Here's our initial take on Roku's (ROKU +2.26%) first-quarter financial report.
Key Metrics
| Metric | Q1 2024 | Q1 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $882 million | $1,021 million | +16% | Beat |
| Earnings per share | ($0.35) | ($0.19) | N/A | Beat |
| Platform revenue | $755 million | $881 million | +17% | n/a |
| Free cash flow | $427 million | $298 million | -30% | n/a |
Platform Growth
Roku beat analyst estimates in the first quarter on the strength of its Platform revenue, which includes advertising revenue, streaming services distribution revenue, and licensing fees. Platform revenue rose by 17% to $880.8 million, with a gross margin of 52.7%. Devices revenue jumped by 11% to $139.9 million and generated a negative gross margin.
Revenue from streaming services distribution was driven by premium subscription sign-ups as well as price increases across available streaming services initiated last year. The company now handles tens of millions of streaming subscriptions. Advertising revenue grew faster than the overall U.S. over-the-top ad market in the first quarter, driven by Roku's growing reach among consumers and improvements to its ad platform.
Looking ahead to the second quarter, Roku expects platform revenue to grow by 14% year over year and achieve a gross margin of 51%. Devices revenue is expected to decline by 10% year over year, although the company expects full-year devices revenue to be similar to its results for 2024. Roku's outlook comes with more questions than usual given the macroeconomic uncertainty created by U.S. tariff policy.
Despite high levels of uncertainty, Roku continues to believe it can reach positive operating profit in 2026.
NASDAQ: ROKU
Key Data Points
Immediate Market Reaction
Roku stock was down about 5% in early after-hours trading soon after the first-quarter report was released. Roku's devices are assembled in China, so the company's device sales are likely exposed to the current tariffs on Chinese imports. While device revenue is far smaller than platform revenue, onboarding fewer new Roku users due to a slump in device sales could hurt platform revenue growth. While Roku beat expectations in the first quarter, tariff-related uncertainty appears to be weighing on investors.
What to Watch
Some electronics, including TV displays, are currently excluded from the worst of the U.S. tariffs on China, although that could change at any time. Even if TVs remain exempt, an economic slowdown could lead to lower TV sales, including those running Roku OS.
Roku's platform growth depends partly on growing the base of users accessing its platform. Roku already has a vast base of users that access its platform through Roku devices or TVs running Roku OS, but any slowdown in user acquisition could hit the platform business. Roku reiterated its previous guidance for platform revenue in 2025, but there's a tremendous amount of uncertainty.
