Roku Blames Second Quarter Earnings Missing “Significant Slowdown in TV Ad Spend” Due to Broader Economy

Roku’s second-quarter results were well below Wall Street expectations, due to a slowdown in TV advertising amid economic uncertainty.

The streaming giant said it lost 82 cents per share, up from 52 cents a year earlier, and posted revenue of $ 764 million, up 18%. Analysts had expected a loss of 68 cents on revenues of $ 805 million.

Roku shares fell more than 25% in trading after the news. It was in the $ 63 range, a level not seen since early 2019.

In the quarter, the company wrote in a letter to shareholders that “there has been a significant slowdown in TV advertising spending due to the macroeconomic environment, which has put pressure on our platform’s revenue growth. Consumers have begun to moderate discretionary spending and advertisers have significantly reduced spending in the broadcast advertising market (TV ads purchased on a quarterly basis). We expect these challenges to continue in the near term as economic concerns continue to put pressure on global markets. “

The number of active accounts ended the quarter on June 30 at 63.1 million, up 14% over the previous year, but was again weighed down by the economic climate. “The decline in consumer discretionary spending is putting pressure on many verticals, including TV and game sales,” the letter said to shareholders. “Retailers managed to manage high US TV inventories and temporarily lowered TV prices in the second quarter, which helped reduce TV unit sales in the quarter.”

Despite the gloom and fate of the quarter, Roku claimed to have completed ad sales exceeding $ 1 billion for the first time. It launched the original programming in 2021 after acquiring the programming originally created at the short-lived mobile subscription startup Quibi and has since added several original titles. The originals air on The Roku Channel, a popular hub for tens of thousands of on-demand movies and TV titles and hundreds of live linear channels.

Roku was a fascinating company during the coronavirus pandemic. Like many of the subscription streaming apps found on its menu, it thrived as more and more users were forced to stay at home and the overall streaming audience grew. Eventually, not only did people start streaming more (although Nielsen noted that streaming continues to gain record shares), but a number of macroeconomic problems emerged. As Roku has licensed its interface to several smart TV manufacturers and is now on more than a third of all TVs in North America, supply chain and inventory issues have meant fewer units on store shelves and fewer new streaming customers. .

Like other tech titles, Roku took a beating this year, but the damage is remarkably persistent. Although the stock has recovered from its recent 52-week low, it is less than 20% off its high of $ 472. Despite the company’s dominance in streaming, a growing number of investors are skeptical of the industry’s profit model. , with some analysts questioning the company’s ability to hold its own against much larger rivals like Amazon or Comcast.

During a conference call with reporters, CFO Steve Loudon said the severity of the return to the advertising / dispersion market “was not anticipated.” But he also said it was “no different” during the 2020 recession and other disruptions.