Roku Q4 Earnings Recap: Strong Results Propel Stock Higher

Roku delivered a much stronger-than-expected fourth quarter, sending its stock surging nearly 14% as it tests the psychologically important $100 level for the first time since late 2023. The company reported a loss of $0.24 per share, which was significantly better than the consensus estimate of a $0.43 loss. Revenue came in at $1.20 billion, beating expectations of $1.15 billion, driven by robust subscriber growth and strength in advertising revenue.

Roku’s Q4 results showed strong top-line expansion, with total revenue growing 22% year-over-year. Platform revenue, which includes advertising and subscriptions, climbed 25% to $1.04 billion, while Player revenue, which includes hardware sales, was up a modest 6.5% to $165.7 million.

For Q1, Roku guided to $1.0 billion in revenue, in line with expectations, with Platform revenue expected to grow 16% year-over-year. Full-year 2025 guidance includes $4.61 billion in revenue (vs. consensus of $4.62 billion) and adjusted EBITDA of $350 million, reflecting continued operating leverage.

Key Metrics & Drivers Behind the Surge

Several notable metrics highlighted Roku’s continued dominance in the connected TV (CTV) space:

- Streaming hours rose 17% year-over-year to 34.1 billion (vs. estimates of 34.44 billion).

- Active streaming households grew 12% year-over-year to 89.8 million, outpacing estimates.

- Average revenue per user (ARPU) climbed 3.9% to $41.49, slightly ahead of the consensus of $40.85.

- Political ad revenue contributed a significant $70 million in Q4, adding approximately 600 basis points to revenue growth.

- Adjusted EBITDA jumped 62% to $77.5 million, far exceeding the estimated $34.9 million, reflecting disciplined cost controls.

Additionally, gross margins were a key highlight, coming in at 42.7%, ahead of the 40.9% estimate, demonstrating improved efficiency in monetization.

Notable Trends

Roku is showing clear momentum in advertising, platform monetization, and free cash flow generation, making it an attractive play on the growing CTV space. The company has made substantial strides in ad-tech partnerships, particularly through deep integrations with multiple demand-side platforms (DSPs), which is leading to higher ad fill rates and increased pricing power.

Retail media ad units are another key growth driver, expanding Roku’s total addressable market (TAM) by attracting small and medium-sized businesses (SMBs) into its ad ecosystem. Roku’s self-service ad platform allows for greater scalability, which is expected to accelerate ad revenue growth in 2025 and beyond.

Moreover, Roku’s installed base reached 90 million homes in January 2025, with nearly 10 million households added in 2024, highlighting the company’s dominance in smart TV operating systems.

Analyst Outlook & Stock Valuation

The strong results led multiple analysts to raise their price targets:

- Needham increased its PT from $100 to $120, highlighting strong subscription revenue growth, higher ad fill ratios, and impressive cost controls.

- Susquehanna (SUSQ) lifted its PT from $80 to $125, citing Roku’s position as one of the best CTV advertising plays.

- JMP raised its PT from $95 to $115, noting that gross profit and EBITDA guidance exceeded expectations.

- Wolfe Research boosted its PT from $93 to $108, emphasizing that Roku is evolving from a "story stock" to a value compounder, forecasting EPS of $1.51 in 2026 and $3.56 in 2027.

Valuation remains a point of debate, with the stock now trading at approximately 35 times forward free cash flow following the post-earnings surge. However, Roku remains debt-free, and its projected doubling of free cash flow in 2025 is likely to attract institutional investors. Analysts see the company growing into its valuation, particularly as advertising tailwinds build momentum.

What Analysts Are Watching Moving Forward

1. Ad Revenue Growth – Roku’s 2024 political ad revenue of $70 million helped Q4 results, but analysts will want to see sustained organic ad growth in non-election years.

2. Retail Media & SMB Ad Expansion – The success of Roku’s self-service ad platform will be a key factor in expanding its advertiser base beyond large corporations.

3. Profitability & Free Cash Flow – The company expects free cash flow to exceed EBITDA in 2025, a strong indicator of financial stability and efficiency.

4. Competitive Landscape – While Roku remains the leading TV OS in the U.S., competition from Amazon Fire TV, Apple TV, and Google Chromecast could challenge its market position over time.

Stock Action & Technical Levels

Following the strong earnings report, Roku shares surged 13.9% in after-hours trading, with investors pushing the stock toward the $100 resistance level. This marks the first time since late 2023 that the stock has tested this level. If it breaks above $100, momentum could drive shares toward the next major resistance near $120, in line with the Needham price target upgrade.

Bottom line: Roku’s strong Q4 results, robust guidance, and improving profitability metrics make it a compelling growth story in the CTV space. With ad revenue rebounding, cost efficiency improving, and free cash flow set to surge, analysts are increasingly bullish on Roku’s long-term monetization potential. However, valuation remains high, meaning continued execution will be key to sustaining the stock’s upward trajectory.