Roku, Inc. (NASDAQ: ROKU)

Roku delivered a strong first quarter with total net revenue increasing 16% year-over-year to $1.02 billion, aligned with the company’s guidance. Platform revenue, which represents the primary growth driver for the business, grew 17% to $881 million, accounting for 86% of total revenue. This growth was driven by contributions from both video advertising and streaming services distribution activities.

Device revenue increased 11% year-over-year to $140 million, exceeding the company’s expectations due to higher-than-anticipated unit sales of Roku-branded TVs and players. However, the Devices segment continued to operate at a loss with a gross margin of -13.8%, reflecting promotional activities carried over from the holiday season.

Total gross profit rose 15% year-over-year to $445 million, representing a 43.6% gross margin. Platform gross profit grew 18% to $464 million, with a gross margin of 52.7%, a 0.5 percentage point improvement from the prior year. This segment continues to be the profit engine for the company, offsetting the losses in the Devices segment.

Operating expenses increased 9% year-over-year to $503 million, growing at a slower rate than revenue, demonstrating improved operational efficiency. Sales and marketing expenses rose 11% to $224 million, while research and development spending increased only 2% to $185 million, and general and administrative expenses grew 22% to $95 million.

The company reported a net loss of $27 million, a significant 46% improvement compared to the $51 million loss in Q1 2024. Adjusted EBITDA was $56 million, representing a 37% increase year-over-year and a 5.5% Adjusted EBITDA margin, an improvement of 0.9 percentage points. Operating cash flow for the trailing twelve months was $310 million, down 32% from the prior year, while free cash flow was $298 million.

The Platform segment, which includes advertising, content distribution, and subscription revenue, continued to be the primary growth driver for Roku in Q1 2025. Platform revenue increased 17% year-over-year to $881 million, outpacing overall company growth. This segment now represents 86% of total revenue, up from 86% in Q1 2024.

A key highlight for the platform was the significant milestone achieved by The Roku Channel, which became the #2 app on the platform in the U.S. by engagement and maintained its #3 position globally by both reach and engagement. Streaming Hours on The Roku Channel grew an impressive 84% year-over-year, demonstrating the success of Roku’s content strategy and user experience improvements.

The Roku Experience

Roku continued to enhance its user experience, which begins with the Home Screen and includes features built to engage users and help them discover content. One of the most successful new features has been the personalized, AI-driven content row, which highlights TV shows and movies from across the Roku platform. More than one-third of Streaming Households in the U.S. streamed monthly from this content row in Q1, helping to grow daily video ad reach and subscription sign-ups.

The company reported that in Q1, more than 85% of Streaming Hours on The Roku Channel originated from features of the Roku Experience other than the channel’s app tile, with the content row on the Home Screen driving the most viewing hours of any entry point. This demonstrates the power of Roku’s platform and its ability to drive content discovery and engagement.

Advertising Activities

Advertising activities across Roku’s platform (excluding the Media & Entertainment vertical) outperformed the U.S. OTT ad market and grew faster than overall Platform revenue. With more than half of U.S. broadband households using Roku devices, the company provides marketers with both the reach of traditional TV and the targeting capabilities of digital advertising.

The company expanded its performance and measurement capabilities through strategic partnerships, including integrations with Adobe Real-Time Customer Data Platform for audience targeting and INCRMNTAL for advanced AI-powered campaign measurement. Roku also integrated Spaceback with its self-service ad platform, Roku Ads Manager, enabling small and medium-sized businesses to efficiently repurpose social media content for connected TV advertising.

Streaming Services Distribution

Streaming services distribution activities growth was driven primarily by Premium Subscription sign-ups and the continued impact of price increases across subscription-based services. The company reported having tens of millions of Roku-billed subscriptions, benefiting from its merchandising capabilities, billing service, and growing consumer interest in streaming bundles.

In Q1, Apple partnered with Roku to create a fan experience on the Home Screen for its hit show “Severance” ahead of its second season. This partnership made the entire first season available for free on The Roku Channel and drove both engagement and new subscriber acquisition for Apple TV+.

On May 1, 2025, Roku announced an agreement to acquire Frndly TV, a subscription streaming service offering over 50 live TV channels, on-demand video, and cloud-based DVR at an affordable price. This acquisition is intended to support Roku’s focus on growing Platform revenue and Roku-billed subscriptions.

Roku’s Devices segment, which includes streaming players and Roku-branded TVs, generated revenue of $140 million in Q1 2025, up 11% year-over-year and above the company’s expectations. This growth was driven by higher-than-anticipated unit sales of both Roku-branded TVs and streaming players.

Despite the revenue growth, the segment reported a gross loss of $19 million, representing a -13.8% gross margin. This loss was primarily due to continued promotional activities carried over from the holiday season, aimed at increasing market share and expanding the user base.

Roku maintained its leadership position as the #1 selling TV operating system in the U.S., Canada, and Mexico during Q1. In the U.S. market, the Roku TV OS represented nearly 40% of TV units sold, which is greater than the combined market share of the #2 and #3 selling TV operating systems.

During the quarter, Roku unveiled a refreshed product lineup that will be available in the coming months:

• New Roku-branded TVs with enhanced picture and sound quality features, including improved contrast and color accuracy, faster app launches, and deeper bass
• An all-new product reference design: the Roku TV Smart Projector, which will be available for all Roku TV OEM partners to build and sell
• Two new streaming players: the Roku Streaming Stick and Roku Streaming Stick Plus, which are 35% smaller than competing products and powered directly by the TV without requiring a separate power adapter

The company is also expanding its global device footprint by bringing its new streaming players to markets outside the U.S., including Canada, Mexico, Central and South America, and the U.K. In Mexico, Hyundai Electronics announced the launch of a new Roku TV lineup, further strengthening Roku’s presence in Latin America.

While the Devices segment operates at a loss, it plays a strategic role in expanding Roku’s active account base, which in turn drives Platform revenue growth through increased advertising reach and content distribution opportunities.

For Q2 2025, Roku provided the following guidance:

• Total net revenue of approximately $1.07 billion, representing 11% year-over-year growth
• Platform revenue expected to grow 14% year-over-year with a gross margin of roughly 51%
• Devices revenue projected to decline about 10% year-over-year with a gross margin of negative 10%
• Total gross profit of approximately $465 million
• Adjusted EBITDA of approximately $70 million

For the full year 2025, Roku reaffirmed its outlook of:

• Platform revenue of $3.95 billion
• Adjusted EBITDA of $350 million

The company updated its expectations for full-year Platform gross margin to be approximately 52% due to evolving dynamics in its advertising product mix. While tariff-related impacts to the Devices segment remain difficult to predict, management expects Devices revenue and gross profit loss to remain consistent with 2024 levels.

Roku reiterated its path to achieving positive operating income in 2026, demonstrating confidence in its long-term strategy despite ongoing macro uncertainty. The company plans to continue focusing on initiatives to grow Platform revenue, Adjusted EBITDA, and Free Cash Flow while closely monitoring the macroeconomic environment.