Shares of Roku surged by 12 percent in after-hours trading on Wednesday following the company’s better-than-expected revenue performance and improvements in its advertising business. Roku reported a total net revenue of $912 million, representing a 20 percent year-over-year increase. The company’s platform revenue, primarily generated from ads, reached $787 million, up 18 percent year-over-year. Roku attributes this growth to the diversifying demand from advertisers on its platform and an increase in partnerships with companies like Spotify and Walmart.
Despite the challenging macro environment, Roku’s video advertising on its platform outperformed both the overall ad market and the linear TV ad market in the United States during the third quarter. While traditional linear TV ad spend declined by 12 percent year-over-year, Roku experienced continued signs of rebound in video advertising. This strong performance can be attributed to advertisers recognizing the benefits of reaching Roku’s vast user base.
However, Roku did report a wider net loss of $349.8 million compared to a net loss of $147 million in the previous year and $126 million in the previous quarter. To mitigate the impact of the challenging market conditions and uncertainties, the company implemented a 10 percent staff reduction and incurred charges related to restructuring. Additionally, Roku took an impairment charge of $55 million to $65 million to remove licensed and produced content from its streaming platform.
The number of active accounts for Roku reached 75.8 million in the third quarter, representing an increase of 2.3 million accounts from the previous quarter. Moreover, total streaming hours amounted to 26.7 billion, surpassing the previous two quarters’ 25.1 billion streaming hours. The Roku Channel introduced new sports FAST (Free Ad-Supported Television) channels, such as FIFA+, DraftKings Network, and CBS Sports HQ. Additionally, local news channels from Fox and CBS, as well as channels from NBCUniversal for shows like “Saved By the Bell” and “Murder, She Wrote,” were added. Notably, YouTube personality MrBeast launched his first FAST channel on Roku during this period.
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Despite the positive performance, Roku remains cautious due to the uncertain macro environment and the uneven recovery of the ad market. The company anticipates maintaining a similar growth rate for video ads in the fourth quarter but acknowledges the need for caution.
Looking ahead to the fourth quarter, Roku expects total net revenue to be approximately $955 million, total gross profit to be around $405 million, and Adjusted EBITDA to be $10 million. The company’s goal is to achieve positive adjusted EBITDA for the full year 2024.
In conclusion, Roku’s strong revenue performance and improvements in its advertising business have propelled its shares to rise significantly. With an expanding user base, partnerships with major companies, and the addition of new content channels, Roku remains well-positioned to capitalize on the growing demand for streaming services. However, the company remains cautious due to uncertainties in the market, highlighting the need for continued vigilance and adaptability in the highly competitive streaming industry.
