Roku on Thursday said it will eliminate 200 jobs, or about 5% of its workforce, citing “economic conditions in our industry.”
The streaming platform’s volatile shares dropped on the news, a reversal from the typical Wall Street reaction to cuts in labor expenses.
“Taking these actions now will allow us to focus our investments on key strategic priorities to drive future growth and enhance our leadership position,” Roku said in a short statement.
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The cuts come two weeks after Roku warned investors that it expects revenue to plummet 7.5% in the fourth quarter from last year, to roughly $800 million. Despite several cuts and downgrades, analysts’ average estimate remains above that figure, at $810 million, for the current quarter.
“As we enter the holiday season, we expect the macro environment to further pressure consumer discretionary spend and degrade advertising budgets, especially in the TV scatter market,” the company said in the earnings letter to shareholders. “We expect these conditions to be temporary, but it is difficult to predict when they will stabilize or rebound.”
Pivotal Research analyst Jeffrey Wlodarczak called the revenue guidance “frankly horrific” in a downgrade of the shares to “sell” the day after the earnings release.
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Roku’s guidance suggested both a year-over-year decline, as well as an “almost unheard of sequential decline” in revenue, the analyst noted, during what is typically the year’s strongest advertising quarter, despite the growth of streaming overall, Wlodarczak wrote in a research note, and suggested there is “something specific going on” at Roku “that seems to have significantly exacerbated the problem” of the advertising slowdown.
The stock has been volatile in the weeks since, and hit a recent high of $61.63 on Friday, still well off the high of $266.05 seen in December.
“Advertising spend on our platform continues to grow more slowly than our beginning-of-year forecast due to current weakness in the overall TV ad market and the ad scatter market in particular,” Roku said in the Nov. 2 earnings announcement.
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