Roku ROKU shares rocketed higher Thursday, adding nearly $3 billion in value in just over three hours of trading, after the streaming service hub and connected TV maker posted a surprise third quarter profit and lifted its near-term sales forecast.
Roku, which only two months ago unveiled plans to slash around 10% of its workforce, said profits for the three months ending in September more than tripled from the same period last year to $43.4 million, defying Street forecasts of a $31.4 million loss.
Group revenues, Roku said, rose 20% to $912 million, topping its updated September forecast of between $835 million to $875 million. Roku added that December quarter revenues would also improve, to around $955 million, amid a rebound in video ad sales.
"However, we remain cautious amid an uncertain macro environment and an uneven ad market recovery. Additionally, we will face difficult YoY growth rate comparisons in content distribution and M&E which will challenge the YoY growth rate of platform revenue in Q4," said CEO Anthony Wood.
"That said, we have significant scale and engagement, and we expect to grow ad share," he added. "We will continue to operate our business with discipline to defend margins, with a focus on driving positive free cash flow over time."
Roku shares were marked 30.3% higher in late Thursday trading to change hands at $77.79 each, a level that would value the San Jose, California-based tech and streaming group at around $11 billion.
The stock closed Thursday with a market value of $8.44 billion.
"Roku reported another quarter of meaningful revenue and earnings upside, reflecting a stronger than expected September due to accounting adjustments and video advertising," said KeyBanc Capital Markets analyst Justin Patterson who carries a 'sector weight' rating on Roku stock.
"While bears will question whether one-time items are driving temporary strength, we will give credit where it is due — Roku has taken considerable cost out of the business and is positioned for margin expansion as macro conditions normalize," he added.
Roku in early September said that it will "implement additional measures to continue to bring down its year-over-year operating expense growth rate" by cutting around 10% of it workforce, slowing its near-term hiring, consolidating office space and cutting services expenses.
The group had around 3,600 employees over 14 countries at the end of the last year, according to its annual report.
Its overall Q3 impairment, Roku said, would likely be in the range of $160 million to $200 million 'related to ceasing to use certain office facilities and an impairment charge in a preliminary estimated range of $55 million to$65 million related to removing select existing licensed and produced content from Company-operated services on its TV streaming platform."
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