Why Revenue Growth Fell Below Analysts’ Projections

Streaming is the future, there’s no doubt about that. But what does that future look like? We’re still figuring that out, and Roku is clearly feeling the pains of that uncertainty.

The company, which produces hardware people use to access their favorite streaming platforms, reported fourth-quarter earnings today, and it was a mixed bag. While Roku continues to post prodigious growth, it has slowed from second and third quarter of the year. And revenue fell short of analyst expectations.

Revenue rose 33% in fourth quarter, to $865.3 million, short of the 38% analysts had projected. It was also short of the heady 51% jump in third quarter and incredible 81% growth in second quarter.

Roku was understandably eager to chalk that up to growing pains and not a sea change. The message from the earnings call? We know where we’re headed, and customers are coming for the ride, if they’re a bit slower to jump on.

“Our scale is past 60 million active accounts and we remain focused on being the best and largest streaming platform. The Roku operating system is poised to gain further market share as TVs shift away from costly proprietary operating systems,” said Roku Founder and CEO Anthony Wood during the earnings call.

In a letter to investors posted right before the earnings call, Wood and Chief Financial Officer Steve Louden emphasized that streaming remains in its early days, despite its huge growth in popularity over the past decade. Consumers are still navigating their choices for delivery method, and Roku is riding the ups and downs of those adjustments.

“Roku’s founding vision remains true: All TV and all TV advertising will be streamed,” reads the letter. “Almost every major media company is reorienting its business around streaming and has launched a flagship service, spending billions on content and marketing to attract and retain subscribers. At the same time, with the significant gap that exists between viewership and ad budgets, we are still in the early days of the secular shift to streaming.”

Wood and Louden also noted that supply issues have stymied consumers. Like in third quarter, they said, TV unit sales in fourth quarter dropped below pre-COVID 2019 levels. “Some of our Roku TV OEM partners were hit particularly hard with inventory challenges, which negatively impacted their unit sales figures and market share in Q4,” the letter said.

Investors weren’t placated. Shares fell more than 10% in extended trading as the results came out, sending it to its lowest position in more than 18 months.

The total active Roku accounts increased by 17%, from 51.2 million in 2020. During the call, Wood expressed confidence that advertisers want to reach that growing base.

“Our ad platform is built for TV streaming. We believe large traditional TV advertisers will continue to shift to Roku for the targeting, measurement, optimization and superior ROI that we provide,” he said. “And for digital first advertisers and small and medium businesses, Roku makes advertising on TV more accessible.”