Roku Inc.
ROKU -4.35%
said it expected revenue from its two main business drivers—advertising and sales of streaming hardware—to fall in the fourth quarter as macroeconomic conditions pressured both consumers and advertisers to reduce their spending, sending the company’s shares down 18% in after-hours trading.
Chief Executive
Anthony Wood
told investors Wednesday that the coming holiday season was “probably going to be different than the typical holiday season.” He said advertisers including toy marketers were reducing their fourth-quarter ad spending because of uncertainty over a potential recession.
“The first thing companies do in the face of such uncertainty is cancel their ad budgets,” he said. “Big advertisers that we traditionally get spend from are not spending this quarter. They aren’t spending with anyone. It’s not just they’re not spending with us.”
San Jose, Calif.-based Roku is the nation’s largest maker of streaming hardware, but derives most of its revenue from advertising. It sells all ads viewed on its own streaming service The Roku Channel and also sells some ads that appear on other streaming services viewed on Roku devices.
Roku said it expected to post about $800 million in revenue in the fourth quarter, or about 8% less than it reported in the year-earlier period. Roku is expecting a fourth-quarter loss of $245 million.
In the third quarter, Roku reported a net loss of $122.2 million, or a loss of 88 cents a share, compared with a profit of nearly $68.9 million, or 48 cents a share, a year earlier. Analysts polled by FactSet expected a loss of $1.29 per share. Revenue grew 12% year-over-year to $761.4 million.
Roku sells services, such as promotions and analytics, to ad-supported streaming services that maintain apps on Roku’s operating system. Major subscription-based streaming services, such as
Netflix Inc.
and
Walt Disney Co.
’s Disney+, have announced plans to begin placing ads in their services during the fourth quarter. Mr. Wood said that streaming services’ embrace of advertising would cause them to spend more on services they purchase from Roku, such as promotions and analytics, to drive viewer engagement.
“For those companies, as soon as they have ads, engagement becomes even more important for them because obviously, the more people watch content, the more ads they can watch and the more money that can be made,” Mr. Wood said. “I think those companies know that we can help them a lot in that area.”
Write to Patience Haggin at [email protected]
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