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Roku Shares Plunge 25 Percent After Earnings Results Miss Estimates

Ibhadojemu Emmanuel by Ibhadojemu Emmanuel
July 29, 2022
in Uncategorised
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Shares of Roku were down over 25 percent in Thursday’s extended trading after the company released its quarterly earnings results which failed to meet the estimates of analysts. Roku blamed its poor quarterly results on macroeconomic conditions highlighting factors like inflation and supply chain challenges. The company also warned of “an economic environment defined by recessionary fears.”

For the second quarter, the company reported a loss of 82 cents compared to a loss of 69 cents that analysts had forecasted for the quarter. Revenue came in at $764 million for the quarter, falling below the estimate of $805 million that analysts expected, according to Refinitiv.

Roku had to cut down on operating expenses and slowed the growth of its workforce, to be able to cope in the second quarter. The company said that it expects a decline in advertising in the ongoing quarter, adding that consumer spending will reduce. This will affect the company’s business of selling Roku TV and associated hardware devices.

In a letter to shareholders, the company said that “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 guidance for the third quarter fell below analysts’ expectations. It expects revenue of $700 million for the third quarter. Analysts forecast revenue of $902 million for the third quarter. The company also withdrew its full-year growth estimate, citing market volatility.

Advertisers reduced their spending on television advertisements during the second quarter, the company said. The company emphasized that fear of an imminent recession is pushing businesses to reduce their advertising.

Like other companies, Roku suffered from macroeconomic uncertainties and a reduction in advertising among other factors. Most of the companies, including Facebook’s parent Meta, that have issued their quarterly results reported disappointing earnings results.

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Ibhadojemu Emmanuel

Ibhadojemu Emmanuel

Ibhadojemu Lucky Emmanuel is a graduate of Education and Economics from the University of Benin. He has a passion for tech and business and has been writing professionally for over a period of five years. He's written across various topics and segments and knew tech-business was it when he first stumbled on it. He has a great passion for music and arts, and wants to visit as many countries as he can someday.

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