VALUATION HIGHLIGHTS

1. Ads & Commissions constitute 86% of the Trefis price estimate for Roku's stock.

WHAT HAS CHANGED?

Latest Earnings: Q4 and Full Year 2025

Roku reported strong fourth-quarter 2025 results with revenue reaching $1.39 billion, a 16% year-over-year increase that surpassed analyst estimates. The company achieved a significant profitability milestone with a GAAP EPS of $0.53, nearly doubling the consensus forecast of $0.28. Growth was primarily fueled by an 18% surge in Platform revenue, which exceeded $1.2 billion for the quarter, alongside record adjusted EBITDA of $169 million and record free cash flow of $484 million for the full year.

Note: Roku's FY'25 ended on December 31, 2025.

Launch of Hiro TV and 2026 Streaming Bundles

Roku recently expanded its hardware lineup with the launch of Hiro, a new Roku-made TV designed to offer the Roku OS at a more accessible price point. Strategically, the company announced plans to roll out new streaming bundles in 2026 to attract cost-conscious consumers and bolster subscription revenue. This pivot includes the expansion of its "Howdy" subscription service to more platforms and deepened partnerships with premium providers like HBO Max to consolidate its position as a central streaming hub.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Roku's value that present opportunities for upside or downside to the current Trefis price estimate:

Platform Monetization

• Advertising ARPU Growth: Roku is aggressively expanding its programmatic capabilities and self-serve Ads Manager for SMBs. If the company captures a larger slice of the estimated $600 billion SMB ad market, there is significant upside to Platform ARPU. Conversely, intense competition from Netflix and Disney's ad-supported tiers remains a primary downside risk to market share.


• Content Distribution and Bundling: The shift toward streaming bundles and the growth of The Roku Channel (now the #2 free ad-supported app in the U.S.) provides a high-margin revenue stream. Trefis estimates often focus on active account growth; however, higher-than-expected conversion from the new "Howdy" service could drive margins above current projections.

For additional details, select a division from the interactive Trefis split for Roku at the top of the page.

BUSINESS SUMMARY

Roku is a leading TV streaming platform that operates through two primary segments: Platform and Devices. The Platform segment generates revenue from digital advertising, content distribution (subscription and transaction sharing), and premium subscriptions, while the Devices segment involves the sale of streaming players, audio products, and branded Roku TVs to expand the user base.

SOURCES OF VALUE

The Platform segment serves as the engine of Roku's valuation due to its high gross margins and recurring revenue nature.

Market-Leading OS Ecosystem

Roku maintains the #1 TV OS share in the U.S., Canada, and Mexico. This massive installed base of over 90 million streaming households creates a powerful "flywheel" effect where scale attracts more content publishers and advertisers, further entrenching its market dominance.

High-Margin Advertising and Services

With a Platform gross margin of 52%, Roku's ability to monetize streaming hours through video advertising and distribution fees provides the cash flow necessary to offset hardware losses. The company's first-party data and "Switzerland-like" neutral positioning allow it to partner across the industry.

KEY TRENDS

Ad-Supported Streaming Dominance

Roku predicts that by 2026, nearly 100% of streaming audiences will engage with ad-supported tiers as ad-free viewers become increasingly rare. The company is positioning itself to capture this shift by increasing the programmatic share of its video impressions and leveraging AI-driven ad performance tools.

Strategic Focus on Free Cash Flow

Management has shifted focus toward "relentless" profitability, aiming for over $1 billion in annual free cash flow by 2028. This strategy includes strict cost controls, a $400 million share buyback program to limit dilution, and a "CapEx light" business model that prioritizes software-driven revenue over hardware margins.