Roku Stock Slumps on Missed Q2 Revenue, Earnings

Roku YouTube TV
(Image credit: Roku)

SAN JOSE, Calif.—Roku reported lower than expected ad revenue and earnings per share in its Q2 2022 earnings, in another sign that the once very hot ad-supported streaming and connected TV ad market may be slowing down. 

Roku’s shares fell sharply on July 29 and were down by 25.3% at 1:10 p.m. on July 29,

The missed revenue targets highlighted growing worries about the state of the ad market. Earlier in the week, Alphabet released a Q2 earnings report that showed the slowest growth in YouTube ad revenue since the company first began reporting those numbers in Q4 2019.

CNBC reported that YouTube’s revenue increased just 4.8% from a year earlier to $7.34 billion, trailing analysts’ estimates of $7.52 billion. The sluggish Q2 increases followed Q1 2022 earnings that showed YouTube ad growth significantly down from a year earlier. 

Facebook also reported disappointing ad revenue results this week that produced the first revenue decline as a public company. 

Roku did report that it has surpassed a milestone of $1 billion in commitments during the upfronts for the first time and that it secured deals with all 7 major agency holding companies, with 25% of all advertisers who committed to Roku during the upfronts being new commitments. 

It also managed to show growth in active accounts (up 14% year over year to 63.1 million), hours streamed (up 19% year over year to 20.7 billion) and average revenue per user (up 21% to $44.10 year over year) in an increasingly competitive streaming landscape.

But the number of hours streamed were slightly down from Q1 2022 and it missed its revenue and earnings per share targets for the Q2. 

In addition management lowered its guidance for Q3, 2022 down to $700 million, a slight 3% year over year increase, and completely withdrew guidance for all of 2022. 

“We are in an economic environment defined by recessionary fears, inflationary pressures, rising interest rates, and ongoing supply chain disruptions,” management said in a shareholder letter. “For the second half of the year, we are forecasting that advertising spend, particularly in the scatter market, will continue to be negatively impacted. We also believe that consumer discretionary spend will continue to moderate, pressuring both Roku TV and Roku player sales.”

“Taking these factors into consideration, our Q3 outlook is for total net revenue to increase approximately 3% year over year to $700 million,” the letter said. “We anticipate total gross profit of roughly $325 million, and adjusted EBITDA of negative $75 million. Finally, given the uncertainties and volatility in the macro environment, we are withdrawing our full-year revenue growth rate estimate. We will remain focused on growing our market leadership by further advancing our technology and brand, and continuing to execute our strategy.”

George Winslow

George Winslow is the senior content producer for TV Tech. He has written about the television, media and technology industries for nearly 30 years for such publications as Broadcasting & Cable, Multichannel News and TV Tech. Over the years, he has edited a number of magazines, including Multichannel News International and World Screen, and moderated panels at such major industry events as NAB and MIP TV. He has published two books and dozens of encyclopedia articles on such subjects as the media, New York City history and economics.