Roku Stock Rises on First Earnings Report

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Roku CEO Anthony Wood

The set-top box maker grew revenue by 40 percent to nearly $125 million during the third quarter.

In its first earnings report since going public in late September, set-top box maker Roku delivered strong revenue growth. 

The company said Wednesday that its advertising business has almost doubled in size since the beginning of the year, helping it to reach nearly $125 million in revenue for the third quarter. That's up 40 percent from the same period last year and higher than the $111 million in revenue that Wall Street was expecting. 

Investors responded favorably to the earnings report, boosting Roku's stock by over 26 percent to nearly $24. That's higher than Roku's IPO close of $23.50 and marks a rebound for the stock following a few weeks of declines. 

Roku ended the quarter with 16.7 million active accounts, up 48 percent year-over-year. And time spent streaming on its devices grew 58 percent to 3.8 billion hours. 

Roku lost $7.9 million during the quarter, less than the $16.7 million in losses that analysts were anticipating. 

The Los Gatos, California, company expects to reach $500 million in revenue for the full year, up from $400 million last year. 

Roku, known for its devices that connect to televisions and allow people to stream video from Netflix, YouTube and other apps, for a long time was primarily in the product business. It currently offers six different streaming devices — from a TV set to a streaming stick. But it has shifted its focus to growing its userbase, to which it can sell advertising and provide new services. During the third quarter, Roku unveiled the Roku Channel, which offers up a curated collection of free programming available on its platform. It is one way that Roku is looking to build out its publishing  business and grow its advertising revenue.

"One point of the Roku channel is for us to start doing a better job of merchandising and recommending content from our partners," CEO Anthony Wood said during a call with investors. He noted that many publishers don't have ad sales teams or direct-to-consumer marketing capabilities, meaning that "there's a lot of content that is not being monetized." 

Roku shares closed Wednesday down more than 1 percent, or around 29 cents, to $18.84.