Can Roku's Subscription Push Power Its Revenue Growth in 2025?
Roku acquired Frndly TV in the first quarter of 2025 to expand affordable live and on-demand subscription offerings. It also partnered with Apple TV+, offering Roku users free access to Season 1 of Severance and a three-month trial of Apple TV+, aimed at driving conversions within the Roku platform.
Roku has built 'tens of millions' of Roku-billed subscriptions each month and reported growing user participation in subscription offers. Personalized promotions and a frictionless billing system contributed to broader adoption. The company noted strong future growth potential, with more initiatives to be announced throughout the rest of the year.
Platform revenues in the first quarter of 2025 reached $881 million, up 17% year over year, representing 86.3% of total revenues. Roku attributed this growth primarily to increased monetization from subscriptions. Premium Subscriptions through The Roku Channel also contributed to deferred revenue growth in the quarter, which was $141 million, reflecting a sequential increase of 7.8%. The Zacks Consensus Estimate for Roku's second-quarter 2025 revenues of the Platform segment is pegged at $942 million, reflecting year-over-year growth of 14.3%.
Roku's Competition in the Subscription Business
Roku faces strong competition in the subscription business from Amazon AMZN and Disney DIS.
Amazon's Prime Video Channels lets users subscribe to more than 100 services like Max and Paramount+ with seamless billing, free trials and easy cancellation, all from within the Prime Video app. Disney offers bundled access to Disney+, Hulu and ESPN+ through different plan options. Additionally, Hulu allows subscribers to add on premium networks like HBO and Showtime for an extra fee.
Both Amazon and Disney use integrated billing and content ecosystems to boost retention and monetization, challenging Roku's efforts to grow its Roku-billed subscriptions.
ROKU's Share Price Performance, Valuation and Estimates
ROKU shares have risen 18.6% year to date, underperforming the Zacks Broadcast Radio and Television industry's growth of 32.3% but outperforming the Zacks Consumer Discretionar y sector's return of 11.5%.
ROKU's YTD Price Performance
From a valuation standpoint, Roku stock is currently trading at a Price/Cash Flow ratio of 41.56X compared with the industry's 34.65X. 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 17 cents per share, which has remained unchanged over the past 60 days, indicating 29.17% year-over-year growth.
Roku currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
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