Roku in a Tailspin: Growth Forecasts Disappoint Wall Street

Roku's shares suffered a setback of over 10% in after-hours trading on Wednesday. Despite recording revenues of one billion US dollars in a quarter for the first time, the forecast for the fourth quarter disappointed investors. For the current quarter, Roku expects a gross profit of 465 million US dollars and an adjusted EBITDA of 30 million US dollars, both below Wall Street's expectations of 477 million and 36.2 million US dollars, respectively. Roku also announced that it will cease reporting on streaming households as a key metric, similar to Netflix, which will stop publishing subscriber numbers next year. Instead, from the first quarter of 2025, Roku plans to focus on streaming hours, platform revenues, adjusted EBITDA, and free cash flow. The company emphasizes that the streaming industry has evolved significantly since its IPO in 2017. In light of these changes and increased streaming usage, Roku is now more focused on growth opportunities through platform revenues and profitability. Ahead of the recent report, the shares had gained more than 30% in anticipation of a strong advertising market. Roku implemented a series of cost-cutting measures to reduce operating costs and optimize profits, including enhanced collaboration with advertising giant The Trade Desk. According to Roku, political advertising expenditures are also contributing to positive developments in the fourth quarter. In the third quarter, Roku reported revenues of 1.1 billion US dollars, a 16% increase year-on-year, with a net loss of 65 million US dollars. This loss was significantly lower than analysts had expected. Platform revenues, which include advertising sales, distribution deals, and the streaming service "The Roku Channel," rose by 15% to 908 million US dollars. Growth in the advertising market, content distribution, and international markets contributed significantly to this increase. Roku highlighted that the growth of advertising-driven activities on the platform in the third quarter exceeded the overall advertising market and the OTT advertising market in the US, particularly in the areas of politics, retail, and consumer goods.