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Roku (ROKU - Free Report) is set to report results for the second quarter of 2024 on August 1.

For second-quarter 2024, Roku expects total net revenues of $935 million, total gross profit of roughly $410 million and adjusted EBITDA of $30 million.

The consensus mark for revenues is pegged at $935.29 million, indicating 10.4% growth from the year-ago quarter’s reported figure.

For the quarter to be reported, the Zacks Consensus Estimate for loss is pegged at 45 cents per share, which has remained unchanged in the past 30 days. The figure suggests a 40.79% increase from the year-ago quarter’s reported figure.

The company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average earnings surprise being 23.36%.

Roku, Inc. Price and EPS Surprise

Roku, Inc. price-eps-surprise | Roku, Inc. Quote

Factors to Consider

This Zacks Rank #3 (Hold) company’s second-quarter performance is expected to have benefited from the growing popularity of The Roku Channel, expanding TV brands & retailer partner base and third-party streaming channels.

In the to-be-reported quarter, the company announced various notable partnerships with companies like Fandango and iSpot to help advertisers measure the impact of their Roku ad campaigns. The company has also partnered with The Trade Desk to equip advertisers with better planning, buying and measurement of TV streaming media. This is expected to have boosted ROKU’s top line in the second quarter of 2024.

Streaming households were 81.6 million in the first quarter of 2024. Sequential net adds of 1.6 million were in line with the first quarter of 2023, driven by both TVs and streaming players. This trend is expected to have continued in the to-be-reported quarter.

Our model estimate for streaming households is pegged at 83 million, indicating growth of 12.9% from the figure reported in the year-ago quarter.

ROKU has become the No. 1 TV-selling operating system in the United States and Mexico. Users streamed 30.8 billion hours globally, up 23% year over year. Our model estimate for streaming hours is pegged at 30.11 billion, indicating growth of 19.9% from the figure reported in the year-ago quarter.

However, Roku faces immense competition from existing local traditional pay-TV services and products, including those provided by incumbent pay-TV service providers and mobile streaming platforms. In the first quarter, the average revenue per user (ARPU) was relatively flat from the prior-year quarter’s $40.65 (on a trailing 12-month basis). Our model estimate for ARPU is pegged at $40.62, indicating a decline of 0.1% from the figure reported in the year-ago quarter.

Companies like Amazon (AMZN - Free Report), Apple (AAPL - Free Report), and Alphabet (GOOGL - Free Report) offer TV streaming devices that compete with ROKU’s streaming players and Roku TV. 

Additionally, Alphabet's Google and Amazon license their respective operating system for integration into smart TVs. Roku’s Smart Soundbar and Wireless Subwoofer face additional competition from makers of TV audio speakers and sound bars, as well as peripheral devices.

Moreover, the industry-wide trend of declining profitability due to regular technology upgrades requires continued investments. The development of these new products and platforms is putting margins under pressure by increasing operating costs.

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