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Earnings Results: Twilio shares drop 7% despite sales, earnings beat

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Twilio Inc. shares were dropping late Wednesday despite a sharp jump in revenue and better-than-expected earnings.

Twilio
TWLO,
-2.30%

reported a third-quarter loss of $224.1 million, or $1.26 a share, on sales of $740.2 million, up from $448 million a year ago. After adjusting for stock compensation and other factors, Twilio reported a profit of a penny a share, worse than adjusted earnings of 4 cents a share a year ago.

Analysts on average were expecting an adjusted loss of 14 cents a share on sales of $681 million, according to FactSet. Shares were down more than 7% in after-hours trading following the announcement, after closing with a 2.3% loss at $345.77.

Twilio’s software, which allows companies to converse with customers through text messages, experienced a surge in the second half last year thanks to political campaigns seeking to communicate with voters. Lapping that period was expected to depress Twilio’s bottom line and sales-growth numbers, but analysts have hope that those numbers will recover in the coming months.

“We acknowledge tough comps in Q3/Q4 due to heavy political messaging traffic last year, and do not see improvement in gross margins yet due to traction of lower-margin core messaging products, but see very healthy demand signals from partners plus the rise of 2-way messaging causing investors to re-rate growth prospects and the stock into” the first half of next year, J.P. Morgan analysts wrote earlier this month after speaking with Twilio partners.

For the fiscal fourth quarter, Twilio projected an adjusted loss of between 23 cents and 26 cents a share on sales of $760 million to $770 million. Analysts on average were projecting an adjusted loss of 10 cents a share on sales of $745 million, according to FactSet.

Twilio shares have struggled amid concerns about second-half growth rates, falling 12.7% in the past six months while the S&P 500 index
SPX,
-0.51%

grew 9.3%. Still, shares have grown more than 850% since the company went public in 2016.

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