Messaging-software provider (NYSE: TWLO) has been one of my least favorite software stocks for a long time. The main reason was the company's bloated cost structure.

To support its core text-message product, Twilio must pay fees to network service providers. These fees push down the company's gross margin far below that of a typical software company. Instead of restraining its spending on sales, marketing, research and development, and other areas to reflect this reality, Twilio has historically spent prolifically as it chased profitless growth.

In 2022, Twilio produced $3.83 billion in revenue. Gross profit was $1.81 billion, good for a gross margin of just 47%.

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Source Fool.com