Roku (ROKU) stock fell more than 17% on Thursday after the company’s fourth-quarter outlook was disappointing, even though the media player reported $1 billion in first-quarter revenue.
For the current quarter, the company expects gross profit to reach $465 million and adjusted EBITDA to be $30 million. Both measures were below Wall Street’s expectations for gross profit of $477 million and adjusted EBITDA of $36.2 million.
The company also said it will stop reporting streaming households as a key performance indicator, echoing a similar move by streaming giant Netflix (NFLX) to stop reporting subscriber numbers early next year.
Instead, Roku said it will focus on streaming hours, platform revenue, adjusted EBITDA and free cash flow starting in the first quarter of 2025.
“Since our IPO in 2017, the streaming industry has undergone meaningful evolution, with Americans now spending significantly more TV time streaming than watching cable,” Roku said in its earnings call. “Our business is also growing and evolving, and we are now primarily focused on increasing the revenue and profitability of our platform.”
Prior to Wednesday’s announcement, the stock had risen more than 30% in the past three months on expectations for a strong advertising market and platform revenue growth.
This is a significant change for the company, which took a number of cost-cutting measures last year to reduce operating expenses and improve profits. Roku has recently been working on a variety of monetization efforts, including deeper integration with programmatic advertising giant Trade Desk (TTD).
Roque said the tailwinds from these efforts and political ad spending “will continue into the fourth quarter.”
The Roku logo appears on the screen along with a silhouette of a hand holding a TV remote. (Pavlo Gonchar/SOPA Images/LightRocket via Getty Images) · SOPA Images via Getty Images
Roku’s net revenue for the third quarter was $1.1 billion, an increase of 16% year-over-year, and its net loss was $65 million, or $0.06 per share. The quarterly net loss was significantly narrower than Wall Street had expected a loss of $0.33 and the quarterly loss of $2.33 a year earlier.
Platform revenue, which includes advertising sales, revenue from distribution agreements and the over-the-top streaming service Roku Channel, increased 15% year over year to $908 million.
This boom was driven by strength in advertising sales, content distribution, and expansion into international markets.
“In the third quarter, year-over-year growth in advertising activity across the Roku platform, excluding media and entertainment, outpaced both the overall U.S. ad market and the over-the-top (OTT) ad market,” Roku said. said. Highlights strengths in political, retail, and consumer packaged goods advertising.
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