Roku fell well short of Wall Street financial forecasts for the second quarter — and the streaming platform saw the number of hours streamed by customers drop from Q1.
The company had 63.1 million active accounts as of the end of Q2, adding 1.8 million in the period, beating analyst forecasts. Customers in the quarter streamed 20.7 billion hours, a decrease of 200 million hours from last quarter.
Shares of Roku tumbled more than 25% in after-hours trading on the miss, and following the company’s projection of only 3% top-line growth for the third quarter.
Overall, Roku posted revenue of $764.4 million, up 18%, and a net loss of $112.3 million (or 82 cents per share). Wall Street analyst average estimates pegged Q2 revenue at $805.2 million with a loss of 68 cents per share.
“In Q2, there was a significant slowdown in TV advertising spend due to the macroeconomic environment, which pressured our platform revenue growth,” Roku said in its Q2 shareholder letter. “Consumers began to moderate discretionary spend, and advertisers significantly curtailed spend in the ad scatter market (TV ads bought during the quarter).”
The company said it expects those challenges to continue in the near term. Roku said it took steps in Q2 to cut costs — significantly slowing both operating expenses and headcount growth.
Roku said Q3 revenue is expected to increase approximately 3% year over year, to $700 million, with a gross profit of roughly $325 million, an adjusted loss of $75 million and a net loss of $190 million. The company said it was withdrawing its full-year revenue growth estimate of 35% “given the uncertainties and volatility in the macro environment.”
For Q2, revenue in the Roku Player segment, which it treats as a loss-leader, fell 19% year over year, to $91 million. Operating loss in the segment was $22 million, up from an operating loss of $6.7 million a year earlier.
Sales in Roku’s Platform segment, which encompasses advertising and content revenue-sharing deals, increased 26% to $673 million. That was lower than expected as “many marketers abruptly curtailed or paused advertising spend in the ad scatter market during the latter half of Q2,” according to Roku.
At the same time, Roku boasted that it closed upfront deals for the 2022-23 TV season with all seven major agency holding companies — topping $1 billion in total commitments. “We continue to take ad dollar share away from traditional TV,” the company told shareholders. About 25% of all advertisers who committed to Roku during the most recent upfronts did not participate last year.
Roku has increasingly focused on adding content for its free, ad-supported Roku Channel. It recently added eight NBC local news channels and has set a Nov. 4 premiere date for spoofy biopic “Weird: The Al Yankovic Story,” starring Daniel Radcliffe. This month, the company officially scored its first Emmy nominations, for Roku Channel original movie “Zoey’s Extraordinary Christmas” and Bill Burr comedy anthology series “Immoral Compass.”
In June, Roku announced a deal with Walmart, under which the streaming platform will sell shoppable ads that will let viewers purchase featured products from Walmart.