Shares of Twilio Inc. surged higher in extended trading today after the company beat Wall Street’s expectations in its second-quarter financial results.

Twilio’s earnings and revenue both topped analysts’ forecasts, and its stock gained more than 6% after-hours, completely reversing a decline of 5% earlier in the day.

The company reported earnings before certain costs such as stock compensation of 54 cents per share, well ahead of Wall Street’s target of 30 cents. Revenue for the period came to $1.04 billion, up 10% from a year earlier and ahead of the $987 million consensus estimate.

All told, Twilio reported a second-quarter net loss of $166.2 million, down from a wider loss of $322.8 million a year earlier.

Twilio is best known for selling developer tools that make it possible to embed capabilities such as voice, text messages and video into software applications. The company’s software also streamlines communications for cloud-based apps. In addition, it has a growing business selling tools for customer engagement, such as its Twilio Engage growth automation platform that’s used by marketers to improve their customer relationships by creating more personalized experiences.

The company’s Communications segment, which consists of application programming interfaces for optimizing communications such as messaging, voice and email, is by far the most profitable. It posted revenue of $913.1 million in the quarter, up from $832.3 million a year earlier. The Data & Applications segment, which consists of Twilio Engage, Segment, Flex and Marketing Campaigns, is much smaller, adding just $124.6 million in sales.

Co-founder and Chief Executive Jeff Lawson (pictured) said the company delivered a “strong second quarter” with record quarterly revenue, income from operations and free cash flow. “We enter the second half of the year confident about our ability to generate meaningful levels of non-GAAP income from operations, and committed to our focus of driving efficient growth across our business,” he said.

Twilio’s customer base continues to grow at an impressive rate. Executives said the company ended the quarter with more than 304,000 active customer accounts, up from 275,000 one year earlier. On the other hand, Twilio’s dollar-based net expansion rate fell to just 103%, down from 123% a year ago.

That’s a key metric that shows how much revenue Twilio has extracted from its existing customer base. It shows that even if it failed to add a single customer in the last 12 months, its revenue would have still grown by 3%.

Holger Mueller of Constellation Research Inc. said Twilio delivered strong results, notably breaking past the $1 billion quarterly revenue barrier for the first time in its history. It also made good progress toward profitability through disciplined cost control, he believes.

“Twilio took out $110 million in expenses compared to the same quarter last year, and that allowed it to halve its net loss to just $166 million,” the analyst explained. “In short, that’s impressive progress toward making a profit, and the management thinks it can achieve this soon as it projects a profitable third quarter. Overall, Twilio continues to be well-positioned with its product portfolio, and it’s now a matter of how well the company executes in the next quarter.”

Although it’s forecasting a first-ever profit, Twilio’s guidance was still a tad mixed. For the third quarter, Twilio said it’s looking at earnings of between 33 and 37 cents per share, ahead of Wall Street’s target of 30 cents per share. However, its revenue forecast of just $980 million to $990 million fell short of the analyst’s call for $1.02 billion in sales.

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