During Roku's second quarter earnings conference call in 2025, company executives shared its strong financial performance, highlighting a platform revenue growth of 18%, with video advertising revenue growing faster than the OTT and digital advertising markets. Roku emphasized the effectiveness of its strategies, including expanding advertising demand, deepening third-party partnerships, launching new products and services, and successfully acquiring and integrating Friendly. Executives stated that these initiatives have driven sustained double-digit growth in platform revenue, and they expect further profit growth in 2026, projecting a positive operating income in the fourth quarter and a consistent growth rate in operating expenses and platform profit margin for the year as in 2025.

The conversation discussed Roku's progress in the advertising business, including its relationships with third-party partners and the development of Roku Ads Manager. Roku Ads Manager was noted as a rapidly growing market, primarily targeting performance-based advertisers, especially small and medium-sized enterprises, opening up new opportunities for Roku. Additionally, the third-party partnerships have been performing well in dealing with traditional video advertisers, with both considered complementary rather than cannibalizing each other. Furthermore, the discussion also touched on the macroeconomic environment, pointing out that despite economic uncertainties, Roku's performance in the advertising market remains strong, especially in sports event advertising.

The conversation discussed the growth situation of the platform in the second and third quarters, mentioning that after removing specific factors (such as 606, political, and friendly), the growth rate is around 20% to 18%. It analyzed whether this change was due to conservative forecasts or slowing store sales. At the same time, the forecast of the platform's gross profit margin of 51% was also discussed, inquiring about whether this was affected by changes in the revenue proportion of advertising and Media & Entertainment (M&E) with video, as well as the dynamics of programmatic advertising.

The company expects the growth rate from Q2 to Q4 to remain around 17%, excluding the impact of political factors, the growth trend is stable and positive. At the same time, the company anticipates that the platform gross margin will be between 51% and 52%. Although growth in some high-margin businesses such as M and E is slowing down, the company can maintain this level of gross margin through efficiency improvements and cost controls. If the M and E businesses rebound, there will be room for an increase in gross margin, but the current forecast does not include assumptions of significant growth.

During the discussion, it was mentioned that the company expects its gross profit margin in the fourth quarter to be higher than 20% for the full year, mainly due to the benefits of fixed cost allocation resulting from increased sales volume. In addition, the company announced a $4 billion share repurchase plan aimed at offsetting dilution effects, while continuing to implement its net share settlement strategy. Regarding capital allocation, the company emphasized investments in acquisitions, strategic investments, share repurchases, and platform initiatives, demonstrating the comprehensiveness of its capital allocation strategy.

In the discussion, emphasis was placed on Roku's strong pricing power in the digital advertising and content distribution fields, utilizing its proprietary data and content. Further exploration was made on how Roku evaluates its own value and whether it could potentially achieve greater business value by joining a larger entity, especially in the face of rising competition. Additionally, strategies for collaboration with third-party DSPs and Amazon were discussed, as well as how these partnerships could deepen the platform's revenue growth strategy, including leveraging its homepage assets and subscription business. These discussions highlighted Roku's positioning in the market, strategic adjustments, and future development direction.

Discussed were strategies for deep integration and customization cooperation with different Digital Signal Processors (DSPs), emphasizing the uniqueness of each DSP and its different technical stacks and approaches to the market. Through customized deals, the aim is to help marketers achieve their goals on each specific platform while maintaining openness and interoperability with all DSPs. Successful collaboration cases with DSPs such as Trade Desk, Amazon, Yahoo, and Google were mentioned, along with a deeper integration announcement with Apple. The core of the strategy is to tailor solutions around customer needs while maintaining close partnerships with all major DSPs to drive business growth and improve effectiveness.

The discussion focuses on the opportunities for Roku's advertising manager in the small and medium-sized business (SMB) and performance marketing markets, especially in comparison to the market structures of online display versus search and social advertising. It highlights that the success of performance advertising will depend on the ability to prove ROI, as well as Roku's leading position in educating on TV shopping. Additionally, it mentions the strong growth of Roku's channel (TRC), which saw an 80% growth rate in the second quarter, although it is expected that growth rates in future quarters may decrease, it is still expected to maintain double-digit high-speed growth.

In the conversation, Dan discussed the progress of deep integration of Friendly TV with the platform, including adding it to the homepage application when new devices are activated and indexing Friendly TV in search results for live television to increase its exposure and subscription volume on the platform. At the same time, Anthony mentioned the advertising challenges faced by Wal-Mart during the holiday season, and the company is taking various tools and strategies to alleviate the related pressure.

The conversation discussed Roku's confidence in its market-leading position and future growth after Walmart's acquisition of Vizio Smartcast. Despite the acquisition being 18 months ago, Roku still believes it can continue to increase its penetration in broadband households globally and achieve double-digit growth in platform revenue by improving its monetization capabilities in the US and international markets. Roku emphasized its market-leading operating system and strong brand effect established in the past 15 years, which continues to drive consumer demand for its products. In addition, Roku plans to continue investing hundreds of millions of dollars annually in distribution strategies, including adjusting investment ratios among retail partners as needed to ensure its sustained growth in the streaming home market.

When facing the attention and concerns of the Connected TV (CTV) advertising market, Roku emphasizes that it can effectively manage and price its advertising inventory based on its market size, market leadership position, and unique advertising products. Regardless of market fluctuations, Roku can maintain inventory scarcity and price stability through diversified demand and offering advertising products at different price points, including high-end sponsorships and sports content, as well as a broader, lower-priced streaming video package. The company's recent early market trading did not show a downward trend in prices, so it remains optimistic.

During the discussion, Roku detailed its strategy to guide users to subscribe to new services through recommendation systems, as well as increase subscription revenue by bundling sales with its own services (such as Friendly). At the same time, the company is also considering how to optimize UI and improve its technical and product capabilities to promote more subscriptions and bundled service sales, thereby diversifying its sources of revenue.

In the discussion, it was mentioned how to optimize the user interface (UI) through complex machine learning algorithms to balance audience satisfaction and company revenue. This includes deciding whether to prioritize promoting Roku's own content or paid content, while taking into account audience viewing preferences, advertising inventory fill rates, and content promotion costs. The team is committed to maintaining audience engagement through this algorithm while ensuring stable revenue growth. This is an ongoing project, and the team believes they are performing well in this area and will continue to improve.

Since its launch in September last year, Roku Ads Manager has been gradually entering a multi-billion dollar market that has not been fully explored by TV platforms, especially targeting small and medium-sized businesses. Although initially the product's financial impact on the company is not significant, it is attracting more advertisers and revenue every month, showing a clear growth trend. The market estimates that the performance-based advertising market is worth over $60 billion, and Roku is attracting more and more small and medium-sized businesses to join through its self-service product and professional artificial intelligence-generated videos. The company is excited about the potential of this market and plans to increase marketing efforts to further expand its business in this area.

In this conference call, the company's management team reviewed the performance of the second quarter in detail, emphasizing the strong growth in the quarter and raising the full-year performance expectations. They discussed the growth of the advertising platform, including the good performance of video ads in the market and the positive feedback on new ad management tools. In addition, the management team also mentioned the progress of integration with Amazon DSP, pointing out that although this process takes time, the company is optimistic about it and looks forward to more demand growth in the future. At the same time, they also mentioned that there was no significant growth seen in the media and entertainment (M&E) sector, but do not see it as a major driver of future growth. Overall, the company is satisfied with the current performance of its advertising and subscription businesses and is confident about future development.