Up More Than 30% This Year, Can Roku Stock Keep Up Its Momentum?

Key Points

• Roku's platform revenue and engagement accelerated this summer, and management raised full-year guidance.

• The company is expanding its advertising capabilities with new integrations that could help support double-digit platform growth.

• Questions remain about intense competition and a high valuation.

• 10 stocks we like better than Roku ›

After a volatile 2024, Roku (NASDAQ: ROKU) shares have rebounded in 2025, rising more than 35% year to date as investors respond to signs of improved execution and a strengthening connected-TV advertising (CTV) market. The company's most recent report highlighted accelerating platform growth, increased engagement, and improved profitability, helping to drive renewed momentum in the stock.

Roku remains the top TV streaming operating system in the U.S., reaching tens of millions of households with free, ad-supported TV, subscriptions, and live sports. The Roku Channel, its ad-supported service, continues to rank among the most watched apps on the platform. While recent momentum is encouraging, the key question for investors is whether this growth is sustainable enough to justify the current valuation.

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Image source: Getty Images.

Improving momentum

Roku's second-quarter results showed a return to faster growth in the company's core platform business, as well as improved profitability. Total revenue increased 15% year over year to approximately $1.11 billion, led by an 18% rise in platform revenue (up from 17% growth in Q1) and stronger advertising demand. Streaming hours reached 35.4 billion, up 5.2 billion from the prior year. Management also announced a $400 million share repurchase program and raised full-year 2025 guidance. Specifically, management guided for full-year platform revenue to increase 16% year over year.

Playing a key role in the company's results during the quarter was its strong performance in video advertising. To this end, the company called out its June integration with Amazon's (NASDAQ: AMZN) demand-side ad-buying platform that connects Amazon Advertisers with users on its platform across its major streaming apps, including its flagship Roku Channel. But on the company's earnings call, management emphasized that it was still in the middle of its integration with Amazon when it reported its second-quarter results. The company expects its integration with Amazon to be complete toward the end of the third quarter.

"Our strategy to grow our Platform revenue is working ... and we believe our strategy is going to keep working and will sustain double-digit platform revenue growth while improving profitability," said CEO Anthony Wood on the second-quarter call.

Competition and valuation are concerns

Competition remains a significant risk. Deep-pocketed rivals are pushing hard across streaming hardware, TV operating systems, and ad technology. Amazon, Alphabet, and major TV makers like Samsung Electronics all want a bigger role in the living room and in CTV advertising. Industry tracker Omdia still shows Roku with the No. 1 U.S. TV OS unit share, but Samsung and Amazon continue to invest and gain ground. If these players succeed in diverting viewing time or ad budgets, Roku's monetization progress could slow.

Valuation also warrants caution. With a market capitalization of close to $15 billion and trailing-12-month revenue of about $4.4 billion, Roku trades at a price-to-sales ratio of roughly 3.3. While this is not excessive for a platform business experiencing accelerating growth, it does require the company to maintain double-digit platform expansion and continue improving margins. Any slowdown in advertising demand, weaker adoption of self-serve tools, or renewed softness in device sales could make the current valuation less appealing.

Overall, Roku's story is improving: Platform growth has reaccelerated, programmatic integrations are broadening the ad funnel, The Roku Channel remains highly engaged, and guidance implies better profitability ahead. Still, it's impossible to ignore just how aggressively Amazon, Google, and leading TV manufacturers are going after Roku's turf. The company has to keep spending to defend its position -- and that leaves little room for missteps. Given the risks and the stock's valuation, waiting on the sidelines arguably looks prudent. Roku's long-term prospects in connected TV remain promising, but with the stock at current levels and heavyweight competitors on the attack, I don't see enough upside right now to call it a buy.

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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Roku. The Motley Fool has a disclosure policy.