Shares of streaming platform specialist Roku (ROKU 6.33%) popped on Friday following the company's fourth-quarter earnings release. Investors were likely impressed with Roku's strong profitability as the company swung from a loss in the year-ago quarter to a meaningful profit in Q4. Additionally, Roku provided upbeat guidance for both the first quarter of 2026 and for the full year.
But despite the stock's sharp gain Friday, the tech company's shares are still down sharply year to date -- down about 17% to be exact. So, is Roku's big year-to-date pullback, even as its business seems to be gaining momentum, a buying opportunity? After all, not only did Roku post strong revenue growth in Q4, but the growth rate even accelerated compared to its recent growth.
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Accelerating growth
Highlighting the company's business momentum, Roku's fourth-quarter revenue rose 16% year over year to about $1.4 billion. This growth was fueled by an 18% increase in its high-margin platform revenue, which accounts for the bulk of Roku's total revenue (88% to be exact). Also worth noting, this top-line momentum represented an acceleration from Roku's 14% total revenue and 17% platform revenue growth in Q3.
Strong engagement remains a key driver of Roku's platform business. For instance, streaming hours on its platform rose 15% year over year in 2025, and its native streaming service, the Roku Channel, has grown rapidly, representing 6.3% of all TV streaming on its platform in December -- up from 4.6% of viewing in December of 2024.
With platform revenue commanding a 52.8% gross profit margin in Q4, the company's rapid growth helped it post strong earnings. Fourth-quarter net income was about $80 million -- up from a loss of $36 million in the year-ago quarter. Further, the company's full-year 2025 net income was $88 million, up from a $129 million loss in 2024.
"By expanding our Platform monetization over the last two years," the company said in its fourth-quarter shareholder letter, "we've unlocked new growth engines and achieved record-breaking financial performance."
NASDAQ: ROKU
Key Data Points
Looking ahead
Adding to the bull case, the company guided to acceleration in both total revenue and its platform business in Q1. Management said it expects first-quarter platform revenue to grow more than 21% year over year, helping total revenue rise about 18% during the period. And for the full year of 2026, management said it currently expects its platform revenue to rise 18% year over year.
Perhaps even more impressive is the company's outlook for profitability. Roku guided for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $130 million in Q1, and $635 million for the full year of 2026. Reflecting management's expectation of continued profitability improvement, this full-year outlook for profitability would be up from $421 million in adjusted EBITDA in 2025. And Roku expects an even more impressive increase in its net income, guiding for 2026 net income of $325 million -- up from $88 million in 2025.
Time to buy?
While Roku's financial momentum is real, I'm still staying on the sidelines with Roku stock.
Why?
The first reason is valuation. Shares trade at more than 40 times management's forecast for its full-year earnings in fiscal 2026. Growing into such a premium valuation won't be easy.
But the more important reason I don't believe the stock is a buy, even after its recent big pullback, is the competitive risks. Roku is facing fierce competition, including from several deep-pocketed tech giants. While the company has successfully competed against these companies so far, it's questionable whether Roku will be able to maintain its market leadership -- especially if any of these tech companies decides to invest more heavily in their competing streaming TV operating systems and devices.
