Roku Q4 2025 Earnings Call

Hello and thank you for standing by. Welcome to Roku's fourth quarter 2025 earnings conference call. At this time all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 111 again. We ask that you limit yourself to one question only. I would now like to turn the call over to Conrad Grod, vice president of investor relations. Sir, you may begin.

Good afternoon. Welcome to Roku's fourth quarter and year-end 2025 earnings call. Joining us on today's call are Anthony Wood, Roku's founder and CEO, Dan Jetta, our CFO and COO, Charlie Collier, president Roku Media, and Mustafa Oskin, president devices. On this call, we'll make forward-looking statements, which are subject to risk and uncertainties. Please refer to our shareholder letter and periodic SEC filings for risk factors that could cause our actual results to differ materially from these forward-looking statements. We'll also present GAAP and non-GAAP financial measures. Reconciliations of non-GAAP measures to the most comparable GAAP financial measures are provided in our shareholder letter. Unless otherwise stated, all comparisons will be against our results for the comparable 2024 period. With that, operator, our first question, please.

Thank you. Ladies and gentlemen, as a reminder to ask a question, please press star one on your telephone, then wait for your name to be announced. To withdraw your question, please press star one. Again, we ask that you limit yourself to one question only. Please stand by while we compile the Q&A roster. Our first question comes from the line of Sean Patil with Sana. Your line is open.

Hey guys, congrats on the strong 2025 and 2026 outlook. I have a couple of questions. The first one, can you help us bridge the one Q revenue outlook of over 21% growth to the full year outlook of about 18% growth? And then I have a follow-up question.

Thanks, Anthony, and thanks for the question. Let me just add a little bit to what Anthony said. Exactly two years ago when we were entering 2024, we said that now that we rightsize our cost structure, we would relentlessly focus on growing our platform revenue, improving our monetization, and driving profitability, including free cash flow. In Q4, we grew platform revenue over 18%, surpassing 1.2 billion. We achieved adjusted EBITDA of 169 million and net income of 80 million. All were records. For full year, we also grew platform revenue 18%, achieved adjusted EBITDA of 421 million which represents a margin expansion of 255 basis points, and we generated free cash flow of 484 million, also a record and over 100% year-over-year growth. With our strong free cash flow, we purchased 150 million of Roku stock through our share buyback program and achieved near 0% dilution for Q4, the lowest dilution we have ever reported. This year, our outlook for platform revenue growth is more than 21% in Q1 and 18% for full year. As we continue to execute on our monetization initiatives, our full year adjusted EBITDA guidance of 635 million represents over 50% year-over-year growth and margin expansion of 267 basis points to 11.6%. I expect that free cash flow will again be above adjusted EBITDA as we remain capex-light. It's also worth noting that we have over a billion dollars of deferred tax asset which will keep our cash taxes low for many years. I see our free cash flow continuing to be strong and outpacing EBITDA beyond this year. In fact, I see a path to over a billion dollars in free cash flow by the end of 2028, if not sooner, which will be a significant milestone for us. We have incredibly strong momentum going into 2026 and our focus is on sustaining growth. To get to your question specifically on Q1 versus full year, a few factors are shaping our Q1 outlook. First, Q1 last year was our easiest comp at just under 17% year-over-year. Second, Q1 of this year includes the full benefit of Friendly. As you recall, we closed that acquisition in Q2 of last year. And finally, we have stronger visibility into Q1 versus the second half of the year. So as we gain better visibility into political and into H2, we'll provide updated guidance.

Thank you for all that. It was really helpful. I did have a quick follow-up. Can you comment on your retail distribution strategy for 2026 given that Walmart is switching its TV to Vizio's operating system?

Great. Thank you, Anthony. Thank you, Dan.

Thank you. Please stand by for our next question. Our next question comes from the line of Corey Carpenter with JP Morgan. Your line is open.

Hey, good afternoon. So, generative video, the advancements have really caught investors' attention of late. You saw Sora yesterday, Google Genie, both recent examples. I think one interpretation from this we're hearing is that it's likely to significantly increase the amount of content available, perhaps shift time spent more to short form videos. So, Anthony, the question for you really is I thought it'd be helpful to hear how do you think AI could impact the streaming landscape and what do you think it means for Roku?

Great. Thank you.

Thank you. Please stand by for our next question. Our next question comes from the line of Michael Morris with Guggenheim Securities. Your line is open.

Thank you. Good afternoon. I wanted to ask about how the third-party ad demand partnership that you have with Amazon is impacting the business so far and how you expect it to progress throughout the year. Is it additive to growth yet or has it cannibalized revenue in any way as it has come online? And then briefly on the platform gross margin, you provided the 51 to 52% range for '26 which is very helpful. What are you expecting for the first quarter and how much variability do you expect quarter to quarter throughout the year?

Great. Thanks Anthony. Hey Michael. Stepping back for a second, our strategy has been to be open and interoperable and be deeply integrated with all the DSPs, so that we can meet clients anywhere they want to transact. The Amazon partnership was natural in that context. Overall, we strive to be the most performant CTV ad platform in the industry. To your question of impact this year, it's early innings. Amazon's working hard to bring new clients over to its DSP, and the combination of our respective device footprints makes for an impressive offering. Over the last year, we've added dozens of ad tech partners, from the Yahoo DSP to AppLovin and Wurl to Magnite, and once they're onboarded, we begin deepening our relationships and they start to ramp. Our goal with all these partnerships is to drive greater outcomes and greater performance for our marketing partners. We're bullish about our position not just as the open interoperable partner in a marketplace with so many walled gardens, but the ability to grow as we deepen the integrations.

Yeah. Let me add to that in terms of how it will affect the business this year, and then I'll answer your gross margin question. Like Charlie said, the ramp of Amazon DSP will take time. We're fully integrated and it's going as expected. Across all the DSPs, we feel very good about how we're performing. As the Amazon DSP grows and becomes successful, which we think it will be, we'll be successful along with it. It does take time for these to ramp and we don't break it out, but it's tracking as we'd expect and we expect it to be more of a contribution over time. With respect to platform gross margins, the guide was 51 to 52% for the full year. We did end at 52%. I don't expect a lot of variability quarter to quarter. It does depend to some extent on the mix of our different activities in the platform business. We saw some stabilization in MEAN in Q4 which helped margins, and that stability is happening in Q1 as well. We're working on providing more detail on our different activities and giving you more color into the margin profile across the platform. I hope to share some more data on that next quarter.

Thank you. It's very helpful.

Thank you. Please stand by for our next question. Our next question comes from the line of Jason Hritzstein with Oppenheimer. Your line is open.

Thanks for taking the question. So in the prepared remarks, you kind of alluded to the success you're seeing with the international viewership and how it's early days of monetization. I guess is there a way to think about what the opportunity is relative to the platform business today? Back in the early days of Netflix, we would think international is potentially X times bigger than the US opportunity. And then just if you want to take a step back, where does that fit with where you think the biggest opportunity is in the business? Comparing, let's say, the international revenue opportunity and advertising to other opportunities that you're looking at right now.

We've talked about international in our focus countries and we're at different stages depending on the country. In Canada and Mexico, we actually have scale and we're starting to monetize that more. In Brazil, we have incredible scale and we're really starting to focus on the monetization side, though the ad market isn't quite there yet. We're still building scale in Brazil and the rest of Latin America. We're making progress on the UK, but monetization is really starting to take hold in Mexico and Canada. In Canada, the market's very good from a digital perspective. Our ARPU is actually quite strong and we're growing our streaming households along with it. In Mexico, the ad market hasn't shifted to digital like it has in the US, although we expect that to happen over time. We have incredible scale in Mexico that rivals the US. We recently launched premium subscriptions in Mexico and we'll likely launch more countries over time. We're very focused not just on advertising but on leveraging our subscription business internationally, and we like what we see. Over time, I do believe international will become a larger percent of our overall platform revenue, but it's still pretty early on. There's a lot of room to grow in these international locations.

And how would you rank that relative to the opportunities you're looking at now for growth? Is this number one?

You mean relative to the US?

Relative to US or just other things you're looking at.

The international is an incredible opportunity for us to grow. Subscriptions alone is a big opportunity. The Roku Channel is doing very well in our international locations. Engagement is growing very well. In Brazil where we have scale, we recently launched FAST, which is doing very well. So I think it's a big opportunity. The question is how do the digital ad markets migrate over, and that is a country-by-country specific situation. But subscriptions can grow really well in these locations and that's a really big opportunity for us.

Thank you.

Please stand by for our next question. Our next question comes from the line of Stephen Cahill with Wells Fargo. Your line is open.

Thanks. Dan, just following up on the platform guide in the first quarter. I don't know how much political or Friendly is in both the current Q1 and the prior Q1, but it seems like there is a little bit of a deceleration in same-store sales in platform from Q4 to Q1 and the comp is slightly easier. Just wanted to know if that's conservatism, is there some natural deceleration because you've gotten to such big scale, or am I doing the math wrong there? And then also if we just think about your revenue and platform outlook for 2026, just curious how you're thinking about the contribution of political dollars in there. I think you did about 90 million in '24. That kind of came out of nowhere. So wondering what you're thinking for '26.

Thanks for the question, Stephen. Q1 doesn't have a lot of political in it in general, so that's not impactful for Q1, although it will be impactful in H2. Yes, Friendly is impactful for Q1 and that does add a couple of points. With respect to Q1 versus the full year, we just have a lot more visibility into Q1. We're waiting to see how political shapes up, how the spending shapes up. I do believe that if the market is similar in the midterms versus the general, we will do well in that market. Charlie and team have built out a very strong political sales funnel. We're very good at targeting and we're a great platform to advertise on. It's just a question of having more visibility right now in Q1 versus H2 and how political will transpire. We'll update you as we go forward. I would agree that the back half is a little bit more conservative given how much visibility we have into Q1.

Thanks.

Thank you. Please stand by for our next question. Our next question comes from the line of Laura Martin with Needham. Your line is open.

Hey, congratulations on really great numbers. I want to follow up on one of the Gen AI questions asked earlier. So Netflix is telling us that they are going to put short form video and user-generated content on their platform because they think engagement is what they are solving for. Anthony, you just said something similar in an earlier question that engagement is your north star. However, I think one of the reasons you get so many really high-quality brand advertisers is that your top of funnel is premium-only video. So how do you think from a judgment point of view of balancing driving engagement, which would mean vertical video and adding user-generated content even short form, compared with protecting your ad environment so that you continue to get high-quality advertisers?

Sure. Hey Laura, it's a good question. We have a few real advantages. One is our FAST channel environment has been really powerful. For example, MrBeast launched his own FAST channel and it premiered on Roku, and because of our scale, that did really well, and we got to see the type of viewers who consume that content. That last point is really one of our advantages—we really do understand the cohorts of viewers. One of the things we've been able to do is curate content around different interests. As we get more into short form, as Anthony said, we do it against specific cohorts and really try to super-serve audiences that we understand. We are known for premium content, and in the foreseeable future it's going to be the majority of what we do and do well. But I very much like the ability of our platform to figure out what the viewer wants to watch and how. Some examples beyond content creators are even in places like our Sports Zone, where we'll do shoulder content. They'll go in to watch the game, they'll get short form clips, short form commentary and other information, and we do that with the league. So there's all sorts of ways you can do it, and Roku is really good at putting it in context.

Super helpful. My second question is on upfronts versus SMBs. It's a similar judgment question—a lot of the letter is talking about your investments in Ads Manager and your focus on SMBs because it is a large market. But what we hear from Mountain, which is 100% performance CTV, is that those types of advertisers are really 100% focused on performance—like within three days, super short-term performance. My recollection is you guys do more than a billion dollars in upfront guarantees, which is like a quarter of your revenue. So as you think about investing in this bottom of funnel, making yourself a full-funnel CTV option for advertising over time, do you think you're going to pivot towards the more performance-oriented, which I would think would have lower margins than top of funnel? Correct me if you think I'm wrong on that thinking. Thank you.

Sure, Laura. Charlie again. I think it's sort of different horses for different courses. We do a lot of guaranteed business at the top of the funnel with enterprise clients, and by the way, I believe they're performant too—they measure perhaps different things, and as you said, conversion in a few days. But the shift to performance marketing and the opening of our platform to small and medium-sized businesses is absolutely a tailwind. We can manage it in a very different way. We've talked a lot in past calls about how unique our situation is as a platform, which is that we can price up and down the pricing curve and the demand curve. You'll see us manage very well the opportunity to both perform and serve the high-end clients. One way to break this out is the way we price our inventory. You'll have specific units and opportunities at the high end of the pricing curve—our sponsorships, our Roku Originals, our sports, our home screen units, or anytime we do a deep digital integration, that comes with a price tag. And then on the other end, you've got advertisers who have different needs, priced at a much lower price point, but they don't get inventory with the same quality signal or any of the unique units or sponsorships. We are the largest CTV footprint, and we have ways to expand our inventory thoughtfully as we grow. Our ability to price up and down the demand curve allows us to not just do well in the current CTV landscape, but as we push to be the most performant CTV platform and welcome in SMBs. They will spend $600 billion on advertising this year, and if the enterprise trend is any indication, you combine the visual impact of television with the performance of digital, and Roku Ads Manager is uniquely positioned to lead in that transition. We'll price it properly at both ends of the curve.

I'll just add one more thing, Laura, to your point. I do think it's important to understand—I agree with everything Charlie and Anthony said—but your comment on the pivot towards lower margin, more performant ads: they're not lower margin for us. A performant-based ad focused on a site visit, focused on a ROAS, focused on a click—they're not lower margin for us. So you should not think that as we focus on the SMBs, it drags down margins. It does not.

Thanks, guys. Very helpful.

Thank you. Please stand by for our next question. Our next question comes from the line of Rob Sanderson with Loop Capital. Your line is open.

Thank you for the opportunity. I wanted to ask about expanding your advertising opportunity on the home screen outside of Roku and into the much larger advertising landscape. Any color on the types of ad formats you might be thinking about? It's something we're likely to learn more about through 2026. And then on go-to-market—these would be completely unique and probably require some advertiser education, maybe not something your third-party demand partners could help with. Is that something you'd have to take on a direct basis, or anything you can share on go-to-market?

Yeah, sure. Well, it's happening already, Rob. It's a great question, and we've expanded well beyond Roku over the last couple years. If you look at the home screen right now, Roku City—which is our beloved interactive world living inside your television—it's got the Olympics on it and some of our sponsors, most of which are not Roku. We also added video to the home screen inside of our marquee unit, which is that big unit on the right-hand side of the screen, and that is really performing well for all sorts of categories beyond Roku. So we are testing several variations of home screen design, and we're proving that it drives more engagement and viewer satisfaction, which is good. You're going to see us do a lot of it. As to your question about whether it's programmatic—to date, it is not. With our enterprise clients and our advertising agencies, they are very focused on these unique units and these performant units, and you'll see more of it moving forward.

Thank you, Anthony. Thank you, Charlie.

Thank you. Please stand by for our next question. Our next question comes from the line of Vikram with Baird. Your line is open.

Hi, thanks for taking the question. I wanted to ask about the Howdy launch as well as the Friendly acquisition. Could you talk more about how each of those integrations is going so far and what are your plans for those businesses in 2026? Thanks.

Okay, thank you.

Thank you. Our next question comes from the line of Matt Condan with Citizens Bank. Your line is open.

Thank you so much for taking my question. As Netflix is pending the acquisition of Warner Brothers and this is potentially changing the broader streaming landscape—can you talk about if they become more guarded about how to distribute their content, how this could potentially impact Roku both on the advertising side and the subscription side? And then a quick follow-up, Dan—just mid-single-digit OpEx growth going forward, is that the right way to continue to think about this? And if revenue growth comes in above expectations, how do you think about reinvesting some of that growth back into the business? Thank you so much.

Yeah, thanks for the question, Matt. With respect to OpEx, we remain focused on execution and operational discipline, ensuring we invest where we see the highest returns. We grew our OpEx 3% in 2025, a little bit lower than I expected, which is fine because we're investing well in all these initiatives that we've laid out. I do expect our OpEx to grow in that mid-single digits. As we've said many times, we expect our platform revenue to grow double digits. I think I've given some pretty concise guidance on gross margin—we don't expect any major dip in gross margin. In fact, we expect it to stay in this 51 to 52% range, and that will translate into improved EBITDA margins over time. It's also one of the reasons why I feel like we're on a good path to achieving a billion dollars in free cash flow by 2028. We are absolutely investing—we're adding headcount, mostly on the engineering side, to invest in these incredible initiatives in front of us. A lot of good things happening. One thing that's helping our OpEx growth is our SBC continues to come down. We've done a lot of work in SBC, and that is actually trending going backwards from 2025 into 2026. Our guide contemplates that, and that's one of the things helping our OpEx stay in that mid-single-digit range.

Thank you.

Thank you. Please stand by for our next question. Our next question comes from the line of Tom Champion with Piper Sandler. Your line is open.

Hi, good afternoon, guys. We can see from your discussion around 2026 expectations pretty solid top-line revenue guidance. I think you've been sort of indicating that you see a path for a very solid multi-year CAGR in revenue growth, and you've talked about some of the near-term drivers. But I'm wondering if you could talk about more intermediate or longer-term dynamics in the business that would give you confidence in a solid growth trajectory beyond this year in 2026. Any thoughts would be welcome. And then maybe for Dan, just a clarification—is it 250 that remains on the buyback? Thank you.

I'll answer the second part of your question. We purchased 50 million in Q3 and 100 million in Q4, so yes, there's 250 million remaining on the buyback. As we noted in the shareholder letter, we see a clear path to offsetting dilution for FY26. We have very strong free cash flow, as our guide contemplates 635 million of adjusted EBITDA, and my comments with respect to we believe free cash flow will be above adjusted EBITDA for the year.

Thanks a lot, guys.

Thank you. Our next question comes from the line of Robert Kirth with Evercore ISI. Your line is open.

Great, thank you very much for taking our questions. Just wanted to go back to Ads Manager for another follow-up. Can you talk about the performance orientation, or some of the ways the product is different from OneView? Or did you use OneView as a base and try to bake more performance into the platform? Just anything you could tell us about the starting point for Ads Manager and your attempt to serve the needs of performance-based advertisers. And then secondly, if you could talk more about the go-to-market for how you identify high-value SMB prospects, how you reach out to them, how you onboard them into the funnel and then onto the platform. Anything more you could tell us about that would be really helpful. Thank you.

Hey Robert, this is Nancy. I'll take the first part and then turn it over to Charlie for the second part. Well, first of all, OneView was a technology platform, but it was also a business strategy, and I would say the business strategy is what's changed. The OneView technology is still integrated throughout our platform, and pieces of it are in Roku Ads Manager, as well as a lot of homegrown technology. Our ad stack wasn't just OneView, but that was a piece of it. OneView was really a strategy around us making that essentially our exclusive DSP on our platform. And that changed a few years ago—we're not going to have OneView be the DSP on our platform. We're going to work with all the large DSPs that are out there that customers are using and want to continue using. So that's when we completely switched our strategy to working with third-party partners. That's when we started deeper integration with The Trade Desk, with Amazon, with all the other third-party platforms. That was really a strategy change, and that strategy change has been extremely effective—it's working well for us. Charlie, do you want to take the second part or add to that?

Well, it's a very different sales funnel, obviously, than going to the agencies and clients the way we do with enterprise. For my career, it is such a joy to be able to serve top of the funnel, middle of the funnel, and bottom of the funnel. It is really the bottom of the funnel that we're working on with the Ads Manager product. Driving it all—to your point about outcomes—is really just trying to prove performance. And Anthony said earlier in the call, and it's spot on—people define performance in very different ways. We've announced a bunch of partnerships—iSpot, AppsFlyer, Incremental—and each of them in one way or another is about measurement of performance. I won't go deep into how we identify the high-value SMB prospects, except to say we've created a very different sales force and sales approach. We do a lot of lead generation, we market into this group, and then the best advertising for this is actually the performance itself. Unlike our enterprise clients who come in with budgets, when this works, people will leave it on and continue to come back to Ads Manager for more. In the letter and in the recording right before the call, you heard about a client with specific objectives who came in, saw the return on ad spend, and then not only do they continue to come back, but we see a lot of proof of performance lead to other advertisers in the category doing the same. So really, in many ways, it's the purest form of advertising—you invest, we tweak and optimize results and outcomes, we prove performance, and then we become good partners. I'm very excited about the ramp of this. I think we can move from hundreds to thousands to tens of thousands of advertisers.

Got it. Thank you very much.

Ladies and gentlemen, due to the interest of time, I would now like to turn the call back to CEO Anthony Wood for closing remarks.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.