Roku's warning on ad-supported streaming competition clouds upbeat earnings

Reuters
Updated ·2 min read
The Roku company logo is displayed on a building in Austin, Texas

(Reuters) -Roku warned that a push by streaming rivals towards ad-supported offerings could weigh on its growth this year, taking the shine off its strong quarterly results and sending its shares down nearly 3% in extended trading on Thursday.

Roku, which sells streaming devices and has its own free, ad-supported channel, has seen more people turn to its platform as major streamers such as Netflix increased prices and economic uncertainty pressured consumer spending.

But the company executives said Roku faces "difficult year-over-year growth rate comparisons within streaming service distribution activities. This headwind is due to past price increases and a higher mix shift toward ad-supported offerings".

Major streaming services, including Netflix, have in the past year focused on growing their more affordable, ad-supported offerings as they look to maintain subscriber growth in an uncertain economic environment.

Still, Roku's earnings for the January-March quarter and a second-quarter sales forecast that was above Street estimates showed the company was benefiting from strong ad sales and the ongoing shift to streaming from cable TV.

The company posted net revenue of $881.5 million in the first quarter, compared with LSEG estimates of $848.6 million.

Roku's revenue from its platform segment, which includes digital ads and ad-free tier subscriptions, as well as from its streaming devices and TV each increased 19%.

The company ended the first quarter with 81.6 million "streaming households" (active accounts), a net increase of 1.6 million from the previous quarter.

"In an environment where engagement is at a premium, Roku continues to see strong growth in both the size of its base and amount of time spent on its platform," said Jamie Lumley, senior analyst at Third Bridge.

Roku forecast second-quarter revenue at $935 million, above analysts' average estimate of $931.4 million.

(Reporting by Juby Babu in Mexico City; Editing by Sriraj Kalluvila and Shilpi Majumdar)