Is Roku's Strategy for Devices Segment Holding Back Its Profitability?
Roku 's ROKU Devices segment remains a challenging part of the business, acting more as a strategic tool to grow its user base than as a source of profitability. While devices are essential for expanding Roku-powered households, the segment continues to face financial strain, with persistent losses and margin pressure. Roku maintains that its priority is growing its streaming footprint, even at the cost of short-term Devices profits.
These trends are expected to continue. For the second quarter of 2025, Roku projects Devices revenues to decline around 10% year over year, with margins staying negative. To manage macro and tariff-related risks, the company is leaning on its diversified manufacturing and flexible pricing. The Zacks Consensus Estimate for Roku's second quarter 2025 revenues of the Devices segment is pegged at $124.42 million and the estimate for the gross loss of the segment is pegged at $14.06 million.
To improve brand appeal and deepen engagement, Roku recently launched a refreshed device lineup. The updated Roku-made TVs feature better picture and sound quality, faster app launches and deeper bass. The new Pro Series introduces QLED and Mini-LED technology, along with an upgraded Voice Remote Pro and software features like Smart Picture and personalized Backdrops.
Despite similar efforts in the past, profitability remains elusive. In the first quarter of 2025, Devices revenues rose 11% year over year to $140 million (13.7% of total revenues), but the segment posted a gross loss of $19 million and a negative 14% margin due to lingering holiday promotions. While unit sales were strong, the Devices business continues to function as a long-term strategic lever rather than a near-term profit engine.
Roku's Competition in This Space
Several players are competing with Roku's devices business, with companies like Amazon AMZN and Apple AAPL offering alternative streaming hardware and expanding their user ecosystems.
Amazon continues to expand its Fire TV lineup, combining affordability with Alexa integration to drive adoption. Amazon's Fire TV devices remain a key part of its strategy to increase engagement within its content and services ecosystem.
Apple's premium Apple TV 4K appeals to users seeking a high-performance experience with seamless integration into the Apple ecosystem. Apple continues to attract loyal users through tight ecosystem linkages and exclusive content.
Roku's Share Price Performance, Valuation and Estimates
ROKU shares have gained 10.3% in the trailing three months, outperforming the Zacks Broadcast Radio and Television industry's return of 22% but underperforming the Zacks Consumer Discretionary sector's growth of 10.6%.
ROKU's 3-Month Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, ROKU stock is currently trading at a Price/Cash Flow ratio of 36.19X compared with the industry's 32.97X. ROKU has a Value Score of D.
ROKU Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for second-quarter 2025 loss is pegged at 15 cents per share, which has remained steady over the past 30 days, indicating 37.5% year-over-year growth.
The consensus mark for 2025 loss is pegged at 17 cents per share, which has remained steady over the past 30 days. The estimate indicates 80.9% year-over-year growth.
Roku currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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