Roku (ROKU 0.05%) was one of last week's biggest winners, soaring 27% after posting blowout financial results. The shares naturally hit fresh all-time highs in the process, and the stock has soared nearly sixfold since going public at $14 two years ago. 

The pioneer of streaming video devices has successfully transitioned from being a hardware maker to a software platform juggernaut, and that's where the money will be made in this fast-growing industry. Roku stock is hot, and the good times should keep coming.

Roku TV running on a TCL television.

Image source: Roku.

The trend is your friend

Revenue growth has accelerated in back-to-back reports and in four of the past five quarters. The key to the headier growth levels -- up 51% in last week's bar-raising news -- is that higher-margin and faster-growing platform revenue continues to become a larger part of Roku's total top line. Platform revenue rose 79% in the quarter, and it's now accounting for a record-high 65% of the revenue mix. With platform revenue continuing to grow faster than device sales, it's easy to see why overall revenue gains are accelerating. 

Turning our attention to the high-flying platform revenue, there are three related metrics that bear watching. The gauges are what's driving the spectacular growth.

  • Roku ended the first quarter with 29.1 million active accounts, 40% ahead of where it was a year earlier. 
  • Those 29.1 million users streamed 1.6 billion hours of content during the quarter, up 74%.
  • Average revenue per user is now $19.06 on a trailing-12-month basis, climbing 27% over the past year. 

Streaming hours growing faster than the number of active accounts means that users are spending more time on the platform, and that stickiness is paying off with the 27% spike in average revenue per user. Usage matters. Roku makes money on ads it serves, and monetized video ad impressions have more than doubled over the past year. Roku also makes money on referral fees for some of the services available through its platform, and it's all about keeping fans of streaming services close and growing on its ecosystem. 

Platform revenue can't grow at this feverish pace forever. It grew at an 85% clip last year, but since it was a smaller part of the revenue mix, Roku was only good for a 45% top-line increase in 2018. The key here will be making sure that platform growth decelerates gradually. 

Roku has been a game changer for investors in just its first 20 months of trading. As the no-brainer winner as even more compelling services go on line later this year, it will continue to change the game.