Roku shares drop 24% as streamer, ads & device results disappoint

Streaming firm and device manufacturer Roku has reported significantly lower-than-expected results, causing shockwaves among its investors and a freefalling share price.

The company’s Q2 2022 net revenue rose by 18% to $764.4m, but this was much lower than analyst estimates of $805m. Also concerning for Roku is a decrease of 200 million viewing hours from last quarter, to 20.7 billion hours at the most recent count.

The company also warned of “recessionary fears”, with spooked investors sending the stock down by 24% in after hours dealing. It has fallen from a high of $449 this time last year to around $63 today.

Streamer & ads disappoint

The ‘platform’ segment – which includes Roku’s advertising business and its streaming operations – saw revenues increase by 26% to $673m. This was also lower than expectations, with the company attributing this to the decision of “many marketers [who] abruptly curtailed or paused advertising spend in the ad scatter market during the latter half of Q2.”

The loss-leading ‘player’ segment, which houses sales of Roku CTV devices and smart speakers, saw revenues hit $91m, 19% down year-over-year. The segment’s operating loss was at $22m, compared with a loss of $6.7m in Q2 2021.

Despite beating expectations by adding 1.8 million users to a total of 63.1 million active accounts, the two headline-grabbing figures – along with difficulties in the ad business – sent Roku’s shares down.

As a result of current economic uncertainties, Roku said that it is withdrawing its full-year revenue growth estimate of 35%. It expects Q3 revenue to grow 3% year-over-year to $700m with profits of around $325m, an adjusted loss of $75m and a net loss of $190m.

In his letter to investors, Roku CEO Anthony Wood surmised: “We are in an economic environment defined by recessionary fears, inflationary pressures, rising interest rates, and ongoing supply chain disruptions.

“For the second half of the year, we are forecasting that advertising spend, particularly in the scatter market, will continue to be negatively impacted. We also believe that consumer discretionary spend will continue to moderate, pressuring both Roku TV and Roku player sales.”