Roku (ROKU 3.19%) delivered mixed results following its earnings report. The advertising and streaming leader continues to grow in popularity, and audiences continue to spend more time on the platform. But amid an ad market slump, revenue growth has slowed dramatically, and losses continue to mount.

The question for investors now is whether the slowing revenue growth is enough to derail Roku's long-term growth story. Here's a closer look at the potential impact on the company moving forward.

Roku's Q1 results

Roku's latest report offered news that could affirm either the bull or bear case for its stock. Revenue of $741 million grew 1% versus year-ago levels. An 18% surge in device revenue compensated for a 1% decline in platform revenue as the advertising market continued to struggle. It also represented further slowing from the 13% revenue growth in 2022 and a 55% revenue increase in 2021.

Unfortunately for Roku, net losses surged to $194 million from $26 million in the same quarter in 2022. A double-digit increase in both the cost of revenue and operating expenses led to massively higher losses as the company coped with a slumping ad market and invested heavily in its future growth.

Given the state of the ad market, it will likely surprise few that Roku's average revenue per user (ARPU) dropped 5% year over year, coming in at $40.67. Nonetheless, users continue to adopt the platform in higher numbers. Its user base of almost 72 million grew 17% in one year. This means it surpassed cable in terms of audience size, according to figures from the Leichtman Research Group. Streaming hours increased 20% over the same period to 25.1 billion, a likely confirmation that it continues to take market share from cable TV.

Will the report help Roku stock?

Admittedly, the report indicates the company remains mired in a slump. Roku's prediction of $770 million in revenue for the second quarter amounts to yearly growth of about 1%. That likely means the ad market will remain in a downturn for the immediate future.

Moreover, the massive increases in year-over-year losses are another point of concern, particularly after the frontloading of growth in 2021 led to a positive net income that year. The $194 losses in the first quarter were a slight improvement from the $237 million in losses in the fourth. Still, the prediction for positive EBITDA in 2024 shows the return to profitability is a long-term process.

However, the growth in users and streaming hours should bode well for the company when the ad market recovers. Although the forecasted return of positive adjusted EBITDA in 2024 may disappoint on some levels, it should mean higher ad revenue and a significant improvement in ARPU, which could inspire a recovery in Roku stock.

The stock may also be ready for a recovery. While it is down by 88% from its all-time high in the summer of 2021, it has risen by more than 50% from its December low. Its price-to-sales (P/S) ratio is less than 3. That could indicate it has reached a reasonable valuation, especially considering that the P/S ratio climbed as high as 33 in early 2021.

Consider Roku

Given the current conditions, it looks like a long-term position in Roku could pay off for investors. Aside from the massive discount in the stock price and low valuation, the entertainment stock has continued to grow its user base and the hours streamed on the platform.

The mounting losses and the continuing slump in the ad industry seem to rightly concern investors. But the ad market should recover eventually, a factor that would probably take Roku's ARPU -- and, by extension, its stock price -- significantly higher.