ROKU forecast on Thursday (Feb 15) a bigger first-quarter loss, as it grappled with intense competition from deep-pocketed rivals and weak customer spending on video streaming, sending its shares down 15 per cent in after-market trading.
The streaming service provider expects a first-quarter loss of 90 US cents per share, while analysts were expecting a loss of 69 US cents apiece, according to LSEG data.
Roku faces competition from streaming rivals such as Netflix and Amazon’s Prime Video to attract subscribers at a time when Americans are trying to reduce expenses amid sticky inflation.
Streaming services are now prioritising profitability after years of chasing subscriber growth, bringing more focus to advertising revenue.
Roku has to compete for advertising revenue against heavyweights such as Meta and Alphabet at a time when advertisers are gravitating towards larger, stable companies amid an uncertain economy.
It is also facing slow spending on media and entertainment (M&E) promotions due to limited releases as a result of a Hollywood strike last year.
“We expect the M&E markets to continue to be challenged this year,” Roku CFO Dan Jedda said.
Roku shares have fallen 4 per cent since Tuesday after a media report said Walmart was in talks to buy the company’s rival Vizio for more than US$2 billion.
Roku has an exclusive deal with Walmart to sell products fulfilled by the retailer on its devices.
For the fourth quarter, the San Jose, California-based company reported a loss of 55 US cents per share, while analysts had expected a loss of 52 US cents, according to LSEG estimates.
Roku posted a 13 per cent increase in fourth-quarter revenue from its platform that includes digital ads, and ad-free tier subscriptions. Revenue from its streaming devices and TV, which contributed about 16 per cent of its total sales, advanced by 15 per cent. REUTERS
