You will be redirected back to your article in seconds

Roku’s Ad Business Keeps Growing Rapidly, but Q3 Results Still Made Some Investors Nervous

Roku continues its transition from a hardware company to one that primarily makes money with advertising at a rapid pace. The company revealed Wednesday that it surpassed $100 million in advertising and services revenue during its most recent quarter for the first time in its corporate history.

“We had a great quarter,” said Roku CEO Anthony Wood in an interview with Variety. “Ad sales continue to grow nicely.”

But while Roku’s platform revenue grew 74% year-over-year, its hardware revenue shows slower growth rates, to the tune of 9%, and its non-hardware gross margin also declined notably — resulting in panicked investors ditching the company’s stock, and sending Roku’s share price down 13% in after-hours trading.

During the quarter that ended on Sept. 30, Roku generated revenue of $173.4 million compared to $124.78 million during the same quarter last year. Net losses came in at $11.7 million, compared to $7.89 million a year ago. This translates to losses of $0.09 per share. Analysts had expected revenue of $169.08 million and losses of $0.15 per share.

Roku executives specifically called out video advertising as a key contributor to its growth, detailing that video ad revenue more than doubled year-over-year.

Some of that could undoubtedly be attributed to the company’s ad-supported Roku Channel, which is now among the top five free channels on its platform. “The Roku Channel is super important,” said Wood. “A material percentage of our advertising now flows through the Roku Channel.”

However, video advertising also comes with a lower gross margin than some of Roku’s other services and advertising products, resulting in a decline of platform gross margin that likely spooked some investors.

The company also revealed that it ended the quarter with 23.8 million active accounts, up from 16.7 million a year ago. Streaming hours for the quarter were 6.2 billion, compared to 3.8 billion during the same quarter last year.

Roku executives called out smart TVs running Roku’s operating system as a key contributor to the company’s growth, writing in their letter to investors that “more than half of new accounts [are] coming from licensed sources, primarily Roku TVs.” Since the beginning of the year, more than one in four TVs sold in the U.S. have been Roku TVs, according the company.

Executives alluded to plans to grow the Roku Channel by bringing it to new territories in their letter to investors. Wood later told Variety that the company had plans to grow its international business, but that it wasn’t able to share any details yet. “We are very bullish on international,” he said. “It’s a very big opportunity for us.”

More Digital

  • Smithsonian subscription VOD

    Smithsonian Networks Launches New Subscription VOD Service, Folding in Smithsonian Earth

    Smithsonian Networks has expanded its push to reach cord-cutters with the launch of Smithsonian Channel Plus, promising subscribers 1,000-plus hours of streaming nonfiction programming for $5 per month. The new subscription VOD service incorporates and supersedes Smithsonian Earth, the company’s $3.99-monthly SVOD service that launched three years ago, which had been geared around nature and wildlife. [...]

  • YouTube Rewind 2018

    YouTube Rewind 2018 Officially Becomes Most-Disliked Video Ever

    The haters have spoken: In less than a week, YouTube Rewind 2018 — its year-in-review mashup — has registered the most dislikes of any video on the platform. As of Thursday (Dec. 13) morning, YouTube Rewind 2018 had notched 9.9 million dislikes after debuting Dec. 6. That pushed it above the previous record holder: Justin [...]

  • NPR Releases Open Source Podcast Metrics

    How NPR Aims to Bring Transparency to Podcast Metrics

    NPR unveiled a new open source podcast measurement project Wednesday that aims to bring more transparency and granularity to podcast metrics. The project, dubbed Remote Audio Data (RAD), has been developed in partnership with a number of podcast app developers, ad tech companies as well as tech and media heavyweights including ESPN, Google and iHeartMedia. [...]

  • 2019 Variety Predictions

    2019 Predictions: What's in Store for Film, TV and Music Next Year?

    It would be hard to top the drama of 2018. From media mega-mergers to the rise of Time’s Up, it was a year that had more than its fair share of twists and turns. Leslie Moonves resigned in disgrace, AT&T snapped up Time Warner, Disney inched closer to subsuming Fox and “Black Panther” shattered box [...]

  • apple brooklyn october 2018 event

    Apple Looking to Launch Magazine Subscriptions in Early 2019 (Report)

    Apple is preparing to relaunch Texture, a news subscription app it acquired in March, as a premium tier of Apple News early next year, according to a Bloomberg report. To prepare for the launch, Apple has been trying to get prominent newspapers including the New York Times and the Wall Street Journal to come on [...]

  • Tencent Music Raises $1.1 Billion for

    Tencent Music Raises $1.1 Billion for IPO, Much Less Than Expected

    China-based music streaming company Tencent Music Entertainment Group said it raised nearly $1.1 billion in its U.S. initial public offering, according to Reuters. Earlier this year, the company was expected to be valued at as much as $30 billion and raise $4 billion for its IPO, but those estimates were slashed in September. The IPO [...]

  • Netflix Orders ‘I Am Not Okay

    Netflix Orders ‘I Am Not Okay With This’ From Producers of ‘Stranger Things’

    The producers of “Stranger Things” and creator and director of “The End of the F***ing World” series are making “I Am Not Okay With This” for Netflix, a coming-of-age tale about a girl with mysterious powers. 21 Laps will make the series, which was co-created by Jonathan Entwistle, who was behind Channel 4 and Netflix show [...]

More From Our Brands

Access exclusive content