Roku (NASDAQ:ROKU) Posts Better-Than-Expected Sales In Q2, Stock Soars

Adam Hejl /
2023/07/27 4:12 pm EDT

Streaming TV platform Roku (NASDAQ: ROKU) reported Q2 FY2023 results exceeding Wall Street analysts' expectations, with revenue up 10.8% year on year to $847.2 million. The company also expects next quarter's revenue to be around $815 million, roughly in line with analysts' estimates. Roku made a GAAP loss of $107.6 million, improving from its loss of $112.3 million in the same quarter last year.

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Roku (ROKU) Q2 FY2023 Highlights:

  • Revenue: $847.2 million vs analyst estimates of $774.5 million (9.38% beat)
  • EPS: -$0.76 vs analyst estimates of -$1.26 (39.8% beat)
  • Revenue guidance for Q3 2023 is $815 million at the midpoint, above analyst estimates of $808 million
  • Free cash flow of $129 million is up from -$208 million in the previous quarter
  • Gross Margin (GAAP): 44.7%, down from 46.5% in the same quarter last year
  • Active Accounts: 73.5 million, up 10.4 million year on year

"We delivered solid results in Q2, growing scale, engagement, and monetization. The operating environment remains largely unchanged from Q1, with strong consumer demand for Roku TV models while TV advertising remains muted industry-wide. We have begun to see some ad verticals improve, which resulted in modest YoY Platform revenue growth in Q2, and we are well positioned to re-accelerate growth as the ad market recovers. We continue to moderate the YoY growth rate of operating expenses and remain committed to our plan to deliver positive Adjusted EBITDA for the full year 2024."

Spun out from Netflix, Roku (NASDAQ: ROKU) makes hardware players that offer access to various online streaming TV services.

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Sales Growth

Roku's revenue growth over the last three years has been very strong, averaging 37.1% annually. This quarter, Roku beat analysts' estimates but reported mediocre 10.8% year-on-year revenue growth.

Roku Total Revenue

Guidance for the next quarter indicates Roku is expecting revenue to grow 7.04% year on year to $815 million, slowing down from the 12% year-on-year increase it recorded in the same quarter last year. Ahead of the earnings results, analysts covering the company were projecting sales to grow 8.46% over the next 12 months.

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Usage Growth

As a subscription-based app, Roku generates revenue growth by expanding both its subscriber base and the amount each subscriber spends over time.

Over the last two years, Roku's monthly active users, a key performance metric for the company, grew 16.8% annually to 73.5 million. This is solid growth for a consumer internet company.

Roku Active Accounts

In Q2, Roku added 10.4 million monthly active users, translating into 16.5% year-on-year growth.

Key Takeaways from Roku's Q2 Results

Although Roku, which has a market capitalization of $10.1 billion, has been burning cash over the last 12 months, its more than $1.8 billion in cash on hand gives it the flexibility to continue prioritizing growth over profitability.

We were impressed by how significantly Roku blew past analysts' revenue expectations this quarter, partly driven in a beat in Active Accounts and partly by revenue per Active Account. Additionally, adjusted EBITDA beat expectations, and the company intends to deliver positive adjusted EBITDA for 2024, something anticipated by Wall Street. The only minor negative we found was that revenue decelerated. Overall, we think this was a really good quarter that should please shareholders. The stock is up 8.52% after reporting and currently trades at $74 per share.

So should you invest in Roku right now? When making that decision, it's important to consider its valuation, business qualities, and what's happened in the latest quarter. We cover this and more in our full company report, and it's free.

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The author has no position in any of the stocks mentioned in this report.