Roku experienced notable growth in both revenue and earnings, yet the company’s shares dropped significantly by 15.5% amid investor dissatisfaction. Despite exceeding expectations with a revenue of $1.11 billion for the second quarter—up 15% from last year, which surpassed estimates of $1.07 billion—investors expressed concerns over key metrics and future guidance.
The report indicated that while Roku continues to face GAAP losses, it is making progress toward profitability. Revenue from devices declined by 6% to $135.6 million, raising some red flags as this area is critical for expanding Roku’s customer base. However, the company’s core platform revenue, fueled by advertising and subscription revenue shares, saw an 18% increase to $975.5 million, and streaming hours rose 17% to 35.4 billion, reinforcing the positive consumer engagement trend.
On profitability, adjusted EBITDA showed a remarkable improvement, rising by 79% to $78.2 million. Roku’s GAAP operating loss narrowed significantly from $71.2 million to $23.3 million, while its GAAP per-share profit improved to $0.07, crossing the estimates which had projected a loss of $0.16 per share.
Looking forward, Roku anticipates revenue of $1.205 billion for the third quarter, representing 13% growth, although this guidance slightly trails the consensus estimate of $1.17 billion. The company also announced a $400 million share buyback program, displaying confidence in its value despite recent stock declines.
Overall, while recent quarters have shown Roku’s ability to progress toward profitability and maintain significant engagement, the slower expected growth in coming months has left some investors hesitant. The company’s continued focus on enhancing ad technology and strategic acquisitions, such as its recent purchase of Frndly, could position it for better performance in the future.