Roku (ROKU) reported strong fourth-quarter results, surpassing Wall Street’s expectations and indicating a path towards future profitability. The streaming video platform, based in San Jose, California, recorded a loss of 24 cents per share on sales of $1.20 billion for the December quarter.
Roku reports strong fourth-quarter results, surpassing expectations
Analysts had projected a loss of 41 cents per share on revenues of $1.15 billion, while the company had lost 55 cents per share on $984 million in sales during the prior year’s quarter. For the current quarter, Roku forecasts sales at $1.01 billion, aligning with analyst predictions. For the full year, Roku anticipates revenue of $4.61 billion, a 12% increase from 2024, which also meets expectations.
Significantly, Roku expects to achieve operating income positivity by the full year 2026. In the fourth quarter, the company reported 89.8 million streaming households, exceeding the consensus estimate of 89 million. As of January 7, Roku confirmed it surpassed 90 million streaming households. The company added 4.3 million households in Q4.
Roku primarily generates revenue through advertising on its platform and Roku-billed subscriptions to paid services. It maintains the number one streaming TV operating system in the U.S., Canada, and Mexico, while also manufacturing devices like televisions and streaming boxes and licensing its OS to other manufacturers.
The stock experienced a surge over 11% in after-hours trading, reaching 96.75, following a 2.4% increase in regular trading that left it at 86.80. Roku’s growth has been bolstered by increasing political ad spending and the launch of major streaming channels such as Peacock, Disney+, and HBO Max.
In its letter to shareholders, Roku emphasized ongoing progress in enhancing advertising demand through deeper third-party platform integrations, improvements to the Roku experience starting at the home screen, and growth in Roku-billed subscriptions. The company has broadened its advertising services to small- and medium-sized businesses, including brands in retail, automotive, and telecommunications, enhancing user engagement.
The platform segment, which encompasses revenue from ads and subscriptions, grew 25% to $1.04 billion, driven largely by political ad revenue. Analyst Barton Crockett noted that political advertising on connected TV significantly increased compared to the previous election cycle, partly due to notable efforts from Vice President Kamala Harris.
Despite industry tariffs imposed by the Trump administration on electronics imported from China, Roku executives stated that these tariffs are not expected to materially affect the company’s platform business. The company reported a fourth-quarter revenue of $1.20 billion, above the average analyst estimate of $1.15 billion, indicating a year-on-year growth of 22% and a 4.4% beat.
Key financial metrics included a GAAP EPS of -$0.24 compared to estimates of -$0.41, an adjusted EBITDA of $77.5 million against $34.85 million in estimates, and an EBITDA guidance for the upcoming financial year of $350 million, surpassing analyst expectations of $287.5 million. Roku’s operating margin improved to -3.3%, up from -10.6% in the same quarter last year, while its free cash flow margin remained steady at 6.4%.
Roku’s active accounts rose to 89.8 million, representing an increase of 9.8 million year-on-year. The company has a market capitalization of $12.31 billion. Over the past three years, Roku has achieved a compounded annual sales growth rate of 14.2%, outperforming the average growth in the consumer internet sector. Looking ahead, analysts project revenue to grow by 12.2% over the next 12 months, a slight deceleration compared to the previous years but still above average for the sector.
Roku’s average revenue per user (ARPU) stood at $41.49, reflecting a year-on-year growth of 3.9%, although this represented a decline of 2.4% annually over the past two years. The increase in active accounts is a key indicator of long-term business potential, despite concerns over the sustainability of user growth against a backdrop of fluctuating ARPU.
The company’s strong fourth-quarter performance, particularly its significant outperformance in EBITDA, has raised interest among analysts, and it traded up 12.5% to $97.75 immediately following the earnings report.
Featured image credit: Roku
