Roku beats third-quarter estimates as Fox acquisition looms

Roku, a leading streaming platform, surpassed Wall Street expectations in its third-quarter earnings report. Adjusted earnings per share reached $1.20, exceeding the analyst estimate of $0.53 by $0.67. Revenue surged to $1.5 billion, marking a 24% increase compared to the previous year. Platform revenue, encompassing advertising and subscriptions, grew 23% year-over-year to $1.3 billion.

Advertising revenue climbed 23% to $727 million, continuing the company's streak of double-digit growth in nine consecutive quarters. Subscriptions revenue also climbed 23% to $581 million. The company reported a net income of $183 million and an adjusted EBITDA of $249 million. Roku's shares were relatively stable in premarket trading.

Fox Corporation, which is in the process of acquiring Roku for approximately $25 billion, saw a slight increase in its stock price. Roku's platform is the second most engaged app globally, with streaming hours reaching 39.9 billion, a 9% increase. Total gross profit amounted to $649 million, up 24%. Devices revenue grew by 33% to $194 million, although the gross margin was negative at -25.1%, primarily due to higher memory-chip costs.

Approximately 95% of Premium Subscription sign-ups came from customers who had never subscribed to those services directly. Given the pending acquisition, Roku did not host an earnings call or provide financial guidance. The company maintains a Market Perform rating, acknowledging the risks associated with the competitive market, macro advertising concerns, AI advancements, and the presence of larger competitors with substantial capital resources, as well as key distribution partner relationships, according to analysts at William Blair.