As earnings season continued this week, three tech companies' earnings reports stood out. Roku (NASDAQ: ROKU) and Square (NYSE: SQ) both impressed investors with surging business growth, and Snap (NYSE: SNAP) missed the mark yet again, sending shares plummeting. Here's what investors should know about these three stocks.
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Roku stock soars
Roku's third quarter obliterated expectations. The streaming set-top box company reported revenue of $125 million, up 40% year over year. Meanwhile, Roku's adjusted loss per share narrowed from a loss of $0.17 in the year-ago quarter to a loss of $0.10 in Q3. On average, analysts expected revenue of just $110 million and adjusted loss per share of $0.28.
Roku said its better-than-expected results were fueled primarily by 137% year-over-year growth in its platform revenue.
Though Roku's platform revenue only accounts for 46% of total revenue, it represents 89% of total gross profit. So, it's easy to see why strong triple-digit growth in Roku's platform segment can drive so much upside.
Roku stock absolutely exploded. Shares soared a total of about 75% in the two trading days after the report was released.
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Square's growth accelerates
Square's adjusted revenue and adjusted earnings per share (EPS) for its third quarter were $257 million and $0.07, respectively. These results were up from $178 million and $0.01 in the year-ago quarter. Both metrics handily exceeded consensus analyst estimates for $245 million and $0.05.
What was particularly notable from Square's results was a meaningful acceleration in the company's revenue growth. Total revenue and adjusted revenue were up 33% and 45% year over year, respectively. In Square's second quarter, these metrics were up 26% and 42% year over year.
Square saw strong growth across all of its segments. Transaction-based revenue, which is Square's largest segment by far, was up 31% year over year. Subscription and services-based revenue was up 84% year over year. And hardware revenue -- Square's smallest segment -- was up 23% year over year.
Square stock increased a total of about 7% in the two trading days after its earnings release.
Snap's growth falls short of expectations
Snap let investors down with another disappointing quarter. While Snap's third-quarter revenue increased 62% year over year to $208 million, this marks a significant deceleration compared to Snap's 153% year-over-year revenue growth in Q2. In addition, Snap's revenue was far below a consensus analyst estimate for revenue of $237 million.
Making matters worse, losses mounted. The company's net loss worsened from $124 million in the year-ago quarter to $443 million. These losses were driven primarily by a 338% increase in research and development costs, a 193% rise in sales and marketing, and a 180% jump in general and administrative expenses.
Snap's daily active users, which were up 17% year over year and 3% sequentially, were 178 million. This key metric was also below a consensus analyst estimate for 182 million.
During Snap's earnings call, CEO Evan Spiegel fueled investor concern when he said the company is planning a major redesign of the app that he expects will be disruptive to business in the short term. Of course, he believes the redesign will pay off over the long haul. But investors aren't buying it.
Snap stock fell a total of 16% in the three days following its earnings report this week.
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