Roku Q4 FY2021 Earnings Preview: Key Insights and What Investors Should Watch

Focus on Roku's Active User Growth

Essential Highlights

• Analysts predict an EPS of $0.06, a sharp decline from $0.49 in Q4 FY 2020.
• Active accounts are expected to increase year-over-year, but at less than half the growth rate compared to the same quarter last year.
• Revenue growth is projected to slow as the initial pandemic-driven surge fades.

Roku Inc. (ROKU) experienced significant profit and revenue growth during the COVID-19 pandemic, fueled by a surge in home streaming of TV shows and movies. This led to a substantial increase in streaming hours and advertising revenue. However, recent data suggests the pandemic’s positive impact is diminishing. In Q3 FY2021, Roku reported a marked slowdown in both revenue growth and active account additions.

Investors will be closely monitoring whether Roku can reverse these trends and continue to grow profits when it releases its Q4 FY2021 earnings on February 17, 2021. Analysts forecast a steep drop in earnings per share (EPS) alongside the slowest revenue growth in over three years.

Another critical metric under scrutiny is Roku’s total active accounts, reflecting the size of its user base. A larger subscriber base attracts more advertisers, a vital revenue source. While active accounts are expected to grow, this increase is anticipated to be the slowest quarterly pace in at least four years.

Over the past year, Roku’s stock has significantly underperformed the broader market. The gap widened between late February and early May 2021, narrowed briefly mid-year, but then expanded again with a sustained decline starting in late July. Roku’s shares have returned -64.2% over the past year, compared to the S&P 500’s 13.7% gain.

Roku’s Recent Earnings Performance

Roku’s Q3 FY2021 earnings were mixed. EPS exceeded analyst expectations, rising 411.4% year-over-year, marking the fifth consecutive quarter of positive EPS after six quarters of losses. However, revenue growth slowed to 50.5% YOY, missing estimates and representing the slowest pace since Q2 FY2020. The company cited ongoing global supply chain challenges impacting its business.

In Q2 FY2021, Roku surpassed consensus estimates for both earnings and revenue, with EPS positive for the fourth straight quarter and revenue soaring 81.2% YOY—the fastest growth rate in the company’s history. Roku emphasized the rapid shift of advertisers from traditional TV to streaming platforms and reported that monetized video ad impressions more than doubled year-over-year.

For Q4 FY2021, analysts anticipate a decline in Roku’s financial performance, with EPS expected to drop 86.6% YOY and revenue growth slowing to 37.3%, the slowest in at least 15 quarters. Despite this, Roku is projected to report its first full fiscal year of positive EPS in five years for FY2021. Annual revenue growth is forecasted at 57.0%, slightly slower than the prior year but still outpacing the three years before FY2020.

Source: Visible Alpha

The Critical User Base Metric

Investors will pay close attention to Roku’s active account growth, a key indicator of platform engagement. Active accounts are defined as unique user accounts that streamed content on Roku’s platform within the past 30 days. Streaming from the Roku Channel on non-Roku devices does not count, nor does the metric differentiate between multiple viewers on the same account—each account counts as one active user regardless of the number of viewers.

The number of active accounts directly correlates with advertising reach. More active accounts mean a larger audience for ads, making Roku’s platform more attractive to advertisers and increasing ad revenue potential.

Roku’s active accounts have grown rapidly over recent years, from 19.3 million at FY2017’s end to 51.2 million by FY2020. However, growth rates have slowed: quarterly YOY increases dropped from 40%-46% in FY2018 to 37%-42% in FY2020, and further decelerated to 34.7%, 28.1%, and 22.6% in Q1, Q2, and Q3 FY2021 respectively. Analysts expect this trend to continue, forecasting only a 16.3% YOY increase in Q4 FY2021—the slowest quarterly growth in at least four years.

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