Roku forecasts robust second-quarter revenue as some ad spending improves

(Reuters) -Roku Inc forecast second-quarter revenue above Wall Street estimates on Wednesday on optimism that increased cord-cutting and a broader shift to ad-based streaming will boost business, sending its shares up about 4% in extended trading.

The company’s ad-supported streaming platform has gained popularity with users trying to cut down on their discretionary spending. Moreover, with streaming giants like Netflix and Disney+ adding ad-supported tiers to their services, more advertising dollars are flowing to streaming from TV.

Roku added 1.6 million “active accounts” in the reported quarter from the fourth quarter.

“We expect the advertising market in the second quarter to look much the same as it did in the first,” Roku executives said in a letter to shareholders.

Ad spend from certain verticals like travel and health and wellness was improving, while others like media and entertainment, and financial services remain pressured, the San Jose, California-based company said.

“The performance and outlook suggest to us that advertising trends, while still under pressure, have continued to be stable, despite incremental macroeconomic weakness and the mini banking crisis in the period,” said D.A. Davidson & Co analyst Tom Forte.

Roku expects macro uncertainties to persist throughout this year as inflation and recession fears dent consumer spending on discretionary goods.

The company, which aims to be profitable by 2024, is also cutting costs to ride out the weakness in the ad industry. But, operating expenses in the first quarter ended March 31 rose 42% to $550 million. Net loss per share was $1.38, slightly bigger than estimates of loss of $1.37 per share, as per Refinitiv data.

The company forecast current-quarter revenue of about $770 million. Analysts on average expect revenue to come in at $767.6 million.

Net revenue rose 1% to $741 million in the first quarter, compared with analysts’ expectations of $708.5 million.

(Reporting by Akshita Toshniwal and Chavi Mehta in Bengaluru; Editing by Shailesh Kuber)

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