NFLX vs. ROKU: Which Ad-Supported Streaming Stock is the Better Buy?

The streaming wars have entered a new phase as both Netflix NFLX and Roku ROKU pivot toward ad-supported models to drive growth. While both companies have delivered impressive stock performance in 2025 — with Netflix up more than 30% year to date and Roku recovering nearly 60% from its 52-week lows — investors are now weighing which streaming giant offers better long-term potential.

Both companies share the critical shift toward advertising revenues as a growth catalyst. Netflix's ad-supported tier has reached 94 million monthly active users globally, while Roku earned $1.1 billion from advertising and subscriptions during the second quarter. This parallel strategy makes them natural competitors for investor attention, particularly as the streaming landscape evolves beyond pure subscription models.

Let's delve deep and closely compare the fundamentals of the two stocks to determine which one is a better investment now.

The Case for NFLX Stock

Netflix's transformation into an advertising powerhouse represents one of the most compelling growth stories in streaming today. The company doubled its annual ad revenues last year and expects to double them again this year, demonstrating remarkable momentum in monetizing its massive user base. The ad-supported tier's explosive growth, with more than half of new Netflix subscribers now signing up for ads, signals a fundamental shift in how the company generates revenues.

The content pipeline remains Netflix's strongest competitive advantage. The 2025 slate includes highly anticipated returns of flagship series that have defined streaming culture, including Stranger Things S5, Wednesday S2 and Squid Game S3, representing three of the platform's most-watched properties ever. This content dominance translates directly into financial performance, with second-quarter revenues reaching $11.08 billion, up 16% year over year, while operating margins improved to 34.1%.

The company raised its full-year revenue guidance to be between $44.8 billion and $45.2 billion, reflecting confidence in both subscriber growth and pricing power. The platform's ability to command premium prices while expanding its ad-supported base demonstrates remarkable business model flexibility. Furthermore, Netflix's global reach provides unmatched scale advantages — the platform reached 301.6 million global subscribers as of August 2025, creating network effects that competitors struggle to replicate. This scale enables Netflix to invest aggressively in content while maintaining industry-leading margins, a virtuous cycle that should continue driving shareholder value.

The Zacks Consensus Estimate for NFLX’s 2025 earnings is pegged at $26.06 per share, indicating a 31.42% increase from the previous year.

Netflix, Inc. Price and Consensus

Netflix, Inc. price-consensus-chart | Netflix, Inc. Quote

The Case for ROKU Stock

Roku maintains its position as the leading streaming platform operator in North America, providing a different approach to the streaming ecosystem. The company remains the No. 1 streaming platform operator in the United States, Canada, and Mexico, selling more devices in the third quarter than the next two platforms combined. This hardware dominance creates a strategic moat for Roku's platform business.

The company's financial trajectory shows improvement, though challenges remain. Roku posted total net revenues of $1.11 billion in the second quarter, up 15% year over year, with platform revenues rising to $975 million. Importantly, Roku expects to achieve double-digit platform revenue growth while becoming operating income positive in the fourth quarter of 2025 and for the full-year 2026. The partnership with Amazon represents a significant development, as the collaboration will give advertisers access to more than 80% of U.S. connected-TV households, potentially accelerating advertising revenue growth.

However, Roku faces structural headwinds that temper enthusiasm. The company's reliance on hardware sales, which declined 6% year over year, creates vulnerability in an increasingly commoditized market. While platform revenue growth remains robust, the company still posted losses of $105.96 million over the last 12 months. The competitive landscape also poses challenges, with major players like Amazon, Apple, and Google commanding significant resources to compete in the streaming platform space. Roku's smaller scale — with a market capitalization of approximately $13 billion compared with Netflix's $500+ billion — limits its ability to invest in original content or withstand prolonged competitive pressure.

The Zacks Consensus Estimate for 2025 earnings is pinned at 12 cents per share. The estimate indicates year-over-year growth against a loss of 89 cents per share reported in the year-ago period.

Roku, Inc. Price and Consensus

Roku, Inc. price-consensus-chart | Roku, Inc. Quote

Valuation and Price Performance Comparison

The valuation gap between Netflix and Roku reflects their divergent financial profiles and market positions. Netflix trades at a P/S ratio of approximately 10.53x, which, while elevated, is supported by consistent profitability and robust earnings growth. In contrast, Roku's P/S ratio of 2.61x appears reasonable compared to peers, but the lack of consistent profitability makes traditional valuation metrics less meaningful. The company's negative operating margin of 4.04% highlights ongoing profitability challenges despite revenue growth.

NFLX vs. ROKU: P/E F12M Ratio

While both stocks carry premium valuations relative to the broader market, Netflix's proven ability to convert revenues into profits and cash flow provides greater valuation support. 

Netflix has delivered impressive returns for shareholders so far in 2025, with the streaming giant's shares surging approximately 35.1% year to date, significantly outpacing Roku, as well as the broader Zacks Consumer Discretionary sector and the S&P 500.

NFLX Outperforms ROKU YTD

Conclusion

While both Netflix and Roku operate in the high-growth streaming sector, Netflix emerges as the superior investment opportunity. Netflix's combination of massive scale, content dominance, rapidly growing advertising business, and consistent profitability creates multiple paths to value creation. The company's ability to raise prices while expanding its ad-supported tier demonstrates pricing power that few media companies possess. With blockbuster content releases scheduled throughout 2025 and advertising revenues set to double, Netflix offers compelling upside potential despite its premium valuation. Investors should consider buying Netflix stock to capitalize on its transformation into a diversified streaming and advertising powerhouse, while adopting a wait-and-see approach with Roku until clearer evidence of sustainable profitability emerges. NFLX currently sports a Zacks Rank #1 (Strong Buy), whereas ROKU has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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