Roku saw its revenue growth slow in Q3, and warned investors Wednesday that things are about to get worse: “A lot of Q4 ad campaigns are being canceled,” said Roku CEO Anthony Wood during the company’s Q4 earnings call. “We’re seeing lots of big categories pull back. Telecom, insurance … even toy marketers are planning on reducing their spending.”
As a result, Roku now expects its Q4 revenue to decline by around 7.5% year-over-year. Roku’s Q3 revenue was up 15% year-over-year, but continued pressure on hardware margins and declining margins for the company’s advertising and services business led to a net loss of $122 million. In Q3 of 2021, Roku generated close to $69 million in net income.
Roku is an interesting test case for both consumer electronics and the general video ad market. The company sells its own hardware, but generates the vast majority of its money with advertising. Both sectors typically see a major cash influx in Q4, but Roku executives warned that things will be different this time around.
“This is not a normal holiday season,” Wood said. He also insisted that marketers were pulling back across the board. “They are not spending with anyone,” Wood said. However, he expressed optimism that advertisers would move even more of their budgets to streaming once the worst of the current crisis is over. “We expect to emerge from the current advertising downturn stronger and in a better position than ever,” Wood said.
Roku recently expanded beyond streaming with the launch of its own line of smart home products, which are being manufactured by Wyze Labs. “That was a cost-efficient and expeditious way to enter that market,” Roku CFO Steve Louden told Protocol Wednesday afternoon. “We're hoping that it does give us an opportunity to leverage [it] into a growing market over time.”