Popular TV streaming platform Roku (ROKU) is set to report its third-quarter fiscal 2026 results on Nov. 2, after the market closes. Investors in Roku and Fox Corporation (FOXA) are awaiting the results, as shareholders of both companies recently approved Fox’s proposed acquisition of Roku.
Fox has put a $22 billion price tag on Roku, with Fox shareholders set to own about 73% of the combined business and ROKU stock shareholders claiming the other 27%. In an entertainment climate rife with mergers and acquisitions, this deal is expected to close in the first half of 2027. However, regulatory hurdles still remain. According to Semafor, the U.S. Department of Justice has widened the antitrust inquiry into the deal, requesting more information through a “second request.”
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As Roku stands at a crucial juncture, let's take a closer look ahead of its Q3 results.
About Roku Stock
Roku is a U.S. streaming company headquartered in San Jose, California. The company operates a TV streaming platform that helps people find and watch shows, movies, news, and sports, while also connecting content publishers and advertisers with viewers.
The company has two main businesses. Its Platform segment earns money from digital advertising, streaming-service distribution, subscriptions, and related services, while its Devices segment sells streaming players, Roku-branded TVs, smart-home products, audio products, and accessories. The company has a market capitalization of about $23 billion.
ROKU stock has gained 55% over the past 52 weeks, reflecting investors rewarding the company for proving its large streaming audience can generate faster, more profitable advertising and subscription revenue. Shares are also up 33% over the past six months. The stock reached a 52-week high of $160.22 on Oct. 23 but is now down 3% from that level.
www.barchart.com ROKU stock is trading at a considerably stretched valuation compared to its peers. Its forward price-to-earnings (P/E) ratio of 52.6 times is higher than the industry average of roughly 14 times.
Roku Reported Better-Than-Expected Q2 Results
Roku reported a strong second quarter. Total net revenue increased 22% year-over-year (YOY) to $1.35 billion, surpassing the $1.3 billion that Wall Street analysts had expected. Growth was driven by a 25% YOY jump in Platform revenue to $1.22 billion, as both advertising and subscription revenues increased.
Advertising revenue grew 25% from the prior-year period to $673 million, while the segment’s gross margin climbed 650 basis points YOY to 62.4% as Roku shifted to higher-margin products. Subscription revenue grew 26% YOY to $548 million. However, subscription gross margin fell about 360 basis points YOY to 41.4%, driven mainly by a shift toward premium subscriptions.
Roku’s overall gross margin grew 4.9 percentage points YOY to 49.7%. Adjusted EBITDA improved 225% YOY to $254.3 million, with adjusted EBITDA margin rising to 18.8%. Roku’s EPS increased from $0.07 to $1.08 over the same period, exceeding Wall Street’s expectations.
Analysts are extremely optimistic about the company’s bottom-line trajectory. For fiscal 2026, EPS is expected to climb 403% YOY to $2.97, followed by a 33% improvement to $3.96 in fiscal 2027. For Q3, EPS is projected to rise 244% YOY to $0.55.
What Do Analysts Think About Roku Stock?
In September, Wedbush analysts reiterated a “Neutral” rating on ROKU stock and set a $155 price target. Analysts foresee the Fox merger happening in the first half of 2027 and believe the deal is likely to clear any regulatory challenges. Wedbush expects Roku to remain largely independent after the deal.
In August, Wells Fargo analysts downgraded Roku from “Overweight” to “Equal Weight” and cut their price target from $167 to $165. Following the Q2 report, the firm said the streaming platform’s strong results lifted estimates while leaving little room for further upside in the lead-up to Fox's acquisition.
Roku has been in the spotlight on Wall Street, with analysts awarding ROKU stock a consensus “Moderate Buy” rating overall. Of the 30 analysts covering the stock, seven analysts have a “Strong Buy” rating, two suggest a “Moderate Buy,” and 21 analysts play it safe with a “Hold” rating. The average price target of $159.18 represents potential upside of 3% from current levels, while the Street-high price target of $176 indicates potential upside of 13% from here.
www.barchart.com On the date of publication, Anushka Dutta did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.