Copyright Benzinga
Roku Inc.'s (NASDAQ:ROKU) upbeat fourth-quarter outlook reignited investor optimism after the streaming platform beat its third-quarter earnings. The improving ad performance, positive cash flow, and renewed momentum in platform expansion suggest it's regaining strength heading into 2026. JPMorgan analyst Cory Carpenter maintained an Overweight rating on Roku and raised the price forecast to $115 from $105. Also Read: Roku’s Amazon Deal Revenue To Be A ‘Gradual Ramp,’ Not a Sudden Boost, Analyst Says Carpenter said Roku slightly beat third-quarter expectations but delivered a stronger surprise with its raised fourth-quarter outlook. The analyst noted that Roku's 17% platform revenue growth fell short of elevated investor expectations of around 19–20%, which drove shares down 5% after hours. However, he attributed the modest top-line surprise to Roku's more conservative guidance philosophy rather than to any execution weakness. Carpenter said Roku has executed effectively on its monetization initiatives in recent quarters and that management's bullish tone for the fourth quarter signals steady momentum. Roku now expects platform revenue growth of 15%, exceeding investor forecasts and implying a slight acceleration in growth when excluding one-time political and Frndly TV impacts. The analyst believes Roku's platform growth could reaccelerate next year, supported by several potential tailwinds — including the Amazon DSP rollout, Roku Ads Manager, the U.S. midterm elections, a refreshed home screen interface, and the World Cup. Roku's third-quarter revenue of $1.21 billion rose 14%, topping guidance of $1.205 billion. Platform revenue climbed 17%, driven by ad performance. Platform margins of 51.5% backed gross margin of 43%. Roku posted positive GAAP operating income for the first time since 2021. It generated $125 million in free cash flow, topping Carpenter's $75 million estimate. Looking ahead, Roku raised its fourth-quarter adjusted EBITDA guidance from $131 million to $145 million and lifted its platform growth outlook from 12.5% to 15%. The company also improved its device revenue forecast to roughly flat year over year, up from prior expectations of a 10% decline. Carpenter said Roku's management confirmed that it expects similar margin expansion of about 200 basis points in 2026, underscoring continued operating leverage. Carpenter believes Roku will exit 2025 with platform growth above 21% (excluding one-time items) and sees meaningful upside to current Street estimates, which call for 13% platform growth next year. The analyst views connected TV advertising as one of the fastest-growing segments in the ad industry over the next several years, positioning Roku as a leading beneficiary thanks to its scale, engagement, and expanding ad technology ecosystem. He projected fourth-quarter revenue of $1.36 billion and adjusted EPS of $0.89. Price Action: ROKU stock is trading higher by 10.86% to $110.89 at last check on Friday. Read Next: Mastercard’s Strong Earnings Signal Americans Are Still Spending, Despite Inflation Fears Image created using artificial intelligence via Midjourney.
