Roku Delivers ‘Solid’ Third Quarter, Buoyed By Advertising Growth

Roku, the television streaming platform, reported results after the close of trading. (Dreamstime)

Key Points

• Roku’s third-quarter earnings of 16 cents a share beat expectations and revenue of $1.21 billion was inline with expectations.
• Net income increased 375% to $24.8 million from a net loss of $9 million in the prior-year quarter.
• Platform revenue, including advertising, climbed 17% to $1.06 billion, while devices revenue declined 5% to $146 million.

Streaming television company Roku surpassed third-quarter earnings expectations on Thursday afternoon, fulfilling predictions by analysts that its advertising and platform growth would outperform.

For the third quarter ended in September, Roku’s earnings of 16 cents a share beat the 9 cents a share Wall Street expected, and its revenue of $1.21 billion was inline with the $1.2 billion expected, according to FactSet.

Net income of $24.8 million jumped 375% from a net loss of $9 million in the year-ago quarter.

Roku’s shares were down 6% on Thursday afternoon, after closing up 1.4% at $100.03 in regular trading, ahead of the earnings announcement. The stock is up 34.6% so far this year and up 56.1% over the past 12 months.

Roku’s platform revenue, including advertising and subscription fees, climbed 17% during the quarter to $1.06 billion from last year.

Devices revenue, the sale of Roku hardware, declined 5% to $146 million.

For the fourth quarter, Roku projects net revenue of $1.35 billion, net income of $40 million, and adjusted earnings before interest, taxes, depreciation, and amortization of $145 million.

For the full year, Roku projects net revenue of $4.69 billion, net income of $50 million, and adjusted Ebitda of $395 million.

Roku has previously said that it expects platform revenue to increase to $4.08 billion for the year, above earlier estimates for $3.95 billion, and it expects devices revenue “to be slightly down, mostly due to tariffs.”

Roku will host a conference call to discuss its financial results at 5 p.m. Eastern time on Thursday.

Wedbush analysts had expected Roku to deliver another “solid” quarter, citing Roku’s increasingly diversified business model, with “significantly more” advertising opportunities and its growing recommendation functions.

“While Roku is not immune to the impact of tariffs, it can more than offset them through platform growth driven by revenue diversification, expanding DSP partnerships, growing ad inventory, and improved content recommendations,” Wedbush wrote in a Monday research note.

DSP refers to demand-side platform technology that enables advertisers to target specific audiences in real-time by automating digital advertising purchases, such as Roku’s recent partnership with Amazon.com that the companies said lets advertisers reach an estimated 80 million connected-TV U.S. households.

Wedbush expects Roku to continue gaining market share as advertising spending shifts from traditional, or linear, TV to connected TV.

Write to Janet H. Cho at janet.cho@dowjones.com