Roku Q3 Earnings Beat Estimates, Device Weakness Weighs on Stock

Roku ROKU reported third-quarter 2025 earnings of 16 cents per share, which beat the Zacks Consensus Estimate of 7 cents. The company had incurred a loss of 6 cents per share in the year-ago quarter.

Revenues increased 14% from the year-ago quarter’s level to $1.21 billion and beat the consensus mark by 0.45%.

Following the results, ROKU shares fell about 5.07% as investors focused on weakness in the device segment despite the earnings beat. The segment’s gross margin declined 15.7%, underscoring persistent hardware profitability challenges that continue to weigh on performance.

Roku’s Ad Momentum & Platform Growth Drive Top-Line Gains

In the third quarter of 2025, the company delivered positive operating income for the first time since 2021, marking a key milestone in its financial recovery. The Roku Channel maintained strong momentum, ranking as the #2 app on the platform by engagement in the United States and #3 globally by reach. According to Nielsen’s The Gauge report, The Roku Channel captured 6.2% of total U.S. TV streaming time in September, reaffirming its position as the nation’s most-watched FAST service.

Roku, Inc. Price, Consensus and EPS Surprise

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

In the third quarter, video advertising on the platform outpaced year-over-year growth in both the United States. OTT and broader digital ad markets. By deepening integrations with leading third-party demand-side platforms (DSPs), Roku is broadening advertiser access and meeting enterprise clients on their preferred platforms. The share of Roku’s video impressions executed programmatically continues to climb, reflecting growing automation and demand efficiency. Moreover, expanded partnerships with major DSPs such as Amazon are strengthening the company’s ad ecosystem and further enhancing its monetization capabilities.

The quarter saw continued progress in expanding Roku’s advertising ecosystem through key partner integrations. In September, the company integrated AppsFlyer across its platform to give advertisers a unified view of campaign performance across CTV and mobile. It also expanded its partnership with FreeWheel, improving transparency, demand signals and buyer access to Roku’s premium CTV inventory, enhancing overall ad efficiency and yield.

Roku’s new ad-free streaming service, Howdy, launched on Aug. 5, 2025, at just $2.99 per month, offering nearly 10,000 hours of content from partners like Lionsgate, Warner Bros. Discovery and FilmRise. The affordable pricing and broad content library are expected to tap into a large underserved market seeking low-cost, ad-free entertainment.

Quarter Details of ROKU

Platform revenues (87.9% of revenues) increased 17.2% year over year to $1.06 billion, driven by strength in streaming services distribution and video advertising activities.

Devices revenues (12.1% of revenues) declined 5.2% from the year-ago quarter’s level to $146 million.

ROKU’s Operating Details

Gross margin, as a percentage of total revenues, contracted 180 basis points (bps) from the year-ago quarter’s level to 43.4%.

Operating expenses decreased 0.1% year over year to $515.4 million. As a percentage of total revenues, the metric contracted to 42.6% from 48.6% reported in the year-ago quarter.

Research and development expenses increased 2% year over year to $182.2 million, while sales and marketing expenses also rose 2% to $242.1 million. In contrast, general and administrative expenses declined 9% to $91.1 million.

In the third quarter, adjusted EBITDA was $116.9 million, up 19% year over year. The adjusted EBITDA margin improved 40 bps on a year-over-year basis to 9.7%.

Operating income rose to $9.5 million in the reported quarter compared with an operating loss of $35.8 million in the year-ago quarter.

Balance Sheet of Roku

As of Sept. 30, 2025, cash and cash equivalents were $2.3 billion compared with $2.25 billion as of June 30, 2025. As of Sept. 30, 2025, Roku had no long-term debt.

Roku Provides Q4 Outlook & Raises 2025 Guidance

For the fourth quarter, Roku estimates total net revenues of approximately $1.35 billion, up 12% year over year. Platform revenues are expected to grow 15% year over year, with a gross margin of around 52%. Device revenues are anticipated to remain roughly flat from the prior year, with gross margin projected in the negative high-20% range, reflecting seasonal trends and consistency with fourth-quarter 2024 levels. Roku expects total gross profit of approximately $575 million and adjusted EBITDA of about $145 million for the quarter.

For 2025, Roku has raised its outlook, projecting platform revenues of $4.11 billion and adjusted EBITDA of $395 million. The anticipated 17% year-over-year growth in platform revenues, along with a gross margin of approximately 52%, underscores continued strength across advertising and streaming distribution. Device revenues and gross profit are expected to remain roughly in line with 2024 levels.

ROKU’s Zacks Rank & Stocks to Consider

Roku currently carries a Zacks Rank #3 (Hold).

Some top-ranked stocks in the broader Zacks Consumer Discretionary sector are Amer Sports AS, Wynn Resorts WYNN and Vasta Platform VSTA. While Amer Sports and Wynn Resorts flaunt a Zacks Rank #1 (Strong Buy) each, Vasta Platform carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Amer Sports have returned 14.2% year to date. Amer Sports is set to report third-quarter 2025 results on Nov. 18.

Shares of Wynn Resorts have jumped 39% year to date. Wynn Resorts is set to report third-quarter 2025 results on Nov. 6.

Shares of Vasta Platform have surged 145.5% year to date. Vasta Platform is slated to report third-quarter 2025 results on Nov. 6.

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

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