To The Moon

$Roku Inc (ROKU)$ reported Q3 results after the bell on Oct. 30, and while both revenue and profit beat estimates, the company lowered its guidance for the Q4 quarter, and the company's shares fell more than 12% after a brief after-hours rally.

Earnings overview

• Revenue increased 16% to $1.06 billion, above the market's general expectation of $1.02 billion;

• Gross profit of $480 million, up 30% year-over-year and up 10% year-over-year excluding the impact of restructuring;

• Net loss narrowed to $9 million from $330.1 million a year ago

• Approximately 85.5 million households subscribed, up 13% year-over-year, with 32 billion hours of streaming, up 5.3 billion hours from a year ago;

• ARPU for the past 12 months was $41.10, unchanged from the previous quarter

  

Guidance

• The company's revenue for Q4 is expected to be $1.14 billion, higher than the market's general estimate of $1.11 billion.

• But the company expects gross profit of $465 million, below the consensus estimate of $476.8 million

• EBITDA profit of $30 million, below the consensus estimate of $36.2 million.

Investment highlights

1. Increased uncertainty in the economic environment.The Company's advertising platforms are attracting more brands and advertising revenue is expected to continue to grow, particularly during the holiday season.At the same time, the Company is actively exploring international market opportunities, particularly in Europe and Asia Pacific, with plans to accelerate growth through localized content and partnerships.

2. Advertising Slowdown and Increased Competition.The Company faces intense competition from other streaming platforms, particularly in terms of subscriber acquisition and retention, which has also impacted its growth expectations.Netflix's current ad packages, for example, also divert CTV ad traffic to some extent.

3. Why was profit guidance less than expected?To some extent it is determined by the type of advertisers the company has.Brand advertising in the market is currently growing at a lower rate than e-commerce oriented SME advertising, which is why it is difficult for companies to benefit from more flexible ad types in in-stream advertising.