KEY POINTS

  • The revenue for the streaming platform increased in Q1.
  • Roku has reaffirmed its full-year revenue prediction for a significant increase this year.
  • The firm is well-positioned to take advantage of marketers’ shifting budget priorities from traditional TV to streaming TV.

Roku (NASDAQ:ROKU) investors were seeking some respite from the stock’s rough year, and they got it when Roku’s earnings report revealed excellent results. Shares rose more than 8% during market hours as a part of a more significant market attempt to recover some of this year’s losses. However, the firm also issued an excellent quarterly report last week.

While the technology firm’s headline top line is undeniable, considering Roku’s challenging situation, the most important takeaways from its first-quarter report are two other figures: platform revenue growth and full-year revenue guidance.

Here’s a closer look at these two metrics and why Roku bulls should be enthusiastic.

Rapid revenue growth

Roku’s worldwide revenue rose 28% year over year to $734 million in Q1. These numbers exceeded the average estimate of $718 million. That is remarkable given that analysts’ expectations were likely set before the war in Russia and Ukraine began.

On the other hand, Roku’s revenue growth over the last year only tells one part of the tale because it includes both hardware sales and platform revenues. Streaming-TV platform fees (which include subscriptions, advertising, and transactions), for example, grew 39% year over year.

According to Roku’s first-quarter shareholder letter, the platform segment, which generates 88% of total revenue, has benefited from “higher content distribution and advertising revenue”. The ad business, in particular, is on fire.

Advertising momentum

Roku is seeing momentum from advertisers. As they commit more considerable advertising dollars to connected TV, management stated: “the top ten broadcast TV advertisers invested almost 80% more on Roku year-over-year while spending 7% less on legacy pay television.”

There’s good reason to believe that Roku will keep scooping up a significant share of the advertising dollars flowing to streaming TV. According to management, 96% of those advertising spend over $1 million on its platform. Moreover, the spending has grown an average of more than 50% year over year among those kept.

Optimistic guidance

Roku’s upbeat forecast for the whole year was particularly encouraging. Roku maintained its forecast for full-year revenue of 35%, compared to 2021.  That was despite reporting just 28% growth in Q1 and management predicting only 25% growth in Q2. This forecast implies that management expects a significant increase in the second half of the year.

Supply-chain disruptions and geopolitical conflict have impacted several advertisers’ ad budgets this year. Nevertheless, Roku’s earning report revealed excellent results. The firm forecasted growth of 35%. That’s just another sign that the secular tailwinds for the firm are strong and the firm is well positioned.

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