ROKU, INC

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and with our audited consolidated financial statements included in our Annual Report for the year ended December 31, 2024, filed on February 14, 2025 with the SEC.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and with our audited consolidated financial statements included in our Annual Report for the year ended December 31, 2025, filed on February 13, 2026 with the SEC (the “Annual Report”). In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs, and expectations, and involve risks and uncertainties. Factors that could cause or contribute to these differences include those discussed below and in our Annual Report.

Previous wording

Our two reportable segments are the platform segment and the devices segment. Platform revenue is generated from the sale of digital advertising (including direct and programmatic video advertising, ads integrated into our user interface (“UI”), and related services) and streaming services distribution (including subscription and transaction revenue shares, the sale of Premium Subscriptions, the sale of owned and operated subscription services, and the sale of branded app buttons on remote controls).

Current wording

Advertising revenue is generated from the sale of digital advertising, including direct and programmatic video advertising, ads integrated into our user interface (“UI”), and related services.

Previous wording

Devices revenue is generated from the sale of streaming players, Roku-branded TVs, smart home products and services, audio products, and related accessories. We expect to continue to manage the average selling prices of Roku streaming devices in an effort to sell more devices, which we believe will increase our Streaming Households. We expect that this trade off from devices gross profit or loss to grow Streaming Households should result in increased platform revenue and platform gross profit over time.

Current wording

Devices revenue is generated from the sale of streaming players, Roku-made TVs, smart home products and services, audio products, and related accessories. We expect to continue to manage the average selling prices of Roku streaming devices in an effort to sell more devices, which we believe will increase our Streaming Households. We expect that this trade off from Devices gross profit or loss to grow Streaming Households should result in increased total Platform revenue and total Platform gross profit over time.

Previous wording

Our business is subject to risks related to the evolving macroeconomic environment, including the effects of increased volatility in financial markets, higher inflation and interest rates, potential economic slowdown or recession, geopolitical developments, changes in economic or government policies, including the unknown impact of tariffs, changing global regulations, and the overall uncertainty surrounding international trade relations. While we intend to remain vigilant in monitoring the impacts of these circumstances on our business and adapt accordingly, the effects of these macroeconomic factors on our business, results of operations, and financial condition remain largely uncertain. See Item 1A, Risk Factors, and the Note Regarding Forward Looking Statements elsewhere in this Quarterly Report for additional details.

Current wording

Our business is subject to risks related to the evolving macroeconomic environment, including the effects of increased volatility in financial markets, higher inflation and interest rates, potential economic slowdown or recession, geopolitical developments, such as the conflict in the Middle East, changes in economic or government policies, including the unknown impact of tariffs, changing global regulations, global supply chain constraints, including the scarcity of, or increased prices for, key components such as memory chips, and the overall uncertainty surrounding international trade relations. While we intend to remain vigilant in monitoring the impacts of these circumstances on our business and adapt accordingly, the effects of these macroeconomic factors on our business, results of operations, and financial condition remain largely uncertain. See Item 1A, Risk Factors, and the Note Regarding Forward Looking Statements elsewhere in this Quarterly Report for additional details.

Previous wording

Since our IPO in 2017, the streaming TV industry has evolved meaningfully, with Americans now spending significantly more TV time streaming than watching cable. Our business has also grown and evolved, and we are now primarily focused on growing Platform revenue and profitability. As a result, and as previously disclosed, starting in the first quarter of 2025, we have updated our Key Performance Metrics (“KPMs”) to better align with these priorities.

Current wording

Since our IPO in 2017, the streaming TV industry has evolved meaningfully, with Americans now spending significantly more TV time streaming than watching traditional TV. Our business has also grown and evolved, and we are now primarily focused on growing Platform revenue and profitability.

Previous wording

The key performance metrics we use to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions are Streaming Hours, Platform Revenue, Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), and Free Cash Flow.

Current wording

The key performance metrics (“KPMs”) we use to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions are Streaming Hours, Platform revenue, Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), and Free Cash Flow.

Previous wording

We streamed 36.5 billion and 32.0 billion hours during the three months ended September 30, 2025 and 2024, respectively, reflecting an increase of 14%.

Current wording

We streamed 38.7 billion and 35.8 billion hours during the three months ended March 31, 2026 and 2025, respectively, reflecting an increase of 8%.

Previous wording

We use Platform revenue as a primary metric to measure the performance of our business because it represents our ability to successfully monetize our platform. Platform revenue growth is one of our strategic priorities. Platform revenue was $1,064.6 million and $908.2 million for the three months ended September 30, 2025 and 2024, respectively.

Current wording

We use Platform revenue as a primary metric to measure the performance of our business because it represents our ability to successfully monetize our platform. Platform revenue includes revenue from both our Advertising and Subscriptions segments and its growth is one of our strategic priorities. Platform revenue was $1,131.2 million and $880.8 million for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

Adjusted EBITDA is a non-GAAP financial measure. The Adjusted EBITDA reconciliation excludes total other income, net, stock-based compensation expense, depreciation and amortization, restructuring charges, and income tax (benefit) from the net income (loss) of the period. We believe Adjusted EBITDA is useful as a supplement in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance. However, this non-GAAP financial measure has limitations, and should not be considered in isolation or as a substitute for our GAAP financial information, such as GAAP net income (loss). In addition, Adjusted EBITDA may not be comparable to similarly titled metrics of other companies due to differences in methods of calculation.

Current wording

Adjusted EBITDA is a non-GAAP financial measure. The Adjusted EBITDA reconciliation excludes total other income, net, stock-based compensation expense, depreciation and amortization, restructuring charges, and income tax expense (benefit) from the net income (loss) of the period. We believe Adjusted EBITDA is useful as a supplement in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance. However, this non-GAAP financial measure has limitations, and should not be considered in isolation or as a substitute for our GAAP financial information, such as GAAP net income (loss). In addition, Adjusted EBITDA may not be comparable to similarly titled metrics of other companies due to differences in methods of calculation.

Previous wording

Our Free Cash Flow was $443.0 million and $157.3 million for the TTM periods ended September 30, 2025 and 2024, respectively.

Current wording

Our Free Cash Flow was $538.8 million and $298.4 million for the TTM periods ended March 31, 2026 and 2025, respectively.

Previous wording

We generate platform revenue from the sale of digital advertising (including direct and programmatic video advertising, ads integrated into our UI, and related services), as well as streaming services distribution (including subscription and transaction revenue shares, the sale of Premium Subscriptions, the sale of owned and operated subscription services, and the sale of branded app buttons on remote controls). Our ad inventory primarily includes video ad inventory from AVOD content in The Roku Channel, native display ads throughout the Roku Experience, as well as ad inventory we obtain through our streaming services distribution agreements with our content partners. To supplement supply, we purchase advertising inventory from our content partners, on an as needed basis. To date, we have generated most of our platform revenue in the United States.

Current wording

We generate Advertising revenue from the sale of digital advertising including direct and programmatic video advertising, ads integrated into our UI, and related services. Our ad inventory primarily includes video ad inventory from AVOD content in The Roku Channel, native ads throughout the Roku Experience, as well as ad inventory we obtain as consideration from our streaming services distribution agreements with our content partners.

Previous wording

We generate devices revenue from the sale of streaming players, Roku-branded TVs, smart home products and services, audio products, and related accessories. We generate most of our devices revenue in the United States. In our international markets, we primarily sell our devices through wholesale distributors which, in turn, sell to retailers.

Current wording

We generate Devices revenue from the sale of streaming players, Roku-made TVs, smart home products and services, audio products, and related accessories. We generate most of our Devices revenue in the United States. In our international markets, we primarily sell our devices through wholesale distributors which, in turn, sell to retailers.

Previous wording

Cost of revenue, platform primarily consists of costs associated with acquiring advertising inventory, content amortization costs for both licensed and produced content, costs for licensed premium subscriptions, and revenue share payments on licensed content. Cost of revenue, platform also includes other costs such as payment processing fees, allocated expenses associated with the delivery of our services that primarily include costs of third-party cloud services and salaries, benefits, and stock-based compensation for our platform operations personnel, and amortization of acquired developed technology.

Current wording

Cost of revenue, advertising primarily consists of costs associated with acquiring advertising inventory, content amortization costs for both licensed and produced content, and costs associated with the delivery of our services that primarily include costs of third-party cloud services.

Previous wording

Cost of revenue, devices is comprised mostly of manufacturing costs payable to third-party manufacturers for devices we sell which include streaming players, Roku-branded TVs, audio products and smart home products. Cost of revenue, devices also includes technology licenses or royalty fees on devices we sell, inbound and outbound freight, duty and logistics costs, third-party packaging, inventory provisions, and allocated overhead costs related to facilities, third-party cloud services, and salaries, benefits, and stock-based compensation for operations personnel.

Current wording

Cost of revenue, devices is comprised mostly of manufacturing costs payable to third-party manufacturers for devices we sell which include streaming players, Roku-made TVs, audio products and smart home products. Cost of revenue, devices also includes technology licenses or royalty fees on devices we sell, inbound and outbound freight, duty and logistics costs, third-party packaging, inventory provisions, and allocated overhead costs related to facilities, third-party cloud services, and salaries, benefits, and stock-based compensation for operations personnel.

Previous wording

Other income, net primarily consists of interest income on cash and cash equivalents, short-term investments, foreign currency remeasurement, transaction gains and losses, andnet change in the fair value of our strategic investments.

Current wording

Other income, net primarily consists of interest income on cash and cash equivalents and short-term investments, foreign currency remeasurement, transaction gains and losses, andnet change in the fair value of our strategic investments.

Previous wording

Our income tax expense (benefit) consists primarily of income tax expense in certain foreign jurisdictions where we conduct business and income tax expense (benefit) in the United States. We have a full valuation allowance against net deferred tax assets in the United States. We expect to maintain this valuation allowance for the foreseeable future.

Current wording

Our income tax expense (benefit) consists primarily of income tax expense in certain foreign jurisdictions where we conduct business and income tax expense (benefit) in the United States. We have a full valuation allowance against net deferred tax assets in the United States as of March 31, 2026. Given our current and anticipated future earnings, we believe that there is a reasonable possibility that the valuation allowance against these net deferred tax assets may be reversed within the next twelve months. The exact timing and amount of the valuation allowance release are subject to change based on the level of profitability that the Company actually achieves.

Previous wording

Comparison of the Three and Nine Months Ended September 30, 2025 and September 30, 2024

Current wording

Comparison of the Three Months Ended March 31, 2026 and 2025

Previous wording

Devices revenue decreased by $8.0 million, or 5%, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The decrease was primarily due to lower revenue from streaming players. During the three months ended September 30, 2025, the average selling price of all devices shipped decreased by 6% and the volume of all devices shipped increased by 1% as compared to the three months ended September 30, 2024. The decrease in average selling price is primarily due to the mix of products sold.

Current wording

Devices revenue decreased by $22.2 million, or 16%, during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The decrease in revenue is primarily due to lower sales of streaming players. During the three months ended March 31, 2026, the average selling price of all devices shipped decreased by 3% and the volume of all devices shipped decreased by 15% as compared to the three months ended March 31, 2025.

Previous wording

General and administrative expenses increased by $8.8 million, or 3%, during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. The increase was primarily driven by higher legal and consulting expenses of $15.7 million, partially offset by lower restructuring charges of $4.5 million.

Current wording

Research and development expenses increased by $4.9 million, or 3%, during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The increase was primarily driven by higher facilities and IT expenses of $5.2 million and higher cloud hosting and consulting expenses of $3.7 million. The increase was partially offset by $2.3 million of non-recurring restructuring costs in the prior year.

Previous wording

Income tax expense increased by $9.1 million during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily due to higher pre-tax book income, partially offset by the impact from the enactment of the One Big Beautiful Bill Act.

Current wording

Income tax expense increased by $16.0 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The increase was primarily driven by an increase in pre-tax book income, partially offset by decreases due to a reduction in U.S income taxes due to the 2025 enactment of the One Big Beautiful Bill Act.

Previous wording

As of September 30, 2025, we had cash and cash equivalents of $1,575.5 million, and short-term investments of $726.9 million. Approximately 8% of our cash and cash equivalents was held outside the United States in accounts held by our foreign subsidiaries, which are used to fund foreign operations, and all short-term investments were held inside the United States.

Current wording

As of March 31, 2026, we had cash and cash equivalents of $1,649.9 million and short-term investments of $730.3 million. Approximately 6% of our cash was held outside the United States in accounts held by our foreign subsidiaries, which are used to fund foreign operations, and all short-term investments were held in the United States.

Previous wording

Our primary sources of cash are receipts from platform and devices revenue. The primary uses of cash are costs of revenue including costs to acquire advertising inventory, costs to license and produce content, third-party manufacturing costs for our products, as well as operating expenses such as personnel-related expenses, consulting and professional service expenses, facility expenses, and marketing expenses. Other uses of cash include purchases of property and equipment and mergers and acquisitions.

Current wording

Our primary sources of cash are receipts from Advertising, Subscriptions, and Devices revenue. The primary uses of cash are costs of revenue including costs to acquire advertising inventory, costs to license and produce content, third-party manufacturing costs for our products, as well as operating expenses such as personnel-related expenses, consulting and professional service expenses, facility expenses, and marketing expenses. Other uses of cash include purchases of property and equipment, mergers and acquisitions, and share repurchases.

Previous wording

We have pursued merger and acquisition activities, such as the acquisition of Frndly, and we may pursue additional merger and acquisition activities in the future, including the acquisition of rights to programming and content assets. Though we do not expect to incur expenses for facilities and building related costs at the same level as in the last few fiscal years, we will continue to incur expenses on the maintenance of our facilities and purchases of computer systems, and other property and equipment, in order to support future growth in our business. These activities may materially impact our liquidity and capital resources.

Current wording

We have pursued merger and acquisition activities, such as the acquisition of Frndly TV, and we may pursue additional merger and acquisition activities in the future, including the acquisition of rights to programming and content assets. Though we do not expect to incur expenses for facilities and building related costs at the same level as we have in the last few fiscal years, we will continue to incur expenses on the maintenance of our facilities and purchases of computer systems, and other property and equipment, in order to support future growth in our business. These activities may materially impact our liquidity and capital resources.

Previous wording

On September 16, 2024, we entered into a Credit Agreement, by and among the Company, as borrower, certain of our subsidiaries, as guarantors, the lenders and issuing banks party thereto, and Citibank N.A., as administrative agent (the “Credit Agreement”), which provides for (i) a five-year revolving credit facility in an aggregate principal amount of up to $300.0 million, and (ii) an uncommitted increase option of up to an additional $300.0 million exercisable upon the satisfaction of certain customary conditions. The Credit Agreement provides for a $100.0 million sub-facility for the issuance of letters of credit, and certain existing letters of credit were deemed outstanding under this facility. The Credit Agreement will mature on September 16, 2029. Proceeds from the Credit Agreement may be used for general corporate purposes, including to finance working capital requirements.

Current wording

On September 16, 2024, we entered into a Credit Agreement, by and among the Company, as borrower, certain of our subsidiaries, as guarantors, the lenders and issuing banks party thereto, and with Citibank N.A., as administrative agent (the “Credit Agreement”), which provides for (i) a five-year revolving credit facility in an aggregate principal amount of up to $300.0 million, and (ii) an uncommitted increase option of up to an additional $300.0 million exercisable upon the satisfaction of certain customary conditions. The Credit Agreement provides for a $100.0 million sub-facility for the issuance of letters of credit, and certain existing letters of credit were deemed outstanding under this facility. The Credit Agreement will mature on September 16, 2029. Proceeds from the Credit Agreement may be used for general corporate purposes, including to finance working capital requirements.

Previous wording

We had outstanding letters of credit secured by the Credit Agreement of $39.5 million as of September 30, 2025. As of September 30, 2025, we had not borrowed against the Credit Agreement, and we were in compliance with all of the covenants of the Credit Agreement.

Current wording

We had outstanding letters of credit secured by the Credit Agreement of $39.5 million as of March 31, 2026. As of March 31, 2026, we had not borrowed against the Credit Agreement, and we were in compliance with all of the covenants of the Credit Agreement. See Note 11 to our Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report for additional details.

Previous wording

Net cash used in financing activities of $146.8 million for the nine months ended September 30, 2025 was primarily due to tax payments of $115.1 million to net settle equity awards vested during the period, and payments of $50.0 million to repurchase common stock, partially offset by proceeds from employee stock option exercises of $18.3 million.

Current wording

Net cash used in financing activities increased during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 primarily due to tax payments of $51.5 million to net settle equity awards vested during the period and $100.0 million in repurchases of our common stock, partially offset by proceeds from the exercise of employee stock options of $1.8 million.

Previous wording

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. These estimates and assumptions are based on historical experience, current trends, and other factors that we believe to be reasonable at the time our condensed consolidated financial statements are prepared. We evaluate our estimates and assumptions on an ongoing basis. Except for the accounting policy related to Business Combinations, as discussed below, there have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report.

Current wording

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. These estimates and assumptions are based on historical experience, current trends and other factors that we believe to be reasonable at the time our condensed consolidated financial statements are prepared. We evaluate our estimates and assumptions on an ongoing basis. Our actual results could differ from these estimates. There have been no material changes to our critical accounting policies and estimates as compared to critical accounting policies and estimates described in our Annual Report.