Twilio (NYSE:TWLO) delivered better-than-expected first-quarter financials. While the company’s Q1 sales and EPS beat Street’s forecasts, its moderating sales growth rate remains a concern. Moreover, the company provided lower-than-expected Q2 revenue guidance that didn’t sit well with investors. As a result, Twilio stock fell nearly 7% in Tuesday’s after-hours trading.
Twilio provides a customer engagement platform, including a suite of software and communications solutions. It’s worth noting that its top-line growth rate has moderated over the past several quarters as macro headwinds continue to impact customer budgets and spending. Moreover, its top-line projection indicates a further slowdown in the sales growth rate.
TWLO stock is down about 16.5% year-to-date, underperforming the S&P 500’s (SPX) gain of 8.6%.
With this backdrop, let’s delve into TWLO’s Q1 performance.
TWLO – Q1 Sales and EPS Exceed Expectations
Twilio delivered total revenue of $1.05 billion in Q1, up 4% year-over-year. Moreover, its top line exceeded Street’s forecast of $1.03 billion. The company’s Communications revenue was $972 million, up 4% year-over-year.
In terms of key metrics, Twilio reported 313,000 active customer accounts as of March 31, 2024, marking an increase from 300,000 in the previous year. However, its dollar-based net expansion rate (DBNER) for Q1 stood at 102%, a decline from 106% in the corresponding quarter of 2023.
The DBNER serves as a gauge of the revenue generated from existing customers through additional purchases, upselling, and cross-selling efforts.
Twilio delivered adjusted earnings of $0.80 per share in Q1, reflecting an increase of over 70% year-over-year. Moreover, its EPS surpassed Street’s expectations of $0.59 per share.
Q2 Outlook Missed Forecast
For Q2, Twilio expects its top line to be between $1.05 billion and $1.06 billion, implying modest 1-2% year-over-year growth. This signals a continued slowdown in the company’s revenue growth rate. Additionally, the company’s Q2 sales projection fell below analysts’ expectations of $1.08 billion.
The company expects EPS to be between $0.64 and $68, up about 19-26% year over year for Q2.
Is Twilio a Buy or Sell Stock?
Wall Street is cautiously optimistic about Twilio stock. With 10 Buys, 12 Holds, and three Sell recommendations, Twilio stock has a Moderate Buy consensus rating. Analysts’ average price target on TWLO stock is $70.45, implying 11.17% upside potential.
