Twilio Races Toward Profitability, But Revenue Growth Is a Concern

In Q1, Twilio reported a net loss – attributable to common stockholders – of $55.35MN.

During the same period in 2023, that figure stood at $342.14MN.

As such, Twilio has cut its losses by 83 percent over the past year, a significant feat.

That comes after the CPaaS stalwart announced two rounds of layoffs, sold its IoT arm to Kore, and divested its ValueFirst business in 2023.

Twilio has also made further moves to streamline its portfolio. Those include shuttering the desktop app for Authy.

Yet, its charge toward profitability has seemingly hampered its ability to drive revenues.

Indeed, this time last year, the vendor reported revenue growth of 15 percent. Now, that has shrunk to just four percent.

As such, Twilio must tread a fine line between profitability and growth. Yet, Aidan Viggiano, CFO at Twilio, believes the business has the right formula.

During the earnings call, Viggiano stated:

We’ve proven over the last year that we can drive significant profitability and cash generation in this business. And while we’re working to reaccelerate growth, we’re confident in our ability to get there on both profit and cash.

To reaccelerate that growth, Twilio recognizes the need to engage existing customers with its broader tech stack – which stretches much further than communications APIs.

Yet, those APIs are still its core business driver. Indeed, revenue growth across its Communications business grew by seven percent year-over-year (YoY) in Q1.

Meanwhile, Segment – the other half of Twilio’s business – rose by only two percent (YoY).

There lies the problem.

As another example, consider the number of active customer accounts Twilio boasts. Now, it has 313,000. Last year, it had 300,000.

So, Twilio has over four percent more customers than in Q1, 2023. Meanwhile, its revenues rose by the same percentage.

That signals how Twilio’s gains stem almost completely from new business, not from cross-selling solutions and adding value to existing deployments.

Thankfully, Twilio has a plan to address the issue. As Khozema Shipchandler, CEO of Twilio, shared in the earnings call:

We have a number of really focused projects in both Communications and Segment that we expect to bear fruit over the medium to long term. And I think that, over time, this will start to show up in some of the growth numbers.

The first “focused project” kicked off last year when Twilio released a CustomerAI solution to bridge its Communications and Segment businesses with generative AI (GenAI).

Now, after a formal review of Segment’s future, Twilio has pledged to go further and release three more solutions in 2024 with the same purpose.

In Q1, the vendor launched the first: Unified Profiles. The offering places a native data layer over Flex, Twilio’s CCaaS platform. In doing so, it pulls together disparate data sources for a “complete” view of each customer.

Segment’s namesake customer data platform (CDP) powers the data layer.

With two more innovations to come, Twilio has not eased back on its research and development (R&D) spending, either.

Indeed, despite the significant effort to cut its losses, the vendor increased its R&D spending by more than five percent YoY in Q1.

Twilio will hope that hike is enough to pull its Communications customers closer to Segment.