Twilio Inc. saw its stock collapse in after-hours trading today after its earnings forecast for the final quarter of the year came in below expectations.

The company actually put in a decent shift in its third quarter, reporting a surprise profit before certain costs such as stock compensation of a penny a share on revenue of $740.2 million, up 65% from a year ago.

That was better than expected, and Twilio itself had forecast revenue of just $670 million to $680 million three months ago. Wall Street was looking for sales of $681 million and a loss of 14 cents per share.

“We delivered another quarter of strong growth at scale in the third quarter as companies continue to turn to Twilio in this digital-first world,” said Twilio co-founder and Chief Executive Jeff Lawson (pictured).

Twilio sells tools for application developers that help them to embed capabilities such as voice, text messages and video into their apps. The company’s software also makes it easier for cloud-based apps to communicate with one another. So it wasn’t at all surprising to see Twilio grow massively over the last 18 months as the coronavirus pandemic pushed more people to live, work and play online, resulting in more demand for its services.

In addition to the revenue gains, Twilio reported it now has more than 250,000 active customer accounts, up from 208,000 during the same period last year.

But with such stunning growth comes much higher expectations, and some of its investors were clearly alarmed at Twilio’s guidance for the fourth quarter of the year. The company said it sees revenue of $760 million to $770 million during the current quarter, which is above the analysts’ consensus of $745 million. However, Twilio execs said they’re also anticipating a loss of 23 to 26 cents per share, versus Wall Street’s forecast of a 10-cent loss.

The lower guidance panicked investors, prompting a rapid selloff that saw Twilio’s stock lose more than 12% of its value in extended trading.

Adding to investors’ fears, perhaps, the company also reported a decline in its dollar-based net expansion rate to 131%, down from 137% the previous quarter. The net expansion rate is a key number that shows how much the company’s existing customer base is spending on its products from one year to the next.

In an interview with ZDNet, Twilio Chief Financial Officer Khozema Shipchandler tried to downplay the lower number, saying that 131% is still well within the range the company has been at for several years already.

“As you know, 130%, even 120%, is still world-class, and so we feel really great about the way our customers continue to grow and innovate with us,” he said.

During the quarter, Twilio announced a key new product launch. Twilio Engage is a growth automation platform that will allow marketers to improve their relationships with customers by delivering personalized customer experiences at large scale.

It’s built on Segment, which is the company’s customer data platform, and combined with the extensibility of a build-it-yourself communication solution. Its vision is to provide any company, large or small, the ability to use any combination of tools, data integrations, analytics and messaging to deliver true one-to-one customer engagement at scale.

Lawson emphasized that he has extremely high hopes for Twilio Engage. “We are extremely excited about the next generation of our customer engagement platform, and our newest pillar, Twilio Engage, which will allow companies of all sizes and in any industry to build and optimize hyperpersonalized marketing campaigns on every channel for customer acquisition, conversion and retention,” he said.

Constellation Research Inc. analyst Holger Mueller told SiliconANGLE investors may also have concerns over Twilio’s profitability, noting that its losses have doubled in the past year.

“Twilio is doing very well based on a mix of existing product R&D investments and the expansion of Twilio Engage, growing its revenue by 65%, and it may even break the $3 billion barrier this full year,” Mueller said. “But the company’s net loss almost doubled in absolute numbers, and it seems Twilio is unlikely to outgrow these loss habits. So a dynamic management will need to better address this, sooner rather than later.

Twilio also revealed that Chief Operating Officer George Hu has officially stepped down from his role at the company as of today. Hu will remain at the company as a strategic advisor for the next three months, helping to transition his go-to-market responsibilities to Chief Revenue Officer Marc Boroditsky. Meanwhile, Shipchandler will take over the COO role while also continuing to serve as the company’s CFO.

Photo: Web Summit/Flickr