What happened

Roku (ROKU 0.95%) investors received some good news this week as their stock soared 29% through Thursday trading. That's as compared to a flat result for the broader market, according to data provided by S&P Global Market Intelligence. The streaming video specialist is now up a whopping 73% so far in 2023, although shares are still down significantly over the past full year.

This week's spike came as Wall Street celebrated Roku's brightening outlook.

So what

Roku said in a Wednesday earnings announcement that revenue from its core business grew 5% in the Q4 selling period that ended in late December. While that result marked a slowdown from the prior quarter's 15% boost, it was much better than expected. Roku's management team had predicted a decline back in early November. Instead of sales landing at around $800 million, Q4 revenue was $865 million.

The company notched solid engagement metrics, too, with streaming hours rising and active accounts jumping higher by 4.6 million. "The shift to TV streaming continues with cord cutting accelerating in the U.S. in 2022," management said in a shareholder letter.

Now what

Roku didn't see a big improvement in the digital advertising market, which is still a key source of revenue and earnings for the business. Continued pressure here will hurt sales and profits at least into early 2023, executives said. But the market might be stabilizing.

Roku is projecting total revenue of about $700 million in Q1, representing just a slight decline year over year. Most Wall Street pros were bracing for a bigger drop, on the order of roughly 7%. Roku is also forecasting another big step forward on its way to profitability and management reiterated its plans to achieve positive earnings on an adjusted basis for the full 2023 year.

The streaming platform's scale and engagement suggest that Roku will see a solid earnings spike once the advertising market rebounds. There's no telling when that turn will happen, but this quarter's results hint at a potential end to the decelerating trend that's been pressuring this growth stock for over a year.