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oku's expanding engagement, ad momentum and subscription growth support improving profitability.
Roku (ROKU - Free Report) is entering a stronger phase of its turnaround as improving margins and disciplined execution reshape expectations for its performance. In the third quarter of 2025, platform revenues grew 17% year over year, gross profit increased to $525 million and adjusted EBITDA rose 19%. Platform gross margin reached 51.5%, supported by healthier advertising demand, stronger subscription activity and more efficient monetisation across its connected-TV ecosystem.
Roku’s expectations for the rest of 2025 remain constructive. Fourth-quarter revenues are projected at $1.35 billion, up 12% year over year, with platform revenues expected to grow 15% and platform gross margin at 52%. Full-year projections include $4.11 billion in platform revenue and $395 million in adjusted EBITDA. The Zacks Consensus Estimate pegs fourth-quarter EPS at 28 cents, up 6 cents over the past 30 days and implying 216.67% growth. These trends reinforce confidence that ROKU’s margin improvements are transitioning into a more durable profitability cycle.
Market Leadership Positions Platform for Sustained Growth
ROKU remains the number one selling TV operating system in the United States, Canada and Mexico, and its U.S. TV unit share continues to exceed the combined share of the second- and third-largest TV operating systems. With streaming devices in more than half of U.S. broadband households, this scale creates a widening competitive moat. The Zacks consensus estimate for fourth-quarter streaming hours is pegged at 38.77 billion, indicating 13.7% year-over-year growth, signalling solid engagement heading into 2026.
The Roku Channel’s position as the second most-engaged app on the platform amplifies this advantage. Nearly 90% of engagement comes through platform entry points, making improvements in recommendations and UI placement directly accretive to advertising and subscription revenues.
Advertising Growth Drives Platform Revenues
ROKU’s advertising engine continues to strengthen as automated, data-driven ad buying expands across the platform. Integrations with third-party demand-side platforms, including expanded access through Amazon’s (AMZN - Free Report) advertising ecosystem, are broadening demand and improving campaign performance. These channels support video advertising growth that continues to outpace the broader U.S. over-the-top and digital ad markets.
Roku Ads Manager is another driver. Roughly 90% of advertisers using the platform in the third quarter were new to ROKU, bringing fresh spending from performance marketers and small businesses. AppsFlyer integration strengthens attribution by connecting CTV exposures with mobile outcomes, reinforcing ROKU’s credibility in outcome-based advertising. As advertising shifts toward measurable formats, ROKU’s data-rich ecosystem positions it well to capture incremental spend. These gains contribute meaningfully to Roku’s improving margins. Amazon is also scaling its connected-TV advertising footprint, suggesting the growing relevance of ROKU’s expanding advertiser ecosystem.
Subscription Growth Diversifies Revenue Streams
ROKU’s streaming services distribution segment continues to see momentum, supported by Premium Subscriptions and the Frndly TV acquisition. Content discovery enhancements are driving subscription growth, while the Sports Experience helps ROKU benefit from the ongoing migration of live sports to streaming. With major sporting events and exclusive streaming packages lined up for 2026, the platform is positioned to capture rising sports-driven engagement. This subscription momentum supports the margin expansion already underway.
The launch of Howdy, a $2.99 per month ad-free service with nearly 10,000 hours of programming, further expands ROKU’s reach. Howdy leverages platform-scale promotion for efficient subscriber acquisition. ROKU’s asset-light model supports healthier margins and greater flexibility as the subscription ecosystem expands.
Valuation and Performance Trends Fend Off Competition
ROKU’s valuation remains attractive relative to the Zacks Broadcast Radio and Television industry and the broader Zacks Consumer Discretionary sector. Trading at a forward twelve-month price-to-sales of 2.98X, which remains 31% below the industry average of 4.3X and modestly above the sector level of 2.35X. Given ROKU’s expanding margins, rising free cash flow of $443 million, and the $50 million in share repurchases completed during the third quarter, the multiple appears undemanding relative to its improving earnings profile.
ROKU’s Valuation
Image Source: Zacks Investment Research
Performance trends strengthen the momentum. Over the past six months, ROKU delivered 42.9% returns, significantly outperforming the industry’s 8.3% decline and the sector’s 3.1% drop. This consistent outperformance suggests rising investor confidence in ROKU’s ability to convert scale, engagement and operating leverage into a more durable and profitable growth trajectory.
ROKU’s Price Performance
Image Source: Zacks Investment Research
Adding on to this, Roku can monetize high-margin owned inventories far more efficiently than competitors like Netflix (NFLX - Free Report) and Warner Bros Discovery (WBD - Free Report) , who spend heavily on content production and development. As Netflix and Warner Bros Discovery manage escalating content costs and debt burdens, ROKU benefits from a structure that supports faster and more efficient margin expansion. A similar advantage plays out in advertising. As Amazon, Netflix and Warner Bros Discovery intensify competition for connected-TV ad budgets, their ad tiers rely more heavily on limited content windows and premium inventory. ROKU, by contrast, monetizes a broader, data-rich supply of CTV inventory without bearing the cost constraints of a content-centric model. This reinforces ROKU’s ability to capture incremental ad spend while maintaining superior margin potential.
Conclusion
ROKU’s strengthening margin profile, growing advertising engine and expanding subscription ecosystem collectively point to a business regaining momentum at scale. With rising free cash flow, clear operating leverage and an attractive valuation relative to its growth outlook, the stock offers a compelling opportunity for investors. The improving fundamentals support a clear buy stance, and investors can consider accumulating the stock at current levels.
Image: Bigstock
Roku's Improving Margins Signal a Turnaround: Is the Stock a Buy Now?
Key Takeaways
Roku (ROKU - Free Report) is entering a stronger phase of its turnaround as improving margins and disciplined execution reshape expectations for its performance. In the third quarter of 2025, platform revenues grew 17% year over year, gross profit increased to $525 million and adjusted EBITDA rose 19%. Platform gross margin reached 51.5%, supported by healthier advertising demand, stronger subscription activity and more efficient monetisation across its connected-TV ecosystem.
Roku’s expectations for the rest of 2025 remain constructive. Fourth-quarter revenues are projected at $1.35 billion, up 12% year over year, with platform revenues expected to grow 15% and platform gross margin at 52%. Full-year projections include $4.11 billion in platform revenue and $395 million in adjusted EBITDA. The Zacks Consensus Estimate pegs fourth-quarter EPS at 28 cents, up 6 cents over the past 30 days and implying 216.67% growth. These trends reinforce confidence that ROKU’s margin improvements are transitioning into a more durable profitability cycle.
Roku, Inc. Price and Consensus
Roku, Inc. price-consensus-chart | Roku, Inc. Quote
Market Leadership Positions Platform for Sustained Growth
ROKU remains the number one selling TV operating system in the United States, Canada and Mexico, and its U.S. TV unit share continues to exceed the combined share of the second- and third-largest TV operating systems. With streaming devices in more than half of U.S. broadband households, this scale creates a widening competitive moat. The Zacks consensus estimate for fourth-quarter streaming hours is pegged at 38.77 billion, indicating 13.7% year-over-year growth, signalling solid engagement heading into 2026.
The Roku Channel’s position as the second most-engaged app on the platform amplifies this advantage. Nearly 90% of engagement comes through platform entry points, making improvements in recommendations and UI placement directly accretive to advertising and subscription revenues.
Advertising Growth Drives Platform Revenues
ROKU’s advertising engine continues to strengthen as automated, data-driven ad buying expands across the platform. Integrations with third-party demand-side platforms, including expanded access through Amazon’s (AMZN - Free Report) advertising ecosystem, are broadening demand and improving campaign performance. These channels support video advertising growth that continues to outpace the broader U.S. over-the-top and digital ad markets.
Roku Ads Manager is another driver. Roughly 90% of advertisers using the platform in the third quarter were new to ROKU, bringing fresh spending from performance marketers and small businesses. AppsFlyer integration strengthens attribution by connecting CTV exposures with mobile outcomes, reinforcing ROKU’s credibility in outcome-based advertising. As advertising shifts toward measurable formats, ROKU’s data-rich ecosystem positions it well to capture incremental spend. These gains contribute meaningfully to Roku’s improving margins. Amazon is also scaling its connected-TV advertising footprint, suggesting the growing relevance of ROKU’s expanding advertiser ecosystem.
Subscription Growth Diversifies Revenue Streams
ROKU’s streaming services distribution segment continues to see momentum, supported by Premium Subscriptions and the Frndly TV acquisition. Content discovery enhancements are driving subscription growth, while the Sports Experience helps ROKU benefit from the ongoing migration of live sports to streaming. With major sporting events and exclusive streaming packages lined up for 2026, the platform is positioned to capture rising sports-driven engagement. This subscription momentum supports the margin expansion already underway.
The launch of Howdy, a $2.99 per month ad-free service with nearly 10,000 hours of programming, further expands ROKU’s reach. Howdy leverages platform-scale promotion for efficient subscriber acquisition. ROKU’s asset-light model supports healthier margins and greater flexibility as the subscription ecosystem expands.
Valuation and Performance Trends Fend Off Competition
ROKU’s valuation remains attractive relative to the Zacks Broadcast Radio and Television industry and the broader Zacks Consumer Discretionary sector. Trading at a forward twelve-month price-to-sales of 2.98X, which remains 31% below the industry average of 4.3X and modestly above the sector level of 2.35X. Given ROKU’s expanding margins, rising free cash flow of $443 million, and the $50 million in share repurchases completed during the third quarter, the multiple appears undemanding relative to its improving earnings profile.
ROKU’s Valuation
Image Source: Zacks Investment Research
Performance trends strengthen the momentum. Over the past six months, ROKU delivered 42.9% returns, significantly outperforming the industry’s 8.3% decline and the sector’s 3.1% drop. This consistent outperformance suggests rising investor confidence in ROKU’s ability to convert scale, engagement and operating leverage into a more durable and profitable growth trajectory.
ROKU’s Price Performance
Image Source: Zacks Investment Research
Adding on to this, Roku can monetize high-margin owned inventories far more efficiently than competitors like Netflix (NFLX - Free Report) and Warner Bros Discovery (WBD - Free Report) , who spend heavily on content production and development. As Netflix and Warner Bros Discovery manage escalating content costs and debt burdens, ROKU benefits from a structure that supports faster and more efficient margin expansion. A similar advantage plays out in advertising. As Amazon, Netflix and Warner Bros Discovery intensify competition for connected-TV ad budgets, their ad tiers rely more heavily on limited content windows and premium inventory. ROKU, by contrast, monetizes a broader, data-rich supply of CTV inventory without bearing the cost constraints of a content-centric model. This reinforces ROKU’s ability to capture incremental ad spend while maintaining superior margin potential.
Conclusion
ROKU’s strengthening margin profile, growing advertising engine and expanding subscription ecosystem collectively point to a business regaining momentum at scale. With rising free cash flow, clear operating leverage and an attractive valuation relative to its growth outlook, the stock offers a compelling opportunity for investors. The improving fundamentals support a clear buy stance, and investors can consider accumulating the stock at current levels.
Roku stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.