- Roku raised its full-year outlook, with platform revenue now expected to grow 21% to $5 billion, while devices revenue will come in at approximately $535 million
- The company says it is “closely monitoring pricing pressure from tightening memory chip supply that is impacting the entire electronics industry”
- Shares of the streamer and hardware maker jumped over 5% in after-hours trading following the results.
Shares of Roku jumped over 5% in after-hours trading on Thursday after the company smashed Wall Street expectations with a profit of $86 million, or earnings of 57 cents per share, compared to a loss of $27.4 million, or a 19 cents per share, a year ago.
Total revenue grew 22% to $86 million, primarily driven by its advertising and subscription units, which were broken out for the first time. Ad revenue grew 27% to $612.7 million, while subscription revenue climbed 30% to $518.5 million. Excluding Frndly, subscriptions revenue grew 23% year over year. Total platform revenue climbed 28% to $1.13 billion, while devices revenue tumbled 16% to $117.6 million.
The latest quarterly results come as the streamer and hardware marker has surpassed 100 million households worldwide. Total streaming hours grew 8% to 38.7 billion during the quarter.
Roku touts video advertising outperformance, highest quarter ever for premium subscription sign-ups
The company said its video advertising growth outpaced both the U.S. over-the-top streaming and digital ad markets, which was attributed to “growing recognition among advertisers that Roku’s unique combination of scale, first-party data, and innovative ad technology delivers measurable outcomes that help businesses grow.”
Ad spend through third-party programmatic partners increased 40%, driven by its deepened partnerships with major demand-side platforms such as Google’s Display & Video 360, Amazon, The Trade Desk, Yahoo and FreeWheel. The number of advertisers using the company’s self-service ad platform, Roku Ads Manager, during the quarter more than doubled year over year.
Roku said it sees “significant long-term opportunity” to target a meaningful share of approximately $600 billion in annual ad spend from small and medium-sized businesses as generative AI reduces the cost and complexity of producing
video creative.
Additionally, the company saw ad spend from non-media and entertainment brands reach nearly 30% of its total Roku Experience revenue, an all-time high, as it looks to diversify its partners. The number of advertisers using Marquee Ad Video on its home screen doubled and its ad spend tripled during the quarter.
It also touted its highest quarter ever for premium subscription sign-ups, added Apple TV and Peacock to that offering, and expanded distribution of its $2.99 per month, ad-free streaming service Howdy, which is now available as an add-on through Prime Video, a standalone mobile app for iOS and Android and on Roku’s platform in Mexico. Roku has not released subscriber figures for Howdy, but Antenna estimates that the service has surpassed 1 million.
Devices drags as Roku monitors impacts from tightened memory chip supply
Meanwhile, the decline in its devices unit was driven by primarily by lower player unit sales and promotional pricing. In addition to its players, devices revenue comes from Roku-made TVs, which saw unit sales grow year-over-year driven by the continued ramp of Hiro Roku TVs at Target, relaunches at Best Buy and strength on Amazon. However, the figure excludes its TV models made by original equipment manufacturer (OEM) licensing partners, which account for the largest portion of its overall unit volume.
Roku said it remains “well-positioned with a diversified portfolio of streaming players, TVs, and projectors. However, the company said it is “closely monitoring pricing pressure from tightening memory chip supply that is impacting the entire electronics industry.”
“While we expect higher memory costs will weigh on Device margins in the second half of the year, the Roku TV OS requires significantly less dynamic memory (DRAM) and storage memory (Flash) than competing platforms,” the company added. “We believe this widening cost differential will drive more TV OEMs to partner with us.”
Roku raises full year outlook
Looking ahead, Roku expects platform revenue to grow 20% year over year and devices revenue to grow by high single digits in the second quarter, which will result in nearly 17% growth in total revenue to $1.3 billion. Total gross profit is projected to hit $580 million in the quarter, while adjusted EBITDA is expected to hit $170 million.
For the full year, Roku is raising its outlook, with platform revenue now expected to grow 21% to $5 billion, while devices revenue will come in at approximately $535 million, resulting in total revenue of $5.5 billion.
It expects a platform gross margin on the high end of its 51% to 52% range and a devices gross margin in the high 20% range. Roku is also actively expanding and diversifying its OEM licensing agreements and expects new partnerships to begin contributing to Roku TV model unit volume in the second half of 2026.
Overall device investment across gross profit and operating expenses remain unchanged, with the latter more heavily weighted in the second half of the year due to the timing of distribution expenses. Roku anticipate mid-single-digit year over year operating expense growth for the full year.
“We are executing against our monetization initiatives and remain well-positioned to drive sustained double-digit Platform growth and achieve $1 billion of free cash flow by 2028, if not sooner,” the company said.
More to come…
