Roku Tops Sales Projections on Growth in Users, Advertising

Updated on
  • Company projects current quarter sales that may top estimates
  • Number of active accounts increased 48% from a year earlier

Why Shares of Roku Are Surging

Roku Inc. beat sales projections in its first quarterly report since going public, bolstered by rising advertising revenue and a 48 percent increase in active user accounts. Shares jumped more than 25 percent in extended trading.

Revenue rose 40 percent to $124.8 in the third quarter, compared with the average analyst estimate of $110.8 million, according to data compiled by Bloomberg. The company reported a loss, adjusted for certain items, of 10 cents a share. Analysts projected 28 cents.

Los Gatos, California-based Roku was one of the pioneers in the market for home streaming devices. The company’s hardware and software allow users to stream video to their televisions from media providers, including Netflix Inc., Amazon.com Inc., and Walt Disney Co.’s ESPN.

“There’s a massive shift to streaming and Roku is very well positioned,” Chief Executive Officer Anthony Wood said in an interview. “The platform business is the clear driver for our growth.”

While the majority of Roku’s revenue comes from sales of its devices, the company has been generating more from its platform businesses, which includes a cut of the subscription or advertising revenue for video streamed through its system. That revenue more than doubled to $57.5 million in the period, the company said in a statement.

Roku also faces growing competition from technology giants such as Apple Inc., Alphabet Inc.’s Google and Amazon, which all make streaming devices. TV manufacturers also have started to offer their own built-in streaming options.

“Roku faces threats from these tech giants since it lacks the financial resources of its competitors and has relatively lower branding,” Ralph Schackart, an analyst at William Blair & Co., wrote in a note to investors ahead of Roku’s results. “Roku is successfully steering away from its hardware business and evolving into a profitable advertising and licensing model.”

Shares rose in extended trading to a high of $24.30 after closing at $18.84 Wednesday in New York before the results were released. The stock went public at $14 in late September. Investors are betting on the continued growth of cord cutters who watch video content without cable TV subscriptions.

The company reported its net loss widened to $46.2 million, or $8.79 cents a share.

Roku reported it had 16.7 million active accounts as of Sept. 30, an 11 percent increase from the 15.1 million in the previous quarter. The company also projected fourth-quarter revenue of $175 million to $190 million. Analysts estimated $177 million.

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