×
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

  • Huawei Restricted From Using Google's Android

    Huawei Restricted From Using Google's Android as U.S.-China Tensions Mount

    Google has prevented controversial Chinese tech firm Huawei from accessing the latest versions of the Android mobile phone operating system. The move follows U.S. government attempts to blacklist the Chinese firm. “We are complying with the order and reviewing the implications,” Google sources told news agencies on Sunday. “Huawei will only be able to use [...]

  • JUMP camera

    Google Is Shutting Down Its Jump VR Video Program

    Google will shut down Jump, its cloud-based video stitching service, this summer. The company emailed creators Friday afternoon to tell them that Jump would be shuttered on June 28, and detailed plans for the shut-down on its website as well. In its email, Google justified the closure of Jump with the emergence of new video [...]

  • Relix Live Music Conference

    Relix Live Music Conference Puts Spotlight on Gender Parity, Privacy

    The third annual Relix Live Music Conference took place at New York’s Brooklyn Bowl earlier this week. The two-day confab, which featured panels and Q&As by executives from such companies as Live Nation, Q Prime, SiriusXM, Bowery Presents, Glassnote Music, Shorefire Media and Splice, among many others, offered a fascinating and honest look at the [...]

  • Spotify Tests 'Car Thing' Audio Adapter

    Spotify Starts Testing In-Car Hardware

    Spotify is carefully taking a first step into the consumer hardware space: The company has begun to test a new in-car device that lets users access music and podcasts with voice commands, it revealed in a blog post Friday morning. “Car Thing,” as the device is being called for now, is only being tested in [...]

  • Hannah-Hart-BuzzFeed-Tasty-Edible-History

    BuzzFeed's Tasty Taps Hannah Hart for Food-History Show on Facebook Watch

    YouTube star and food fanatic Hannah Hart is combining her passions for cuisine and history in a new series for BuzzFeed’s Tasty on Facebook Watch. The eight-episode show, “Edible History,” premieres Sunday, May 19, at 8 a.m PT, on BuzzFeed’s Tasty Presents show page on Facebook Watch, with episodes released weekly. In each episode (7-12 [...]

More From Our Brands

Access exclusive content