Roku’s Ad Business Keeps Growing Rapidly, But Q3 Results Still Made Some Investors Nervous

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.