Cloud communications firm Twilio Inc. saw its stock fall in after-hours trading today on concerns over its profitability and slowing growth rate, though its earnings and revenue for the last quarter topped expectations.

The company reported a second-quarter loss before certain costs such as stock compensation of 11 cents per share. Revenue for the period jumped 67% from a year ago, to $668.9 million, with $46.6 million of that coming from Twilio Segment.

The performance was impressive at first glance. Wall Street had forecast a wider loss of 13 cents per share on revenue of just $598.37 million.

Twilio Chief Executive Jeff Lawson (pictured) noted in a statement how revenue growth accelerated to produce a run rate of more than $2.6 billion. “Companies across industries are adopting our platform to drive better, more personalized levels of customer engagement, and we remain convinced that we are in the midst of a massive shift that is driving a generational opportunity for Twilio,” he added.

Twilio sells tools for application developers that help them to embed capabilities such as voice, text messages and video. The company’s software also makes it easier for cloud-based apps to communicate with one another.

Over the last year Twilio has displayed strong growth as the coronavirus pandemic pushed more people to live, work and play online. That growth apparently gave the company an appetite to expand its business further. Last year it spent $3.2 billion to acquire the customer data platform startup Segment Inc., adding new customer engagement capabilities to its toolbox.

That was the first of three acquisitions in the last year. In March it swooped in to buy Indian communications platform-as-a-service firm ValueFirst Digital Media Pvt Ltd. Then in May, it dropped $850 million to gobble up the business SMS text startup Zipwhip Inc.

The acquisitions were followed by an internal reshuffle that saw Twilio split its research and development unit into three distinct segments in a move that analysts said would enable it to grow its products and innovate faster. Earlier this month the company launched Twilio Live, a new cloud-based platform that allows businesses to embed live, interactive audio and video streaming solutions within applications.

Amid all of that action, the company has been picking up new customers fairly fast too. At the end of the quarter it said it had more than 240,000 active customer accounts, including those from Twilio Segment. That compares with 200,000 accounts one year ago.

That said, the company is perhaps not growing quite fast enough to satisfy the profit lust of its investors. Holger Mueller, an analyst with Constellation Research Inc., told SiliconANGLE that its growth has slowed quite noticeably, and that this seems to be playing havoc with its internal cost structure.

“R&D expenses were up by 50%, which is a good thing for a vendor in a dynamic and fast-growing market like Twiilio,” Mueller said. “But its sales and marketing expenses were up over 80%, while its general and administrative costs jumped almost 90%. This cost structure is not in sync with revenue growth, and so Twilio’s loss per share almost doubled from a year ago.”

Twilio could probably benefit from squeezing more revenue from its existing customer base, Mueller said. During the quarter, its dollar-based net expansion rate was 135%, which is just a small increase from 132% a year ago. It’s an important metric that represents how much revenue of churn the company is generating from its existing customers, and reveals the health and growth potential of the business.

“Twilio’s management will have to rein in costs or find a way to accelerate revenue in the next quarter if it’s to hit its revenue targets,” Mueller said.

It’ll be a tough task, since Twilio offered a very aggressive revenue forecast. It said it’s targeting third-quarter sales of between $670 million and $680 million, some way ahead of Wall Street’s target of $636.4 million.

Twilio’s stock was down 2% in the hours following the report.

Photo: Web Summit/Flickr