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Why Is Twilio (TWLO) Down 14.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for Twilio (TWLO - Free Report) . Shares have lost about 14.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Twilio due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Twilio Posts Better-Than-Expected Q4 Earnings, Strong Guidance

Twilio reported better-than-expected results in the fourth quarter of 2022. Twilio reported non-GAAP earnings of 22 cents per share for the fourth quarter. The bottom line compared favorably with the Zacks Consensus Estimate of a loss of 9 cents per share as well as the year-ago quarter’s loss of 20 cents.

The year-over-year growth in non-GAAP earnings was primarily due to higher revenues and cost savings through headcount reductions.

Revenue Details

The cloud-based communications platform-as-a-service provider reported revenues of $1.02 billion. The figure improved by 22% year over year and surpassed the consensus mark of $998.9 million.

TWLO has been benefiting from the constant expansion of its international business and the continuous acceleration of digital transformation projects across several industries. The top line was primarily driven by the enhancement of customer experiences across various product portfolios like Segment, Flex and Engage, which are its fastest-growing software-as-a-service products at present.

Twilio’s dollar-based net expansion rate was 110% in the reported quarter, down from 122% in the previous quarter and 126% in the year-ago quarter. The company’s active customer accounts increased to 290,000 as of Dec 31, 2022 from 280,000 at the end of the third quarter of 2022 and 256,000 as of Dec 31, 2021.

Operating Results

The non-GAAP gross profit climbed 20% year over year to $518 million. However, the non-GAAP gross margin remained flat at 51%.

Twilio reported a fourth-quarter non-GAAP operating income of $32.9 million, while it reported an operating loss of $4.5 million in the year-ago quarter. The non-GAAP operating margin was 3% for the fourth quarter.

General & administrative expenses on a non-GAAP basis increased 11.5% to $87.5 million and accounted for 8.5% of the quarterly revenues. Research & development expenses on a non-GAAP basis surged 21.7% year over year to $177.6 million and made up 17.3% of the quarterly revenues.

Non-GAAP sales & marketing expenses declined 6.4% to $219.8 million. The same represented 21.5% of fourth-quarter revenues.

Balance Sheet

The company exited the October-December 2022 quarter with cash and cash equivalents and short-term marketable securities of $4.16 billion, down from $4.21 billion at the end of the third quarter of 2022. As of Dec 31, 2022, TWLO’s long-term debt was $987.4 million.

First-Quarter 2023 Guidance

Twilio forecast non-GAAP earnings between 18 cents and 22 cents per share for the first quarter of 2023. The Zacks Consensus Estimate for the same is pegged at a loss of 2 cents per share.

For the current quarter ending Mar 31, 2023, the company anticipates revenues between $995 million and $1.005 billion, suggesting year-over-year growth of 14% to 15%. Management estimates the non-GAAP income from operations in the range of $45-$55 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

The consensus estimate has shifted 26.89% due to these changes.

VGM Scores

At this time, Twilio has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Twilio has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Twilio is part of the Zacks Internet - Software industry. Over the past month, Meta Platforms (META - Free Report) , a stock from the same industry, has gained 18.8%. The company reported its results for the quarter ended December 2022 more than a month ago.

Meta Platforms reported revenues of $32.17 billion in the last reported quarter, representing a year-over-year change of -4.5%. EPS of $3 for the same period compares with $3.67 a year ago.

Meta Platforms is expected to post earnings of $2.04 per share for the current quarter, representing a year-over-year change of -25%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.4%.

Meta Platforms has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.

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