Roku’s stock price surged 13% in pre-market trading on Friday following the release of its fourth-quarter earnings report. The streaming platform giant exceeded Wall Street expectations for both quarterly revenue and annual revenue guidance, fueled by robust advertising sales as consumers continue to embrace streaming services. This positive momentum built upon a 14% increase in extended trading on Thursday.
The confluence of increased political ad spending during the recent election cycle and the proliferation of new streaming services like Peacock, Disney+, and HBO Max has significantly contributed to Roku’s growth. This expansion is evident in its growing subscriber base, escalating ad revenue, and overall business performance. Roku attributed its success to “growing ad demand through deeper third-party platform integrations, improving the Roku Experience (which starts at our Home Screen) to expand monetization, and growing Roku-billed subscriptions,” in a letter to shareholders.
/cloudfront-us-east-2.images.arcpublishing.com/reuters/2YOWH66ZIVL7XNX45U3IKQOW7I.jpg)
Roku has strategically broadened its advertising offerings to encompass small and medium-sized businesses (SMBs). By leveraging the prominence of its home screen, the company has successfully diversified its revenue streams across various sectors. Brands spanning retail, automotive, and telecommunications are increasingly featuring their advertisements on the platform, capitalizing on Roku’s extensive user base to enhance visibility and drive user engagement.
This strategic focus on advertising has yielded impressive results. Roku’s platform segment, which generates revenue primarily from ad sales and subscriptions, experienced a remarkable 25% growth in the fourth quarter, reaching $1.04 billion. This surge is largely attributed to increased advertising activity, particularly within the political advertising vertical. Preceding the earnings release, Barton Crockett of Rosenblatt highlighted the significant increase in political advertising on Connected TV (CTV) during this election cycle, partly driven by a strategic push into the medium.
/cloudfront-us-east-2.images.arcpublishing.com/reuters/K2OWGXTX5ZNDJNA724G2WTC62Q.jpg)
While recent tariffs on electronics imported from China have raised concerns within the industry, Roku executives downplayed their potential impact during a post-earnings call. They indicated that while the tariffs could affect the industry broadly, they do not anticipate a material impact on Roku’s platform business.
Roku reported fourth-quarter revenue of $1.20 billion, surpassing the analysts’ average estimate of $1.15 billion, according to LSEG data. Looking ahead, Roku projects full-year 2024 net revenue of $4.61 billion, exceeding the current consensus estimate of $4.59 billion. This optimistic outlook further reinforces the company’s strong position in the rapidly evolving streaming landscape. Roku’s ability to capitalize on the shift to streaming, coupled with its strategic expansion into new advertising markets, positions the company for continued growth in the coming year.
