Roku's (ROKU -10.29%) fourth-quarter results are out -- and the initial reaction from Wall Street is positive -- at least based on the growth stock's more than 10% gain during after-hours trading on Wednesday. But are the results as good as the Street's initial reaction implies?
Revenue for the quarter crushed analyst estimates -- and guidance was slightly better than expected, too. Additionally, active users and streaming hours grew by double-digit rates.
But even though some figures were better than analyst expectations, the results were largely underwhelming, if not concerning, when considered outside the context of analyst expectations. Here are some of the key takeaways from the quarter.
Revenue barely grew
Perhaps the first thing to note is that Roku's fourth-quarter revenue remained virtually the same as it was in the year-ago quarter. Sure, the $867 million in total net revenue the company reported beat analysts' consensus view for revenue of $801.7 million, but this doesn't mean it was a stellar quarter for the streaming-TV platform company.
Looking to Q1, management said it expects revenue to decline from about $733 million in the first quarter of 2022 to about $700 million.
Platform revenue slowed significantly
Even worse, the company's platform revenue, which is largely derived from Roku's claim to a portion of subscriptions, ad sales, and transactions that take place on its platform, saw growth slow. After reporting 15% platform growth in the third quarter of 2022, fourth-quarter platform revenue increased only 5% year over year. Accounting for the bulk of the company's revenue and all of its gross profit, it would be difficult to overstate the importance of Roku's platform segment to the overall business.
"Inflation and macro-economic uncertainty continued to pressure consumers and advertisers in Q4," said Roku in its fourth-quarter shareholder letter.
Roku reported a big loss
The company's loss for the quarter was $237 million. This compares to a profit of about $24 million in the year-ago quarter. On a per-share basis, Roku lost $1.70, compared to a loss of $0.17 in the year-ago period. For the full year, Roku's net loss was close to $500 million, compared to a profit of $242 million in 2021.
Management did note that it has been making adjustments to its "operations and operating expense profile to better manage through the challenging macro environment." Specifically, management said it expects operating expense growth to decelerate from a growth rate of about 40% year over year in the first quarter of 2023 to a single-digit rate by the fourth quarter of 2023.
Active account growth was strong
While Roku's financials have been disappointing, the company has been doing a good job of attracting users. Active Roku accounts increased 16% year over year in Q4, in line with the growth rate seen in the third quarter of 2022. This put total active accounts at 70 million.
Management said growth in active accounts has been driven primarily by sales of Roku TVs in the U.S. and international markets.
Streaming-hour growth accelerated
Another impressive metric was the company's growth in streaming hours. Nearly 24 billion hours were streamed on Roku during the quarter, up 23% year over year. This is an acceleration from the 21% growth in streaming hours Roku saw in Q3.
In another upbeat data point, Roku noted that streaming hours originating from its home screen increased twice as fast as its overall growth rate for streaming hours, "demonstrating the significant value the menu provides our users." Management believes that, over time, there's more room for improvement on this front.
While it's possible that Roku's growth in active accounts and streaming hours will eventually translate to big enough profits to justify the stock's valuation, this thesis isn't playing out yet.
