Roku Q3 FY2021 Earnings Preview: Growth Slowdown and Stock Insights for 2021

Focus on Roku's Active User Growth

Essential Highlights

• Analysts project earnings per share (EPS) of $0.08, slightly down from $0.09 in Q3 FY 2020.
• Active accounts are anticipated to increase year-over-year (YOY), though at a slower rate.
• Revenue growth is expected to continue but at a more moderate pace compared to the previous year’s rapid expansion.

Roku Inc. (ROKU) experienced significant profit and revenue acceleration over the past year, fueled by the COVID-19 pandemic and the ongoing transition from traditional television to streaming platforms. Despite its relatively smaller size, Roku has recently been involved in a high-profile dispute with tech giant Google amid intensifying streaming wars. Roku alleges Google sought preferential treatment for its YouTube services on Roku’s platform, a claim Google denies. Subsequently, Google announced on October 22 that Roku users would no longer be able to download YouTube or YouTube TV apps starting December 9.

Investors are closely monitoring how these developments and other factors will influence Roku’s growth trajectory as the company prepares to release its Q3 FY2021 earnings on November 3, 2021. Analyst forecasts are mixed, with expectations of a decline in EPS despite strong revenue growth.

A critical metric under scrutiny is Roku's total active accounts, which reflect the size of its user base. A larger subscriber base attracts more advertisers, a key revenue driver. Analysts predict growth in active accounts but at the slowest rate seen in at least four years.

Over the past year, Roku’s stock performance has mirrored broader market trends, though it exhibited higher volatility. After peaking in late July, shares have declined sharply. Nonetheless, Roku’s stock has delivered a total return of 39.9% over the past year, slightly surpassing the S&P 500’s 39.1% total return.

Roku’s Earnings Performance History

In Q2 FY2021, Roku surpassed analyst expectations with record EPS growth of 246.9% compared to the prior year and revenue growth of 81.2% YOY—the fastest in at least four years. The company emphasized the accelerating shift of advertisers from traditional to streaming TV and reported more than doubling monetized video ad impressions YOY.

During Q1 FY2021, Roku also beat estimates with EPS increasing 219.7% YOY and revenue expanding 79.0%, marking the fastest quarterly growth in over three years. Streaming hours reached a record 18.3 billion, up 1.4 billion from the previous quarter.

For Q3 FY2021, analysts forecast a mixed outcome: EPS is expected to decline by 18.9% YOY after four quarters of rapid growth, while revenue is projected to rise 51.4% YOY—the slowest pace since Q2 FY2020. For the full FY2021, analysts anticipate Roku to report positive EPS for the first time in at least five years, with annual revenue growth forecasted at 59.8%, the fastest in the same period.

Source: Visible Alpha

Key Metric: Active Accounts Growth

Investors will also focus on the growth of Roku’s active accounts, defined as unique user accounts that streamed content through Roku’s platform within the last 30 days. Content streamed solely via the Roku Channel on non-Roku devices is excluded. Multiple viewers on a single account count as one active account. This metric closely correlates with the potential advertising audience size, influencing ad revenue.

Active accounts have expanded rapidly over recent years—from 19.3 million at FY2017’s end to 51.2 million by FY2020’s close. However, growth rates have moderated; YOY quarterly growth was between 40%-46% in FY2018, decreasing to 37%-42% in FY2020, and further slowing to 34.7% in Q1 and 28.1% in Q2 FY2021. Analysts expect Q3 FY2021 growth to slow further to 23.3%, the lowest in at least four years.

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