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Roku's Strong Growth Continues With 42% Jump in Revenue in Q2

By Howard Smith – Aug 6, 2020 at 11:23AM

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Active Roku accounts now total 43 million, and streaming hours rose 19% from the previous quarter.

Streaming device and platform provider Roku (ROKU 0.69%) continued along its strong growth trajectory in the second quarter, according to its report for the period, which it delivered after the bell Wednesday. Compared to the previous year, revenue increased 42%, gross profit was up 29%, and average revenue per user (ARPU) jumped 18%. 

In recent years, the company has been focusing more on its video-streaming platform, which now provides more than 68% of its total revenue. It said platform revenue grew 46% year over year, while player revenue, which includes its Roku devices, grew 35%. The company beat analysts' estimates on both the top and bottom lines for the quarter.

streaming tv with remote in hand

Image source: Getty Images.

Investors had high expectations for the report -- the company's share price has risen by almost 25% since July 1. After an initially positive reaction to the quarterly numbers, shares reversed course somewhat. On the earnings call, founder and CEO Anthony Wood said he believed it will be "well into 2021 before TV ad investment recovers to pre-pandemic levels." The company also noted that the forecasters at Magna Global had predicted that second-quarter U.S. TV and digital advertising spend would drop by 24% and 5%, respectively, versus last year. 

But the company said its ad business is growing. The number of first-time Roku ad clients was up 40% compared to the year-ago quarter. And its performance advertising business, which caters to direct-response advertisers, grew 346%, in part due to marketers "reevaluating their social media spending." 

Roku continues to be optimistic about its future, though it has tempered its expectations due to the COVID-19 pandemic. "We believe that our overall revenue will grow substantially on a year-over-year basis in the second half and for the full-year 2020, albeit not as strongly as we had anticipated prior to the pandemic," it said in its earnings release.

Howard Smith owns shares of Roku. The Motley Fool owns shares of and recommends Roku. The Motley Fool has a disclosure policy.

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