Twilio stock falls after giving soft earnings guidance

Key Points
  • Twilio beat expectations on the top and bottom lines.
  • The company's earnings guidance was soft.
Jeff Lawson
Abigail Stevenson | CNBC

Shares of cloud communications company Twilio fell as much as 17% on Wednesday after the company gave lower-than expected quarterly earnings and revenue guidance. The stock was down about 7% after a conference call with analysts.

Here's how the company did:

  • Earnings: Excluding certain items, 3 cents per share, vs. 1 cent per share as expected by analysts, according to Refinitiv.
  • Revenue: $295.1 million, vs. $287.8 million as expected by analysts, according to Refinitiv.

Twilio's revenue grew 75% in the fiscal third quarter, which ended on September 30, according to a statement. The company said its net-dollar expansion rate, a measurement of revenue growth from for active customer accounts, in the quarter was 132%, below the 138% consensus estimate among analysts polled by FactSet.

"We're running into the law of large numbers," said Khozema Shipchandler, Twilio's chief financial officer, said on the conference call.

In the quarter and before that, Twilio ran into problems with its billing systems, which led to the company giving customers about $5 million in one-time credits, Shipchandler said.

The company called for 1 cent to 2 cents in earnings per share, excluding certain items, on $311 million to $314 million in fiscal fourth quarter revenue. Analysts polled by Refinitiv had expected an average of 7 cents in earnings per share, excluding certain items, and $322.0 million in revenue.

Twilio put a buffer around its guidance given the billing issues, Shipchandler said. 

Piper Jaffray analysts led by Brent Bracelin assumed coverage of Twilio with the equivalent of a buy rating on Monday.

"Few cloud software franchises are at $1B+ run-rate, yet still growing organically by 50%-plus with a profitable model, large TAM opportunity, and strong leadership," the analysts wrote.

In the fiscal third quarter Twilio announced a service for carriers and app makers that can prove the validity of phone calls, and a tool companies can use to have conversations with customers across multiple channels.

Twilio shares are up 22% since the start of 2019.

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