- Roku shares dropped as much as 27% on Friday after the streaming service missed Q2 results and warned of a Q3 revenue shortfall.
- Advertisers and consumers pulled back on spending in Q2 and the company sees that continuing through its September quarter.
- Roku foresees Q3 total revenue of $700 million, below the FactSet estimate of $898 million.
Roku shares lost nearly a third of their value on Friday after the entertainment streaming service warned of weaker-than-expected revenue as consumers and advertisers alike pull back on spending.
"We are in an economic environment defined by recessionary fears, inflationary pressures, rising interest rates, and ongoing supply chain disruptions," Roku's CEO Anthony Wood and CFO Steve Louden said in a second-quarter letter to shareholders published late Thursday.
Roku stock fell as much as 27%, the lowest price since March 2020. The shares had already lost about 62% this year through Thursday's regular session.
Investors knocked the shares lower after Roku late Thursday projected third-quarter total net revenue of $700 million, a 3% increase year over year but well below FactSet's consensus estimate of $898 million. It also pulled its full-year revenue growth estimate.
Roku said it experienced a "significant slowdown" in TV advertising spending in the second quarter that pressured its platform revenue growth. Platform revenue increased 26% to $673 million from a year ago, but Roku said that growth was lower than expected.
"We believe this pullback mirrors the start of the pandemic in 2020, when marketers prepared for macro uncertainties by quickly reducing ad spend across all platforms," the company said.
Roku expects spending by advertisers to continue to be dented in the second half of 2022. It also foresees continued moderation in consumer-discretionary spending, moves that will likely hurt sales of Roku TV and Roku players.
The company swung to a second-quarter loss of $0.82 a share from earnings of $0.52 a share a year earlier. Revenue for the quarter ended June 30 did rise to $764.4 million from $645.1 million a year ago. But analysts had expected revenue of $804 million and a loss of $0.71 per share.