Key Highlights

● Twilio posted adjusted Earnings of $1.65 a share against $1.47 expected.

● Revenue came in at $1.56 billion, and management raised its 2026 Revenue growth forecast.

● One report cited profit-taking, while another pointed to a weak fourth-quarter outlook.

● Reddit and Roblox also tumbled in extended trading after their own reports.

Twilio (NYSE:TWLO) beat on profit and lifted its full-year growth target, yet its shares sank hard in extended trading Thursday as reports pointed to profit-taking and a softer near-term outlook.

A beat that the market did not reward

On paper, Twilio's third quarter looked like the kind of report that sends a stock higher. The cloud communications company, whose software lets businesses build text messaging, voice calls and email into their apps, posted adjusted earnings of $1.65 a share, comfortably ahead of the $1.47 analysts had pencilled in. Revenue came in at $1.56 billion. Management also raised its forecast for 2026 revenue growth, a move that usually signals confidence in demand.

None of that stopped the selling. The stock plunged in after-hours trading on Thursday, October 29, landing among the steepest decliners in the Russell 1000 once the regular session was over. Twilio was not alone: Reddit (NYSE:RDDT) and Roblox (NYSE:RBLX) also tumbled sharply in extended trading after their own reports, making for a rough evening for internet and software names that had delivered results above Wall Street's targets.

Two explanations for the slide

Reports differed on what drove the drop. One report attributed the move to profit-taking after a rally that had stretched across several quarters, suggesting that the stock had already priced in a good deal of the improvement and that holders took the chance to lock in gains. Another source, by contrast, pointed to a weak growth outlook for the fourth quarter, implying that the near-term picture mattered more to traders than the higher full-year number.

Both explanations fit a pattern seen throughout this earnings season: a company can clear the bar for the quarter just ended and still be punished if the next leg looks less impressive than hoped. Twilio's raised growth forecast for 2026 points to management expecting faster growth over the year, but the extended-trading reaction suggests the market was focused on what comes next.

A brutal day for software

The timing did Twilio no favours. Thursday's regular session was already hostile to software. The iShares Expanded Tech-Software ETF, known as IGV, sank sharply as ServiceNow (NYSE:NOW) and Fortinet (NASDAQ:FTNT) imploded after their own reports. Alphabet (NASDAQ:GOOGL) suffered its worst single-day drop since its 2004 IPO, wiping out roughly $500 billion of Market Value and dragging the Nasdaq Composite down 365.13 points to 26,184.72.

One senior market analyst summed up the mood around technology spending: "markets are no longer rewarding companies simply for investing heavily in AI," the analyst said. While Twilio's story is about communications software rather than Data Center spending, the broader point applies: investors were demanding more than headline beats.

Rotation away from tech

Outside technology, the picture was far brighter. More than 400 members of the S&P 500 closed higher even as the index slipped 23.59 points to 7,720.39, and the small-cap Russell 2000 climbed 28.71 points to 2,859.22. Health care, real estate and utilities led the way. One market strategist said, "Money is rotating within the market rather than leaving it."

That rotation helps explain why a growth-oriented name like Twilio faced a skeptical audience after the bell. Futures tied to the Nasdaq-100 also slid in the evening as Amazon (NASDAQ:AMZN) and Intel (NASDAQ:INTC) dropped after their reports.

What to watch

The first test is Friday's regular session, when Twilio shares will trade with full Liquidity and the after-hours move will either deepen or ease. Extended-trading prices can shift significantly once the broader market opens.

Investors will also be listening for more detail on the fourth-quarter outlook that one source flagged, and for any commentary that reconciles a softer near-term view with the higher 2026 growth target. Beyond Twilio, the reception for Amazon's and Intel's results and Friday's Employment Cost Index will shape whether the software selloff extends or finally finds a floor.