The Good, The Interesting, The Unknown: a 2024 Earnings Check-In

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In one week, the US will elect a new president; in four weeks, the biggest Black Friday / Cyber Monday (BFCM) ever will kick off the holiday season; and in nine weeks, we’ll close out the year—the first “de-risked” year since the post-2021 cleanup. This week, Twilio and Bandwidth will kick off the final CPaaS earnings reports of 2024, setting the stage for what’s to come. With so much riding on Q3 earnings, this “show me the money” quarter will reveal whether major investments in data, RCS, AI, and real-world applications are finally paying off.

A Framework for Organizing My Thoughts

The buckets of The Good, The Interesting, and The Unknown emerged naturally as I sorted through my learnings from earnings reports. Beyond a nod to what might be the greatest western of all time, these categories became a way to organize my thoughts.

  • The Good: Positive news, trends, or signals.
  • The Interesting: New bets or initiatives that bring excitement or come as a surprise.
  • The Unknown: This covers decisions I either don’t understand or may even disagree with. It’s my way of extending grace to management, acknowledging that while I may not agree or see the rationale, I’m not on the inside. So, I hold off on judgment and give space for outcomes to unfold. It’s easy to criticize from the sidelines; it takes more discipline to voice concerns and then step back and let time reveal the result.

I think the framework works, and will be the organizing principle for all reports as it has been thus far. 

What I’m Watching for: SMB Steadiness

Consumer spending has been remarkably strong and continues to drive the economy. As Klaviyo’s Jen Kessler noted, this BFCM season will see higher prices across the board, yet consumers are set to spend more than ever. On the B2B side, however, three signals matter: enterprise, mid-market, and small-business spending. The enterprise has been flashing red for a while; in Q2, the mid-market shifted to yellow; while the small-business segment remains a steady green.

Enterprise clients have been tightening their belts. In large organizations, the buyer and the user are different people. The buyer—typically in procurement—may be tracking the market and the company’s stock price with a little too much intensity. At the first hint of softness, they start clamping down on perceived overspending, often overlooking its impact on end users. This first red signal isn’t cause for concern until the mid-market also starts to feel the slowdown. Both Klaviyo and Braze report longer deal cycles in the mid-market, but in their core business—and in Sinch’s SimpleTexting segment—the SMB remains strong.

This resilience is partly because in small businesses, the buyer and user are often the same person. There’s no room for posturing or sandbagging; small-business owners know exactly when spending is critical for survival and when cuts are essential. There is no place to hide. This same resilience appears in broader trends. For instance, while business travel is on track to reach 95% of 2019 levels this year, airlines are already busier—and more profitable—than ever. Put another way, when the SMB spending scales back, then I think we have a three-alarm fire. I’ll be watching annual reports from Klaviyo, Braze, Olo, Toast, Block, Netflix, and others to see if the third signal shifts.

Sidebar: Thank You for Being Late

Speaking of organizing frameworks, if this is the first time you’re reading my work, maybe there’s a hidden advantage to being late (to borrow a favorite book’s title). Longtime readers enjoy the real-time play-by-play, while you get the benefit of a retrospective map.

Overall Context Setting

  1. Messaging and Growth in the Pandemic
  2. Growth and Valuation in 2024
  3. Messaging and Growth in 2024
  4. The Not-So-Secret Salesforce Playbook
  5. The Four Growth Investments You Must Make

Q2 2024 Earnings Observations

  1. The Problem with CPaaS Stock Market Valuations
  2. Klaviyo Leads the 2024 Valuation Race
  3. Braze Rounds Out the Q2 2024 Earnings Cycle
  4. iConnectiv’s $1 Billion Price Tag
  5. LINK Mobility Reports a Solid Q2
  6. Klaviyo Flexes into the Enterprise to Deliver a Stellar Q2
  7. Q2 Earnings from Twilio, Sinch, Bandwidth, and Upland

Q1 2024 Earnings Observations

  1. The 2024 SaaS Growth Snapshot
  2. Twilio, Sinch, Bandwidth, Upland, LinkMobility and Klaviyo Announce Q1 2024 Earnings
  3. 2024 Earnings Season Kicks Off

Finally

Across tech, Q3 earnings are being widely anticipated. CNN has called it the “show me the money” quarter, i.e., the first quarter where companies have to show meaningful returns on investment. For the CPaaS space, it will hinge on showing returns on investments in data, RCS, AI, and use cases. The expectation is for no unwelcome surprises and the hope? That these earnings exceed forecasts, delivering clarity on where we are headed in 2025.

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