO 1.08%) have seen extremely strong growth rates in the past, but their latest financial releases showed that they've started to see signs of slowing in the pace of revenue gains. That weighed on the two stocks, and as you can see below, shareholders might need reassurance to regain confidence in their future prospects.
Airbnb sees tough comparisons ahead
Shares of Airbnb were down 14% in premarket trading Wednesday morning. The alternative accommodation provider released first-quarter financial results late Tuesday that were generally strong but that also indicated that slower growth was likely ahead.
For a winter quarter that is generally slow for travel activity, Airbnb's numbers looked pretty good. Revenue climbed 20% year over year to $1.8 billion and clocked in at more than double what the company generated in the pre-pandemic first quarter of 2019. Airbnb posted its first profit ever for a first quarter of the year, with net income of $117 million. Free cash flow jumped 32% from year-ago levels to $1.6 billion.
Airbnb's key business metrics also remained strong. Gross booking value climbed 19% to $20.4 billion, as customers booked 121.1 million nights and experiences, also up 19% from the first quarter of 2022. Airbnb is now twice the size it was before the pandemic both in terms of sales and gross booking value.
Yet even though Airbnb expects another strong summer travel season ahead, investors focused on comments that the company will face tough comparisons with the year-earlier period. Pent-up demand for travel in 2022 was extremely high as pandemic-related restrictions had only just started to lift entirely in many parts of the world. As a result, Airbnb expects growth in nights and experiences to be slower in this year's second quarter than it was last year. Moreover, Airbnb expects to spend more on marketing earlier in the season than it did in 2022.
Long-term, Airbnb has a lot going for it. But for now, shareholders need to be prepared for stock-price volatility as those following the travel company get used to the idea of what a true return to normal means for its business.
Twilio offers weaker guidance
Shares of Twilio took an even bigger hit, with the stock falling 18% in premarket trading. The business communications software specialist reported first-quarter financial results that showed continuing growth but at a slower rate than some had wanted to see.
Twilio's revenue climbed 15% year over year to $1.01 billion, with all of that growth coming organically. Twilio was also profitable on an adjusted basis, posting earnings of $0.47 per share compared to break-even results in the year-earlier period. The company boasted passing 300,000 active customer accounts as of March 31.
However, investors reacted negatively to some signs of slower growth ahead. Dollar-based net expansion rates slowed to 106% in the first quarter compared to 127% 12 months earlier, suggesting that businesses aren't spending as much on software enhancements as they have in the past. Twilio also gave guidance for revenue growth of just 4% to 5% for the second quarter, even though it increased the lower end of its operating income projection range.
Twilio has faced challenges getting its momentum back after big share-price gains in 2020. Despite having reached profitability, Twilio will have to work even harder to restore confidence and get shareholders feeling better about its longer-term prospects.
