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Roku (ROKU - Free Report) is set to report third-quarter 2023 results on Nov 1.

For third-quarter 2023, Roku expects total net revenues of $815 million, total gross profit of $355 million, and adjusted EBITDA of negative $50 million.

The consensus mark for revenues is pegged at $855.35 million, indicating 12.34% growth from the year-ago quarter’s reported figure.

For the quarter to be reported, the Zacks Consensus Estimate for loss per share has increased by 26 cents to $1.91 in the past 30 days. The figure suggests a 117.05% decline from the year-ago quarter’s reported figure.

The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average earnings surprise being 20.58%.

Let’s see how things have shaped up for this announcement.

Roku, Inc. Price and EPS Surprise

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

Factors to Consider

Roku’s third-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, Roku entered into a strategic TV streaming advertising partnership with TV Azteca in Mexico. This is expected to boost advertising revenues in the to-be-reported quarter.

Active account net adds were 1.9 million in the second quarter, making a total of 73.5 million active accounts globally, driven primarily by the Roku TV licensing program in the U.S. and international markets

Our model estimate for active accounts is pegged at 75 million, indicating growth of 15.4% from the figure reported in the year-ago quarter.

In second-quarter 2023, Roku users streamed 25.1 billion hours, up 21.2% year over year. Our model estimate for streaming hours is pegged at 25.74 billion, indicating growth of 17.5% from the figure reported in the year-ago quarter.

At the end of the second quarter, ROKU added Disney’s (DIS Quick QuoteDIS - Free Report) Disney+ and Hulu to the Continue Watching feature, expanding coverage to 15 of the top 20 apps on the platform. This is expected to have aided subscriber growth, thereby boosting the company’s top line in the third quarter.

However, the company has been facing challenges from the macroeconomic environment, such as inflation and recessionary fear. The supply chain issues are causing disruptions in its player unit sales in terms of shipping delays, product availability issues and product price increases.

Both consumers and advertisers have significantly curtailed spending, which is expected to have negatively impacted the company’s earnings for the quarter.
In the second quarter, the average revenue per user (ARPU) declined 7% from the prior-year quarter’s levels to $40.67 (on a trailing 12-month basis). Our model estimate for ARPU is pegged at $40.8, indicating a decline of 7.8% from the figure reported in the year-ago quarter.

What Our Model Indicates

Our proven model does not predict an earnings beat for ROKU this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Roku has an Earnings ESP of -69.74% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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