Roku shares tumble as weak device revenue overshadows Q3 profit beat

Investing.com -- Roku Inc (NASDAQ: ROKU) reported its first quarterly operating profit since 2021 on Thursday, but shares tumbled over 8% in after-hours trading as investors focused on declining device revenue despite the company beating earnings expectations.

The streaming platform posted third-quarter adjusted earnings per share of $0.16, exceeding analyst estimates of $0.09. Revenue reached $1.21 billion, matching consensus projections and representing a 14% increase YoY. Platform revenue, which includes advertising and content distribution, grew 17% YoY to $1.065 billion, while device revenue fell 5% YoY to $146 million.

The significant stock drop came despite Roku achieving positive operating income ahead of schedule and raising its full-year outlook. The company’s device segment posted a gross margin of -16%, reflecting ongoing challenges in hardware profitability.

"We delivered strong Q3 results, achieving positive operating income ahead of schedule and for the first time since 2021," said Roku in its shareholder letter, highlighting that The Roku Channel remained the #2 app on its platform by engagement in the U.S.

For the fourth quarter, Roku forecasts revenue of approximately $1.35 billion, above the analyst consensus of $1.324 billion. The company also raised its full-year 2025 revenue guidance to $4.69 billion, surpassing analyst expectations of $4.661 billion.

Streaming hours on the platform reached 36.5 billion, increasing by 4.5 billion hours YoY. The company maintained its position as the #1 selling TV operating system in the U.S., Canada, and Mexico, with its U.S. market share exceeding that of the second and third-place competitors combined.

Roku also announced a $50 million share repurchase as part of its previously announced $400 million stock buyback program, emphasizing its "commitment to delivering long-term shareholder value by growing free cash flow per share."

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