Roku stock continues to fly 6.8% higher in morning trading after a 31% last Friday. Roku forecast upbeat third-quarter revenue and posted market-beating results for the second quarter on improved ad sales.
After several months of muted spending, companies are raising their expenditure on ads on signs of cooling inflation and improving consumer sentiment.
"We have begun to see some ad verticals improve, which resulted in modest YoY platform revenue growth in Q2, and we are well positioned to re-accelerate growth as the ad market recovers," company executives said in a letter to shareholders.
Roku expects $815 million in net revenue in the July-September period, higher than analysts' projection of $809.6 million, according to Refinitiv data.
Chief Financial Officer Dan Jedda said the pickup in ad spending is coming from the consumer products, and health and wellness industries, while tech, media and entertainment remains challenged.
Roku's strong guidance comes after large digital platforms Meta Platforms and Alphabet delivered upbeat results on higher digital ad sales.
"In addition to capturing advertising dollars shifting from traditional linear distribution to over-the-top, Roku has made progress in clawing away spend from other digital channels," said Third Bridge analyst Jamie Lumley.
Roku, which offers streaming devices and also has its own ad-supported channel, posted better-than-expected results for the quarter ended June.
Net revenue grew 11 per cent to $847.2 million, above estimates of $774.5 million, while adjusted loss came in at 76 cents per share, lower than the estimate of $1.26.
The company said it added 1.9 million "active accounts" from the previous quarter to 73.5 million.
