Shares of the communications and customer engagement platform provider Twilio Inc. rose more than 7% in late trading today after it posted a solid third-quarter earnings and revenue beat and followed that with a bullish forecast.

The company reported a net loss of $141.7 million in the quarter, with its earnings before certain costs such as stock compensation coming to 58 cents per share. Revenue for the period rose 5%, to $1.03 billion.

The results were much better than expected, with Wall Street analysts looking for earnings of just 58 cents per share on sales of $985 million.

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.

Twilio co-founder and Chief Executive Jeff Lawson (pictured) said the company delivered a record quarter in terms of income from operations and free cash flow. “We are building a foundation for profitable growth that enables us to invest in our CustomerAI vision to deliver even more compelling outcomes for our customers and our shareholders in the long-term,” he added.

The company’s communications segment, which consists of application programming interfaces for optimizing communications such as messaging, voice and email, remains its most profitable business by far, generating $906.7 million in sales during the quarter. The Data & Applications business, which includes Engage, Segment, Flex and Marketing Campaigns, is much smaller, with sales of $127 million in the quarter. It did grow faster though, up 9% from a year earlier.

The company’s revenue is growing partly because it continues to expand its customer base. It said it had 306,000 active customer accounts at the end of the quarter, compared to just 280,000 in the year-ago period. However, it is struggling to squeeze more revenue from its existing customers. It reported a dollar-based net expansion rate of just 101%, down from 122% a year ago. The number suggests that, had Twilio failed to add any new customers in the last 12 months, its revenue would have grown by just 1%.

On the other hand, the company did remarkably well to reduce its overall cost base, said Holger Mueller of Constellation Research Inc. He pointed out that the executive team took out almost $300 million in expenses, reducing its loss from operations from 50% of its revenue one year earlier to just 10% today. And it did this while still managing to grow.

“That achievement is a major management feat, but investors may question how its cost base grew so high in the first place,” Mueller continued. “Likely, it was because Twilio was focused on growing at all costs. Now that growth is at a pedestrian level. The resizing at Twilio was likely painful, but necessary for its customers who need it to keep lowering the cost of their next-generation applications.”

Nevertheless, investors were in a forgiving mood given the better-than-expected performance, and their enthusiasm was further fueled by Twilio’s strong guidance. The company said it’s forecasting fourth quarter earnings of between 53 and 57 cents on sales of $1.03 billion to $1.04 billion, versus Wall Street’s call for just 36 cents in earnings and $1.03 billion in sales.

Photo: Fortune Brainstorm TECH/Flickr