Earnings Results: Roku’s stock plunges 26% on weak outlook, misses at top and bottom lines

Roku Inc.'s stock was eviscerated by 26% in extended trading after it offered paper-thin guidance and reported fiscal second-quarter revenue Thursday that fell short of Wall Street analysts’ forecasts. Read More...

Roku Inc.’s stock quickly plunged 26% in extended trading after the company offered paper-thin guidance and reported fiscal second-quarter results Thursday that fell short of Wall Street analysts’ forecasts.

“There was a significant slowdown in TV advertising spend due to the macro-economic environment, which pressured our platform revenue growth,” Roku executives said in a letter to shareholders. “Consumers began to moderate discretionary spend, and advertisers significantly curtailed spend in the ad scatter market (TV ads bought during the quarter). We expect these challenges to continue in the near term as economic concerns pressure markets worldwide.”

In the letter to shareholders, Roku executives said they have undertaken steps in “significantly slow both operating expense and headcount growth.”

Roku ROKU, -2.01% posted a net loss of $112.3 million, or 82 cents a share, compared with a net loss of $149.8 million, or $1.06 a share, in the same quarter last year.

Net revenue improved 18% to $764 million from $645.1 million a year ago.

Analysts polled by FactSet had forecast a net loss of 71 cents a share on revenue of $804 million.

Third-quarter revenue guidance, at $700 million, was significantly below FactSet estimates of $898 million.

Roku has cited ongoing supply-chain disruptions contributed to increased U.S. TV prices in the first quarter, leading to industry-wide TV unit sales that were below 2019 (pre-COVID) levels. Those factors, on top of inflation, the war in Ukraine and other macro economic headwinds, brutalized ad revenue for Alphabet Inc.’s GOOGL, +1.03% GOOG, +0.87% Google, Facebook parent Meta Platforms Inc. META, -5.22%, Snap Inc. SNAP, +1.26% and Twitter Inc. TWTR, +2.61% over the past week.

“These signs indicate that exuberance over streaming video advertising is tamping down due to challenging economic conditions,” Insider Intelligence analyst Ross Benes said, in assessing Roku’s results and guidance.

Roku’s stock has been pulverized 63% this year; the broader S&P 500 index SPX, +1.21% is down 15% in 2022.