- Shares of Roku were up as much as 28% after it crushed its first earnings report as a public company. Roku credits the growth to its fast-growing platform business, which more than doubled from the period a year ago.
The streaming-TV-box provider Roku beat Wall Street revenue estimates on its first earnings report as a public company, giving investors confidence that the company is making progress on its plan to evolve from a commodity hardware company into an advertising business.
Roku generated $124.8 million in revenue during the third quarter, compared with the analyst consensus of $110 million. And the company said it expected revenue in the holiday quarter of $175 million to $190 million – well above the $177 million expected by analysts.
The good news sent shares of Roku spiking as much as 28% in after-hours trading, at about $23.75, before giving up some of the gains and trading up 22%.
Roku, started by veterans of the streaming-video powerhouse Netflix, is trying to capitalize on the growing ranks of cable-TV “cord cutters” ditching their cable subscription plans and watching videos streamed on their laptops, phones, and TVs.
Don’t call it a hardware company
Even as Roku’s net losses deepened to $46 million, the company said it was making progress in key growth areas.
Roku said its “active accounts” jumped 48% year over year in the third quarter, to 16.7 million.
And its “platform business,” which includes revenue from advertising and licensing deals, surged 137% and now accounts for nearly half of the company’s total revenue. At this time last year, this business was 26% of Roku’s total revenue.
Roku first went public at the end of September, at $14 a share. It saw a huge pop out of the gate, with first-day gains of about 70%. Since then, Roku has experienced some volatility – it has gone as low as $15.75 and as high as $29.80.
Roku credits much of its growth to its rapidly expanding platform business, rather than its sale of its streaming-media hardware. The hardware promotes the growth of its software platform, on which Roku takes a cut of all transactions.
“Unlike a hardware company that would normally try to maintain higher ASPs and hardware gross margin, we strategically pass along player cost savings to consumers by actively driving down prices to grow active accounts,” Roku said in its letter to shareholders on Wednesday.
Roku’s advertising business more than doubled from the same period last year, while its business in providing Roku software to smart-TV manufacturers continues to grow.
Roku says it’s now on track to see $500 million in revenue this year, which would be up from $400 million in 2016.