Roku's Advertising Growth Outpaces Market: Will the Momentum Continue?
Roku 's ROKU advertising business is showing strong momentum in 2025, driven by multiple content and technology initiatives. In the first quarter of 2025, Roku reported platform revenues of $881 million, marking a 17% year-over-year increase. The company reported that advertising revenues, excluding the media and entertainment vertical, grew faster than overall platform revenues and outperformed the U.S. OTT ad market, indicating Roku is gaining share in an increasingly competitive landscape.
A key factor behind this surge is the enhanced Roku Experience, which begins with its Home Screen. Roku introduced an AI-driven personalized content row that promotes TV shows and movies. In the first quarter, more than a third of U.S. streaming households engaged with this feature monthly, significantly boosting ad reach and viewer interaction. The Roku Channel played a central role, becoming the #2 app on the platform by engagement in the United States. Hours spent on the channel jumped 84% year over year, with more than 85% of viewing driven by Roku's promotional interface rather than direct app clicks.
Roku's partnerships with Adobe and INCRMNTAL have improved advertiser targeting and campaign measurement. Tools like Roku Ads Manager and Spaceback are making it easier for small and medium-sized businesses to run TV ads by repurposing social media content, lowering costs and increasing accessibility.
Roku reaffirmed its 2025 platform revenues guidance at $3.95 billion, with second-quarter platform revenues expected to rise 14% year over year. This outlook reflects Roku's strengthening position in the digital advertising ecosystem.
ROKU Faces Stiff Competition in Ad Industry
Roku operates in a highly competitive advertising industry and faces stiff competition from Netflix NFLX and Disney DIS.
Since launching in 2022, Netflix's ad tier has experienced rapid and consistent growth. As of May 2025, Netflix's ad-supported plan reached more than 94 million users globally each month, a sharp rise from 40 million in May 2024 and 70 million in November.
As of January 2025, Disney's ad-supported monthly active users reached an estimated 157 million globally, including 112 million in the United States, based on average monthly figures over the past six months. These numbers reflect active accounts across Disney+, Hulu, and ESPN+ that have consistently viewed ad-supported content for more than 10 seconds.
ROKU's Share Price Performance, Valuation and Estimates
ROKU shares have risen 8.8% year to date, underperforming the Zacks Broadcast Radio and Television industry's growth of 25.9% but outperforming the Zacks Consumer Discretionary sector's return of 5.9%.
ROKU's YTD Price Performance
From a valuation standpoint, Roku stock is currently trading at a Price/Cash Flow ratio of 37.52X compared with the industry's 33.09X. ROKU has a Value Score of D.
ROKU Valuation
The Zacks Consensus Estimate for second-quarter 2025 loss is pegged at 15 cents per share, which has narrowed by 2 cents 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 also narrowed by 2 cents over the past 30 days. The estimate indicates 80.9% year-over-year growth.
Roku currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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