Twilio Inc.'s (TWLO Quick QuoteTWLO - Free Report) shares lost 7.3% in the extended trading session on Thursday following the company's lower-than-expected fourth-quarter 2024 bottom-line results, as well as first-quarter 2025 earnings per share (EPS) guidance that fell short of the Zacks Consensus Estimate. TWLO's fourth-quarter non-GAAP earnings of $1.00 per share missed the consensus mark of $1.02.

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However, the bottom line witnessed a robust improvement from the year-ago quarter’s figure of 86 cents. The strong year-over-year growth in earnings was primarily driven by increased revenues and cost discipline.

The cloud-based communications platform-as-a-service provider registered revenues of $1.19 billion, which came in line with the Zacks Consensus Estimate and was ahead of management’s guidance of $1.15-$1.16 billion. On a year-over-year basis, the top line soared 11%.

Twilio’s Revenues in Detail

Segment-wise, revenues from the Communications division came in at $1.12 billion, up 12% year over year. The Segment division’s sales inched down 1% year over year at $74.1 million.

Twilio’s dollar-based net expansion rate was 106% in the reported quarter, up from the previous quarter’s 105% and the year-ago quarter’s 102%. The company’s fourth-quarter dollar-based net expansion rates for the Communications and Segment divisions were 108% and 93%, respectively.

Active customer accounts increased to over 325,000 as of Dec. 31 from 320,000 at the end of the third quarter of 2024. The figure was 305,000 as of Dec. 31, 2023. As of Dec. 31, 2024, Communications and Segment active customer accounts were more than 317,000 and 7,400, respectively.

Twilio’s Fourth-Quarter Operating Results

The non-GAAP gross profit increased 10.1% year over year to $620.8 million. However, the non-GAAP gross margin contracted 40 bps year over year to 52%. The fourth-quarter non-GAAP gross margin for the Communications and Segment divisions came in at 50.6% and 72.3%, respectively.

The non-GAAP operating income jumped 14.1% year over year to $197.1 million. The non-GAAP operating margin of 16.5% for the fourth quarter expanded 50 bps on a year-over-year basis.

General & administrative (G&A) expenses on a non-GAAP basis increased to $85.9 million from $62.1 million in the year-ago quarter. G&A expenses accounted for 7.2% of quarterly revenues, up from 5.8% in the year-ago quarter. Research & development (R&D) expenditures on a non-GAAP basis increased 11.9% year over year to $167 million. R&D expenses accounted for 14% of fourth-quarter revenues, up from 13.9% in the year-ago quarter.

Non-GAAP sales & marketing costs declined 4.9% to $170.9 million. The same represented 14.3% of fourth-quarter revenues, lower than 16.7% in the year-ago quarter.

Twilio 2024 Results in Brief

Twilio’s revenues for 2024 grew 7% year over year to $4.46 billion and came in line with the Zacks Consensus Estimate. Communications revenues increased 8% to $4.16 billion, while Segment revenues inched up 1% to $297.7 million.

The company’s EPS for 2025 jumped 49.8% year over year to $3.67 but fell short of the consensus mark of $3.69.

Twilio’s Balance Sheet

The company exited the December quarter with cash and cash equivalents and short-term marketable securities of $2.38 billion, down from $2.70 billion at the end of the third quarter. As of Dec. 31, 2024, TWLO’s long-term debt was $990.6 million.

During the fourth quarter, Twilio generated an operating cash flow of $108.4 million and a free cash flow of $93.5 million. In 2024, it generated operating cash flow and free cash flow of $716.2 million and $657.5 million, respectively.

In 2024, Twilio repurchased stocks worth $2.33 billion and completed the previously authorized $3 billion share buyback plan. In January 2025, its board of directors approved a new share repurchase authorization of $2 billion, which will expire on Dec. 31, 2027.

Twilio Initiates Guidance

Twilio also initiated guidance for the first quarter and full-year 2025. For the quarter ending March 31, 2025, TWLO anticipates revenues between $1.13 billion and $1.14 billion, which indicates a year-over-year increase of 8-9%. The Zacks Consensus Estimate for first-quarter revenues is pegged at $1.13 billion.

Twilio projects non-GAAP income from operations in the range of $180-$190 million for the first quarter. It forecasts non-GAAP earnings in the range of 88-93 cents per share. The consensus mark for first-quarter earnings is pegged at 95 cents per share.

The company anticipates organic revenue growth in the range of 7-8% in 2025. Non-GAAP income from operations is projected in the range of $825-$850 million. The Zacks Consensus Estimate for 2025 revenues is pegged at $4.78 billion, indicating a year-over-year increase of 7.2%.

Twilio’s Zacks Rank and Other Stocks to Consider

Currently, Twilio sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Atlassian (TEAM Quick QuoteTEAM - Free Report) , Planet Labs PBC (PL Quick QuotePL - Free Report) and Fortinet (FTNT Quick QuoteFTNT - Free Report) are some other stocks that investors can consider in the broader Zacks Computer and Technology sector. TEAM, PL and FTNT carry a Zacks Rank #2 (Buy) each at present.

Atlassian shares have soared 45.9% in the past year. The Zacks Consensus Estimate for TEAM’s fiscal 2025 earnings is pegged at $3.45 per share, indicating a 17.8% year-over-year increase.

Planet Labs PBC shares have surged 174.7% in the past year. The Zacks Consensus Estimate for PL’s fiscal 2025 bottom line is pinned at a loss of 15 cents per share. In fiscal 2024, the company had reported a loss of 50 cents per share.

Fortinet shares have gained 55.1% in the past year. The Zacks Consensus Estimate for FTNT’s full-year 2025 earnings is pegged at $2.43 per share, suggesting a year-over-year increase of 2.5%.