Roku stock plunges following mixed earnings report

Yahoo Finance Video
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Yahoo Finance's Allie Canal breaks down Roku's top- and bottom-line beats and earnings guidance.

Video Transcript

DAVE BRIGGS: Roku has now released its third quarter earnings after the bell. Yahoo Finance's Allie Canal has those numbers for us. And look at that stock, Allie, down 20% after-hours.

ALLIE CANAL: It's pretty stunning, and it was an interesting story after the market closed after we got these earnings because it surged, and then it came way down. So let's break down what investors initially reacted to. We had a beat on revenue, 761.4 million versus the expected 702.35 million. Also a narrower adjusted loss per share of $0.88 versus the expected 1.22. So a beat there on both the top and bottom lines. Also a beat on active account growth.

But here's the bad news, and that's what's driving down the stock by more than 20%. It's their guidance. The company now sees fourth quarter adjusted EBITDA loss at about $135 million versus the expected loss of $45.5 million. So that's a huge discrepancy that Wall Street is reacting to. Net revenue guidance for the fourth quarter also lower, 800 million versus 897 million expected.

And we're just getting news as well that Roku CFO Steve Louden plans to leave the company in 2023. So this is just a lot of information for investors to digest. In the earnings release, the company said, quote, "As we enter the holiday season, we expect the macro environment to further pressure consumer discretionary spend and degrade advertising budgets."

Now, advertising is what's been talked about with a lot of these tech companies, especially following the results of Meta, Snap, Alphabet, the state of digital advertising largely in question amid a lot of these macroeconomic challenges. So a lot of near-term headwinds for this company. They have been spending pretty aggressively. They did say they were going to cut back on headcount, but right now, investors not too happy there with shares down more than 20% in after-hours.

RACHELLE AKUFFO: Quite the selloff, indeed. A big thank you there to our very own Allie Canal.