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Roku crushes its first-ever earnings as a public company, shares rocket up over 25% (ROKU)

Roku is soaring after its first-ever earnings statement, in which it raised revenue

  • Roku shares are up as high as 26% after crushing its first-ever earnings report as a public company.
  • Roku credits the growth to its fast-growing platform business, including advertising, which more than doubled from the year-ago period.
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Streaming TV box provider Roku beat Wall Street revenue estimates on its first-ever earnings report as a public company, giving investors confidence that the company is making progress on its plan to evolve from a commodity hardware company into an advertising business.

Roku generated $124.8 million in revenue during the third quarter, compared to the average analyst consensus of $110 million. And the company said it expects revenue in the holiday quarter to range between $175 million and $190 million, well above the $177 million expected by analysts.

The good news sent shares of Roku spiking as much as 28% in after-hours trading, hovering around $23.75 a share, before giving up some of the gains and trading up 22%.

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Roku, which was started by veterans of streaming video powerhouse Netflix, is trying to capitalize on the growing ranks of cable TV "cord cutters," who are ditching their cable subscription plans and watching internet video streamed on their laptops, phones and televisions.

Even as Roku's net losses deepened, with a $46 million loss in Q3, the company said it was making progress in key growth areas.

Roku said its "active accounts" jumped 48% year-over-year in Q3, to total 16.7 million. And its "platform business," which includes revenue from advertising and licensing deals, surged 137% and now accounts for nearly half of the company's total revenue. At this time last year, by contrast, platform revenue was just 26% of Roku's total revenue.

Roku first went public at the end of September 2017, priced at $14 per share. It immediately saw a huge pop out of the gate, with first-day gains of about 70%. Since then, Roku has experienced some volatility: In its brief time as a public company, Roku shares have gone as low as $15,75, and as high as $29.80.

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For this first-ever quarter as a public company, Roku credits much of the growth to its rapidly expanding platform business, rather than its sale of its streaming media hardware. The hardware promotes the growth of its software platform, on which Roku takes a cut of all transactions.

"Unlike a hardware company that would normally try to maintain higher ASPs and hardware gross margin, we strategically pass along player cost savings to consumers by actively driving down prices to grow active accounts," Roku said in its letter to shareholders on Wednesday.

Roku's advertising business more than doubled from the same period last year, while its business in providing Roku software to smart TV manufacturers continues to grow.

Ultimately, Roku says that it's now on track to do $500 million in revenue in 2017, up from $400 million in 2016.

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