Roku beat Wall Street expectations for the second quarter of 2023 after reporting a smaller than expected net loss of $107.6 million, or 76 cents per share. Analysts surveyed by Zacks Investment Research were expecting a loss of $1.28 per share.
The streamer’s total revenue increased 11% year over year to $847 million, above analysts’ forecast of $769.8 million. Platform revenue for the quarter, which is largely based on advertising sales and a subscription revenues split with partners, was $744 million, up 11% year-over-year, while device revenue was $103.4 million, up 9% year over year.
Operating expenses climbed 8% to $504 million, but declined sequentially from $550 million in the previous quarter. Gross profit for the quarter was $378 million, up 7% year over year.
While platform revenue exceeded expectations, the economy continued to create uncertainty with the total U.S. advertising market flat year over year in the second quarter, Roku noted in its letter to shareholders.
Ad spend on traditional TV declined 9.4% year over year, and traditional TV ad scatter was down 17.2% year over year, according to SMI.
Brand advertising on Roku remained pressured year over year in verticals including technology and media and entertainment, which was offset by increasing spend in categories like consumer packaged goods and health and wellness.
The company added 1.9 million active accounts during the quarter for a total of 73.5 million globally, driven primarily by the Roku TV licensing program in the U.S. and international markets. Average revenue per user for the quarter came in at $40.67, down 7% year over year. The decline was attributed to “strong global active account growth outpacing platform revenue growth,” Roku said.
Roku’s total streaming hours in the quarter were 21.5 billion, up by 4.4 billion hours or 21% from the same quarter last year. Viewing hours on traditional TV in the U.S. fell 13%, according to Nielsen. On the Roku Channel, total streaming hours grew more than 50% year over year and represented 1.1% of total U.S. TV viewing in May, according to Nielsen. The figure represented 3% of streaming hours and was in line with Peacock and close to Max.
In addition to its own Roku Channel, the company has added a number of free, ad-supported television channels to its lineup this year. It struck a deal with Warner Bros. Discovery to add several channels in January and in June agreed to carry more than a dozen channels from local ABC stations.
Looking ahead, the company expects total net revenue of roughly $815 million, total gross profit of roughly $355 million and an adjusted EBITDA loss of $50 million for the third quarter.
“While consumer spend is showing some modest growth, macro concerns and uncertainty remain,” Roku added. “We see some recovery signals within certain advertising verticals such as CPG and health and wellness. However, [media and entertainment] spend, which was already challenged industrywide, is expected to be further pressured by limited fall release schedules.”
Roku added that operating expenses would grow modestly in the third quarter. It reaffirmed its plan to deliver positive adjusted EBITDA in 2024 with continued improvement after that.
Shares of Roku surged more than 8% in after-hours trading following the earnings announcement. The stock is up 68% year to date.
