How Roku Makes Money

Roku, Inc. offers a streaming platform for TVs and a variety of streaming devices, including its own Roku-branded TV, players, streaming sticks, and smart soundbars.

The platform acts as a streaming hub. It enables consumers to view thousands of channels on a wide range of streaming services. During 2023, Roku streamed 106 billion hours of content.

The source of the greatest amount of Roku's revenue is its Platform segment, which generates revenue primarily through the sale of digital advertising and the distribution of streaming services.

Roku's Industry

Roku (ROKU) operates in the Communications industry within the Entertainment sector.

Its mission is "to be the global TV streaming platform that connects and benefits the entire TV ecosystem of viewers, content partners, and advertisers." Its business model pushes three directives: the growth of scale (active accounts), the growth of engagement, and the growth of monetization.

Roku faces fierce competition, which includes:

• Legacy pay-TV service operators, such as Comcast Corp. (CMCSA) and AT&T Inc. (T)
• Companies that offer TV streaming devices, such as Amazon.com Inc. (AMZN), Apple Inc. (AAPL), and Alphabet Inc.'s (GOOGL) Google
• TV brands offering their own TV streaming solutions
• Makers of video game consoles
• Mobile streaming platforms, like Twitch
• Companies offering other types of advertising platforms, like Meta Platform Inc.'s (META) Facebook and Snap Inc. (SNAP)

Roku's Financials

As of May 2024, Roku's market capitalization was $8.17 billion.

Roku's 2023 annual report reported the company's financial results for the 2023 fiscal year (FY). Additionally, on April 25, 2024, the company announced financial results for the quarter ended March 31, 2024.

Net Revenue

For FY 2023, net revenue was $3.48 billion, an increase of 11% over the previous year's $3.12 billion. For the first quarter of FY 2024, revenue was $882 million, an increase of 19% over the previous year's first quarter.

Gross Profit

For FY 2023, gross profit was $1.52 billion, an increase of 5.6% over the previous year's $1.44 billion. For the first quarter of FY 2024, gross profit was $388.29 million, an increase of 15% over the previous year's first quarter.

Net Income

For FY 2023, net income was ($709.56) million, a loss larger than the previous year's ($498) million. For the first quarter of FY 2024, net income was ($50.85) million, a loss smaller than the previous first quarter's ($193.60) million.

Revenue From Business Segments

Roku operates two main business segments: Platform and Devices. It provides a breakdown of net revenue and gross profits for each of these two segments.

Platform

The Platform segment generates revenue through the following sources: the sale of digital advertising and related services (including media and entertainment promotional spending); the distribution of streaming services(including subscription and transaction revenue shares, sales of Premium subscriptions, and sales of branded channel buttons on the company's remote controls).

The Platform segment generated $2.99 billion in revenue for FY 2023, a gain of 10% year-over-year. Gross profit for FY 2023 was $1.5 billion. The segment accounts for 86% of Roku's net revenue.

For the first quarter of FY 2024, the Platform segment generated $754.9 million, up 19% from the same period of the previous year. Gross profit was $394.3 million.

Devices

The Devices segment generates revenue from sales of Roku-branded TVs, streaming players, smart home products and services, and audio products. It also captures revenue from licensing agreements with service operators. Roku sells the majority of its products to retail distributors in the U.S., including brick-and-mortar and online retailers, as well as through its own website.

The Devices segment generated $490.51 million in revenue for FY 2023, a gain of 18% year-over-year. Gross profit for FY 2023 was ($43.94) million. The segment accounts for 14% of Roku's net revenue.

For the first quarter of FY 2024, the Devices segment generated $126.5 million, up 19% from the same period of the previous year. Gross profit was ($6.07) million.

History and Leadership

Roku was founded in 2002 by Anthony Wood, who previously had invented the digital video recorder (DVR). The company is headquartered in San Jose, Calif.

With the advent of the internet, Wood saw the potential to transform the way people used their televisions. He created the first TV operating system, and turned TV sets into internet-enabled devices.

CEO Wood had been very active in the tech industry prior to Roku, as founder and chairman of BrightSign, and founder and CEO of Replay TV, which was later sold to DirectTV. Prior to that, he was co-founder and CEO of internet software company iband, which was sold to Macromedia.

Recent Developments

In February 2024, Roku announced that it had amassed more than 80 million active accounts. It also reported that its active accounts total was larger than the total for the six largest traditional pay-TV providers combined.

The Bottom Line

Roku is a technology company that operates a TV streaming platform that's available to users throughout the world. It sells streaming services and devices. Its Platform segment drives the vast majority of Roku's net revenue.