Roku continues its transition from a hardware company to a company that primarily makes money with advertising at a rapid pace. The company revealed Wednesday that it surpassed $100 million in advertising and services revenue during its most recent quarter for the first time in its corporate history.
But while Roku’s ad revenue grew 74 percent year-over-year, its hardware revenue shows much slower growth rates, to the tune of 9 percent, and its non-hardware gross margin also declined notably — resulting in panicked investors ditching the company’s stock, and sending Roku’s share price down 9.5 percent in after-hours trading.
During the quarter that ended on September 30, Roku generated revenue of $173.4 million compared to $124.78 million during the same quarter last year. Net losses came in at $11.7 million, compared to $7.89 million a year ago. This translates to losses of $0.09 per share.
Analysts had expected revenue of $169.08 million and losses of $0.15 per share.
Roku specifically called out video advertising as a key contributor to its growth, detailing that video ad revenue more than doubled year-over-year. Some of that could undoubtedly be attributed to the company’s ad-supported Roku Channel, which is now among the top 5 free channels on its platform.
Related
However, video advertising also comes with a lower gross margin than some of Roku’s other services and advertising products, resulting in a decline of platform gross margin that likely spooked some investors.
The company also revealed that it ended the quarter with 23.8 million active accounts, up from 16.7 million a year ago. Streaming hours for the quarter were 6.2 billion, compared to 3.8 billion during the same quarter last year.
Roku executives called out smart TVs running Roku’s operating system as a key contributor to the company’s growth, writing in their letter to investors that “more than half of new accounts coming from licensed sources, primarily Roku TVs.” Since the beginning of the year, more than 1 in 4 TVs sold in the U.S. have been Roku TVs, according the company.
Developing.