Roku Plunges After Reporting Weak Ad Revenue

Roku beats forecasts for EPS and revenue

By
Nathan Reiff
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Nathan Reiff has been writing expert articles and news about financial topics such as investing and trading, cryptocurrency, ETFs, and alternative investments on Investopedia since 2016.
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Published November 02, 2022
Roku logo at an event glowing on the roof of a building

Astrid Stawiarz / Stringer / Getty Images

Key Takeaways

  • Roku's shares fell by a fifth after it reported slow growth for platform revenue and advertising spending for Q3.
  • Roku's active accounts climbed by 2.3 million to beat analyst expectations.
  • Roku's user base, as gauged by the number of active accounts, is a key measure of the company's ability to generate advertising revenue.
  • Roku's EPS and revenue also both beat analyst predictions.
Roku Earnings Results
Metric Beat/Miss/Match Reported Value Analysts' Prediction
Earnings Per Share Beat -$0.88 -$1.24
Revenue Beat $761.4M $703.9M
Active Accounts Beat 65.4M 64.0M

Source: Predictions based on analysts' consensus from Visible Alpha

Roku (ROKU) Financial Results: Analysis

Roku Inc. (ROKU), among the top eight entertainment platforms in the U.S., lost a fifth of its market value after saying revenue and advertising spending slowed in the third quarter.

The shares slid after Roku reported revenue grew by 12% to $761,4 million, the slowest pace in more than six years. The company lost 88 cents a share, less than the $1.24 per share that analysts estimated.

Roku blamed an ad market hamstrung by the cooling economy for a slowdown in ad sales on its platform. It isn't alone: Netflix Inc. (NFLX) plans to launch a version of its platform with ads early this month. While Roku's products are used to stream Netflix, analysts don't expect Roku to reap the benefits of an uptick in ad sales for the new product.

ROKU Active Accounts

Active accounts, a gauge of Roku's user base, grew by 2.3 million sequentially to 65.4 million, topping expectations. More subscribers mean more people who will see ads, making the platform more attractive to advertisers.

ROKU Outlook and Stock Performance

Roku said it expects consumer discretionary spending and advertising budgets to remain depressed through the end of the year, resulting in player and platform revenue lower than the fourth quarter of last year. It forecast revenue next quarter of $800 million.

Roku's stock has dropped by 83% in the last year, compared with a decline of 19% in the S&P 500 Index.

Roku's next earnings report (for Q4 FY 2022) is expected to be released on Feb. 16, 2023.

Article Sources
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  1. Yahoo! Finance. "Roku, Inc. (ROKU)."

  2. Roku Inc. "Q3 2022 Shareholder Letter," Pages 1, 7, 8, 10.

  3. Statista. "Leading Entertainment and Video Streaming Apps in the United States in 1st Half 2022, by Downloads."

  4. Visible Alpha. "Financial Data."

  5. CNBC. "Facebook and Google Face Skeptics on Wall Street This Week Amid Digital Ads Collapse."

  6. Bloomberg. "Netflix’s Ad Plan Not Enough to Halt Roku’s 78% Stock Rout."

  7. TradingView. "Price Chart: ROKU and S&P 500."

  8. MarketScreener. "ROKU, INC. (ROKU)."

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