Twilio stock drops on Q4 beat, declines to give 2024 outlook

Twilio (TWLO) shares are dropping fast Thursday morning as the company released its forecast which fell short of Wall Street expectations and elected not to share its full-year outlook for 2024. This is the first quarterly report released since previous CEO Jeff Lawson stepped down in January due to activist investor pressure.

Yahoo Finance Anchors Brad Smith and Rachelle Akuffo break down the latest developments for Twilio and what it could mean for the company moving forward.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

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RACHELLE AKUFFO: Let's take a look at one trending ticker that we're watching this morning. Twilio shares sinking after forecasting revenue for its current quarter below expectations, and electing not to give a full year outlook as it reviews its segment business unit. Now this is the company's first earnings report since longtime CEO Jeff Lawson stepped down due to activist investors.

Obviously, the company in something of a transition here, seeing that co-founder announcing that he was stepping down last month. And of course, this activist scrutiny that we continue to see in there in the operational review of its segment business unit that is set to conclude in March. But it's sort of one less thing that you didn't want-- the one less thing you had to worry about here.

BRAD SMITH: Yeah, absolutely. I was poring through this earnings transcript. And one of the huge things that kind of jumped out is they're just trying to, at this point, mitigate within that segment part of the business, mitigate churn and contraction. Not what you want to hear, especially as you're trying to think about where it's going to also, on the other side, continue to investing.

So, CapEx at the same time that you're experiencing perhaps moderation in demand that's showing up through some of this churn of customers and contraction that they talked about on the call, that means that you've got money going out the door where you're also just seeing perhaps some stalling in the other element of where that money is coming in, or the spend levels as well here, even though you did see fourth quarter revenue that was up by about 5% revenue basis there.

And then additionally here, you saw the fourth-quarter and full-year loss ultimately here, the non-GAAP loss, at least from operations. $173 million and then $533 million respectively there. So, still, a lot of questions here and you're seeing that play out within the stock here today.

RACHELLE AKUFFO: It's true. And they did try to alleviate some of those concerns. They talked about some of their cost-cutting measures, talked about enhancing their focus and execution while optimizing their capital allocation strategy. They talked about things like cost structure accelerating their path to profitability and delivering durable growth.

The markets, though, don't seem to be that convinced here, especially given the reaction that we've seen here. And we have to keep in mind, this is a customer engagement platform, at least that's how they coin themselves. And with a lot of people back in the office, perhaps not needing to use Twilio and finding perhaps other options as well.

BRAD SMITH: Well, and within this, too, it sounds like within how they're looking at the allocation of resources as well, it's very clear through some of the language that they use as well on the call, operational changes that they're going to make with respect to segment here. And that's, I think, something that analysts are going to be continuing to keep close tabs on exactly what the impact of those operational changes looks like as they're kind of reviewing the overall business, and making some more of those AI-powered capability investments for the company and for the products and services that they're taking to clients right now.

RACHELLE AKUFFO: And they did bring up customer AI, saying that they had seen some early signs of success with their CustomerAI and really have an aggressive product roadmap. And that's something that the analysts that we've been talking to are saying, that's what people want to see.

They want to see the product roadmap. They want to see the use cases here. They want to see actual use cases of how this AI is going to be initiated versus something nice that people tack on on an earnings call.

BRAD SMITH: Yeah, common denominator. Does it even AI? is that common thread that we're hearing right now.