What happened
Shares of Roku (ROKU +3.11%) were moving higher today after the streaming distribution platform easily beat revenue estimates in its fourth quarter and offered better-than-expected guidance in the first quarter, showing earlier concerns about its struggles had been overdone.
As of 12:09 p.m. ET, the stock was up 19.3% on the news.
NASDAQ: ROKU
Key Data Points
So what
Revenue in the quarter was flat at $867.1 million, but that was actually much better than expectations of $801.7 million, as the company had guided revenue to decline in the quarter.
Platform revenue, which is based on advertising and streaming subscription revenue share, rose 5% to $731.3 million, while revenue from device sales fell 18% to $135.8 million, in line with the company's strategy of shifting revenue to its platform over time.
Usage also continued to grow, with active accounts up 16% to 70 million and streaming hours up 23% to 23.9 million, showing consumers are still eagerly embracing Roku even if the ad business has been sluggish.
While Roku continued to gain market share, the company's losses significantly widened due to the slowdown in revenue growth. It finished the quarter with an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $95.2 million and an operating loss of $249.9 million, a reflection of an earlier decision to ramp up hiring and spending.
On the bottom line, the company lost $1.70 per share on a GAAP basis, roughly even with the consensus at a per-share loss of $1.73.
In its shareholder letter, management said, "While cyclical economic pressures are affecting our business, two things remain true: The secular trend supporting our business remains intact, and the combination of our scale, engagement, and innovation position Roku exceptionally well to benefit when the market rebounds."
Now what
Roku's guidance seemed to be a major reason for the stock's surge today, as the company announced a goal of delivering a full-year adjusted EBITDA profit in 2024.
For the first quarter, it expects revenue of $700 million, representing a decline of 4% from the quarter a year ago but better than the consensus at $690.6 million. The company also sees an adjusted EBITDA loss of $110 million in the first quarter.
Management noted an improvement in some advertising verticals in the first quarter, a sign that recovery in the ad market may come sooner than expected.
With the stock still down roughly 80% from its peak in 2021, investors seemed to have left it for dead. Though the business could be weak through 2023, Roku just showed that its prospects are better than the market thought.
