ROKU warned that a push by streaming rivals towards ad-supported offerings could weigh on its growth this year, taking the shine off its strong quarterly results and sending its shares down nearly 3 per cent in extended trading on Thursday (Apr 25).

Roku, which sells streaming devices and has its own free, ad-supported channel, has seen more people turn to its platform as major streamers such as Netflix increased prices and economic uncertainty pressured consumer spending.

But the company executives said Roku faces “difficult year-over-year growth rate comparisons within streaming service distribution activities. This headwind is due to past price increases and a higher mix shift towards ad-supported offerings”.

Major streaming services, including Netflix, have in the past year focused on growing their more affordable, ad-supported offerings as they look to maintain subscriber growth in an uncertain economic environment.

Still, Roku’s earnings for the January to March quarter and a second-quarter sales forecast that was above Street estimates showed the company was benefiting from strong ad sales and the ongoing shift to streaming from cable TV.

The company posted a net revenue of US$881.5 million in the first quarter, compared with LSEG estimates of US$848.6 million.

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Roku’s revenue from its platform segment, which includes digital ads and ad-free tier subscriptions, as well as from its streaming devices and TV each increased 19 per cent.

The company ended the first quarter with 81.6 million “streaming households” (active accounts), a net increase of 1.6 million from the previous quarter.

“In an environment where engagement is at a premium, Roku continues to see strong growth in both the size of its base and the amount of time spent on its platform,” said Jamie Lumley, senior analyst at Third Bridge.

Roku forecasted second-quarter revenue at US$935 million, above analysts’ average estimate of US$931.4 million. REUTERS