Roku Inc. (ROKU) experienced a sharp 14% plunge in its stock price during pre-market trading on October 31, 2024, despite reporting better-than-expected third-quarter results. The streaming platform provider beat analyst estimates for both revenue and earnings per share in Q3, with revenue rising 16% year-over-year to $1.06 billion.
Roku's strong Q3 performance was driven by robust growth in its Platform segment, which includes advertising and content distribution. Platform revenue grew 15% year-over-year to $908 million, fueled by streaming service distribution activities and increased advertising demand. The company also achieved its fifth consecutive quarter of positive Adjusted EBITDA and Free Cash Flow on a trailing 12-month basis.
However, investor sentiment soured as Roku provided guidance for the fourth quarter that disappointed the market. While the company's Q4 revenue forecast of $1.14 billion exceeded the consensus estimate of $1.11 billion, it represented a slower growth rate of 16% year-over-year, compared to the higher growth achieved in previous quarters. This slower projected growth, coupled with flat Average Revenue Per User (ARPU) of $41.10, raised concerns among investors about Roku's future growth prospects, leading to the sharp sell-off.
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