Roku Inc.
10/31/2025 | Press release | Distributed by Public on 10/31/2025 14:07
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
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.
Overview
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).
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.
Business Conditions and Macroeconomic Factors
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.
Key Performance Metrics and Non-GAAP Measures
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.
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.
Streaming Hours
We believe the number of Streaming Hours on our platform is an effective measure of user engagement and that the growth in the number of hours of content streamed across our platform reflects our success in addressing the growing user demand for TV streaming. We define Streaming Hours as the aggregate amount of time Roku streaming devices stream content on our platform in a given period. Hours streamed from The Roku Channel on non-Roku platforms are not included in this metric. Additionally, smart home products do not contribute to our Streaming Hours.
Additionally, we believe that over time, increasing user engagement on our streaming platform increases our platform monetization because we earn platform revenue from various forms of user engagement, including advertising, as well as revenue shares from subscriptions and transactional video on-demand. However, our revenue from content partners is not tied to the hours streamed on their streaming apps, and the number of Streaming Hours does not correlate to revenue earned from such content partners or ARPU on a period-by-period basis. Moreover, Streaming Hours on our platform are measured whenever a Roku streaming device is streaming content, whether a viewer is actively watching or not. For example, if a Roku player is connected to a TV, and the viewer turns off the TV, steps away, or falls asleep and does not stop or pause the player, then the particular streaming app may continue to play content for a period of time determined by the streaming app. We believe that this also occurs across a wide variety of non-Roku streaming devices and other set-top boxes.
Since 2020, all of our Roku streaming devices include a Roku TV OS feature that is designed to identify when content has been continuously streaming on an app for an extended period of time without user interaction. This feature, which we refer to as "Are you still watching," periodically prompts the user to confirm that they are still watching the selected app and closes the app if the user does not respond affirmatively. We believe that the implementation of this feature across the Roku platform benefits us, our customers, content partners, and advertisers. Some of our leading content partners, including Netflix, also have implemented similar features within their apps. This Roku TV OS feature supplements these app features. This feature has not had and is not expected to have a material impact on our financial performance.
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%.
Platform Revenue
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.
Adjusted EBITDA (Non-GAAP Measure)
We use Adjusted EBITDA as a primary metric to measure the performance of our business because it represents our ability to successfully manage profitability. Our goal is to grow Adjusted EBITDA over time, driving continued growth in stockholder value.
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.
The following table presents a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure for each of the periods indicated (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | September 30, 2025 | September 30, 2024 | ||||||||||||||||||||
| Net income (loss) | $ | 24,812 | $ | (9,030) | $ | 7,884 | $ | (93,838) | |||||||||||||||
| Total other income, net | (28,564) | (30,880) | (73,786) | (84,955) | |||||||||||||||||||
| Stock-based compensation | 88,031 | 100,096 | 268,165 | 283,124 | |||||||||||||||||||
| Depreciation and amortization | 19,441 | 15,349 | 51,514 | 47,629 | |||||||||||||||||||
|
Restructuring charges (1)
|
- | 18,521 | 3,064 | 30,999 | |||||||||||||||||||
| Income tax expense (benefit) | 13,218 | 4,147 | (5,695) | (249) | |||||||||||||||||||
| Adjusted EBITDA | $ | 116,938 | $ | 98,203 | $ | 251,146 | $ | 182,710 | |||||||||||||||
Free Cash Flow (Non-GAAP Measure)
We use Free Cash Flow as a primary metric to measure the performance of our business because we believe maximizing Free Cash Flow helps indicate the financial strength of our business, as well as provide an indication of cash generated or (used) by the business. Our goal is to continuously increase Free Cash Flow over time. We define Free Cash Flow as our trailing 12-month ("TTM") cash flows from operating activities excluding purchases of property and equipment and the effects of exchange rates on cash.
Our Free Cash Flow was $443.0 million and $157.3 million for the TTM periods ended September 30, 2025 and 2024, respectively.
Free Cash Flow is a non-GAAP financial measure. The Free Cash Flow reconciliation excludes purchases of property and equipment and effects of exchange rates on cash from the cash flows from operating activities, in each case where applicable. We believe Free Cash Flow 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 cash flows from operating activities. For additional information about cash flows from operating activities, see "Liquidity and Capital Resources" below. In addition, Free Cash Flow may not be comparable to similarly titled metrics of other companies due to differences in methods of calculation.
The following table presents a reconciliation of Free Cash Flow to the most directly comparable GAAP financial measure for each of the periods indicated (in thousands):
| Trailing Twelve Months Ended | |||||||||||
| September 30, 2025 | September 30, 2024 | ||||||||||
| Net cash provided by operating activities | $ | 455,360 | $ | 155,080 | |||||||
| Less: Purchases of property and equipment | (6,647) | (6,123) | |||||||||
| Add/(Less): Effect of exchange rate changes on cash, cash equivalents and restricted cash | (5,706) | 8,392 | |||||||||
| Free cash flow (TTM) | $ | 443,007 | $ | 157,349 | |||||||
Components of Results of Operations
Revenue
Platform Revenue
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.
Devices Revenue
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.
Cost of Revenue
Cost of Revenue, Platform
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.
Cost of Revenue, Devices
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.
Operating and Other Expenses
Research and Development
Research and development expenses consist primarily of salaries, benefits, and stock-based compensation for our development teams as well as outsourced development expenses. In addition, research and development expenses include allocated facilities and overhead expenses.
Sales and Marketing
Sales and marketing expenses consist primarily of salaries, benefits, commissions, and stock-based compensation for our employees engaged in sales and sales support, marketing, communications, data science and analytics, business development, product management, and partner support functions. Sales and marketing expenses also include marketing, retail and merchandising expenses, consulting and outside services, and allocated facilities and overhead expenses.
General and Administrative
General and administrative expenses consist primarily of salaries, benefits, and stock-based compensation for our finance, legal, information technology, human resources, and other administrative personnel. General and administrative expenses also include outside legal, accounting, and other professional service fees as well as allocated facilities and overhead expenses.
Other Income, Net
Other income, net primarily consists of interest income on cash and cash equivalents, short-term investments, foreign currency remeasurement, transaction gains and losses, and net change in the fair value of our strategic investments.
Income Tax Expense (Benefit)
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.
Results of Operations
The following table sets forth selected condensed consolidated statements of operations data as a percentage of total revenue for each of the periods indicated.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | September 30, 2025 | September 30, 2024 | ||||||||||||||||||||
| Net revenue: | |||||||||||||||||||||||
| Platform | 88 | % | 85 | % | 87 | % | 85 | % | |||||||||||||||
| Devices | 12 | % | 15 | % | 13 | % | 15 | % | |||||||||||||||
| Total net revenue | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Platform | 43 | % | 39 | % | 42 | % | 40 | % | |||||||||||||||
| Devices | 14 | % | 16 | % | 14 | % | 16 | % | |||||||||||||||
| Total cost of revenue | 57 | % | 55 | % | 56 | % | 56 | % | |||||||||||||||
| Gross profit (loss): | |||||||||||||||||||||||
| Platform | 45 | % | 46 | % | 45 | % | 45 | % | |||||||||||||||
| Devices | (2) | % | (1) | % | (1) | % | (1) | % | |||||||||||||||
| Total gross profit | 43 | % | 45 | % | 44 | % | 44 | % | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 15 | % | 17 | % | 16 | % | 18 | % | |||||||||||||||
| Sales and marketing | 20 | % | 22 | % | 21 | % | 23 | % | |||||||||||||||
| General and administrative | 8 | % | 9 | % | 9 | % | 9 | % | |||||||||||||||
| Total operating expenses | 43 | % | 48 | % | 46 | % | 50 | % | |||||||||||||||
| Income (loss) from operations | - | % | (3) | % | (2) | % | (6) | % | |||||||||||||||
| Other income, net: | |||||||||||||||||||||||
| Interest expense | - | % | - | % | - | % | - | % | |||||||||||||||
| Other income, net | 2 | % | 3 | % | 2 | % | 3 | % | |||||||||||||||
| Total other income, net | 2 | % | 3 | % | 2 | % | 3 | % | |||||||||||||||
| Income (loss) before income taxes | 2 | % | - | % | - | % | (3) | % | |||||||||||||||
| Income tax expense (benefit) | 1 | % | - | % | - | % | - | % | |||||||||||||||
| Net income (loss) | 1 | % | - | % | - | % | (3) | % | |||||||||||||||
Comparison of the Three and Nine Months Ended September 30, 2025 and September 30, 2024
Net Revenue
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | Change $ | Change % | September 30, 2025 | September 30, 2024 | Change $ | Change % | ||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Platform | $ | 1,064,644 | $ | 908,175 | $ | 156,469 | 17 | % | $ | 2,920,932 | $ | 2,487,443 | $ | 433,489 | 17 | % | |||||||||||||||||||||||||||||||
| Devices | 145,994 | 154,028 | (8,034) | (5) | % | 421,416 | 424,408 | (2,992) | (1) | % | |||||||||||||||||||||||||||||||||||||
| Total net revenue | $ | 1,210,638 | $ | 1,062,203 | $ | 148,435 | 14 | % | $ | 3,342,348 | $ | 2,911,851 | $ | 430,497 | 15 | % | |||||||||||||||||||||||||||||||
Platform
Platform revenue increased by $156.5 million, or 17%, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The increase was primarily due to higher revenue from streaming services distribution, specifically higher Premium Subscriptions revenue and higher subscription revenue from both third-party and our owned and operated subscription services, and higher advertising revenue, which grew despite continued weakness in the media and entertainment vertical.
Platform revenue increased by $433.5 million, or 17%, during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. The increase was primarily due to higher revenue from streaming services distribution, specifically higher Premium Subscription revenue and higher subscription revenue from both third-party and our owned and operated subscription services. In addition, advertising revenue increased despite continued weakness in the media and entertainment vertical.
Devices
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.
Devices revenue decreased by $3.0 million, or 1%, during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. The decrease was primarily due to lower revenue from streaming players. During the nine months ended September 30, 2025, the average selling price of all devices shipped increased by less than 1% and the volume of all devices shipped increased by 1% as compared to the nine months ended September 30, 2024.
Cost of Revenue and Gross Profit (Loss)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | Change $ | Change % | September 30, 2025 | September 30, 2024 | Change $ | Change % | ||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||||||||||||||||||||||||||
| Platform | $ | 516,869 | $ | 416,396 | $ | 100,473 | 24 | % | $ | 1,411,170 | $ | 1,161,416 | $ | 249,754 | 22 | % | |||||||||||||||||||||||||||||||
| Devices | 168,870 | 165,732 | 3,138 | 2 | % | 463,576 | 457,369 | 6,207 | 1 | % | |||||||||||||||||||||||||||||||||||||
| Total cost of revenue | $ | 685,739 | $ | 582,128 | $ | 103,611 | 18 | % | $ | 1,874,746 | $ | 1,618,785 | $ | 255,961 | 16 | % | |||||||||||||||||||||||||||||||
| Gross profit (loss): | |||||||||||||||||||||||||||||||||||||||||||||||
| Platform | $ | 547,775 | $ | 491,779 | $ | 55,996 | 11 | % | $ | 1,509,762 | $ | 1,326,027 | $ | 183,735 | 14 | % | |||||||||||||||||||||||||||||||
| Devices | (22,876) | (11,704) | (11,172) | 95 | % | (42,160) | (32,961) | (9,199) | 28 | % | |||||||||||||||||||||||||||||||||||||
| Total gross profit | $ | 524,899 | $ | 480,075 | $ | 44,824 | 9 | % | $ | 1,467,602 | $ | 1,293,066 | $ | 174,536 | 13 | % | |||||||||||||||||||||||||||||||
Platform
The Cost of revenue, platform increased by $100.5 million, or 24%, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The increase was primarily driven by higher costs of Premium Subscriptions, acquiring content, and acquiring advertising inventory.
The Cost of revenue, platform increased by $249.8 million, or 22%, 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 costs of Premium Subscriptions, acquiring content, and acquiring advertising inventory.
Gross profit for the platform segment increased by $56.0 million, or 11%, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily driven by the overall growth in our platform revenue.
Gross profit for the platform segment increased by $183.7 million, or 14%, during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily driven by the overall growth in our platform revenue.
Devices
The Cost of revenue, devices increased by $3.1 million, or 2%, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The increase was primarily driven by higher inventory provisions of $7.0 million, partially offset by lower manufacturing costs of $4.0 million related to lower costs to manufacture Roku-branded TVs.
The Cost of revenue, devices increased by $6.2 million, or 1%, 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 freight costs of $8.7 million and higher manufacturing costs of $5.2 million mainly due to a higher proportion of sales from Roku-branded TVs. The increase was partially offset by lower inventory provisions of $4.8 million and lower royalty costs of $3.9 million.
Gross loss for the devices segment increased by $11.2 million, or 95%, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily driven by higher inventory provisions and lower sales of streaming players. We manage the average selling prices of our products to grow our Streaming Households, which we expect should result in increased platform revenue and platform gross profit over time.
Gross loss for the devices segment increased by $9.2 million, or 28%, during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily driven by higher freight costs and higher manufacturing costs. We manage the average selling prices of our products to grow our Streaming Households, which we expect should result in increased platform revenue and platform gross profit over time.
Operating Expenses
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | Change $ | Change % | September 30, 2025 | September 30, 2024 | Change $ | Change % | ||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Research and development | $ | 182,235 | $ | 178,798 | $ | 3,437 | 2 | % | $ | 544,831 | $ | 534,738 | $ | 10,093 | 2 | % | |||||||||||||||||||||||||||||||
| Sales and marketing | 242,077 | 237,047 | 5,030 | 2 | % | 709,026 | 660,827 | 48,199 | 7 | % | |||||||||||||||||||||||||||||||||||||
| General and administrative | 91,121 | 99,993 | (8,872) | (9) | % | 285,342 | 276,543 | 8,799 | 3 | % | |||||||||||||||||||||||||||||||||||||
| Total operating expenses | $ | 515,433 | $ | 515,838 | $ | (405) | - | % | $ | 1,539,199 | $ | 1,472,108 | $ | 67,091 | 5 | % | |||||||||||||||||||||||||||||||
Research and development
Research and development expenses increased by $3.4 million, or 2%, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The increase was primarily driven by higher consulting expenses of $3.8 million.
Research and development expenses increased by $10.1 million, or 2%, 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 consulting expenses of $11.6 million.
Sales and marketing
Sales and marketing expenses increased by $5.0 million, or 2%, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The increase was primarily driven by higher marketing, retail, and merchandising expenses of $14.5 million, higher amortization of $5.4 million, and higher consulting expenses of $2.3 million. The increases were partially offset by lower restructuring charges of $17.0 million.
Sales and marketing expenses increased by $48.2 million, or 7%, 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 marketing, retail, and merchandising expenses of $48.9 million, higher personnel-related expenses of $11.1 million, higher amortization of $7.2 million, and higher consulting expenses of $6.5 million. The increases were partially offset by lower restructuring charges of $25.9 million.
General and administrative
General and administrative expenses decreased by $8.9 million, or 9%, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The decrease was primarily driven by lower personnel-related expenses of $4.6 million, lower restructuring charges of $2.9 million, and lower legal and consulting expenses of $1.0 million.
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.
Other Income, Net
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | Change $ | Change % | September 30, 2025 | September 30, 2024 | Change $ | Change % | ||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | $ | (455) | $ | - | $ | (455) | nm | $ | (1,348) | $ | - | $ | (1,348) | nm | |||||||||||||||||||||||||||||||||
| Other income, net | 29,019 | 30,880 | (1,861) | (6) | % | 75,134 | 84,955 | (9,821) | (12) | % | |||||||||||||||||||||||||||||||||||||
| Total other income, net | $ | 28,564 | $ | 30,880 | $ | (2,316) | (8) | % | $ | 73,786 | $ | 84,955 | $ | (11,169) | (13) | % | |||||||||||||||||||||||||||||||
Total other income, net decreased by $2.3 million, or 8%, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The decrease was driven by lower other income of $1.9 million and higher interest expense of $0.5 million.
Total other income, net decreased by $11.2 million, or 13%, during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. The decrease was primarily driven by a fair value remeasurement loss of $0.3 million on our strategic investment in convertible promissory notes, compared to a gain of $7.0 million during the nine months ended September 30, 2024, and higher interest expense of $1.3 million.
Income Tax Expense (Benefit)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | Change $ | Change % | September 30, 2025 | September 30, 2024 | Change $ | Change % | ||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) | $ | 13,218 | $ | 4,147 | $ | 9,071 | 219 | % | $ | (5,695) | $ | (249) | $ | (5,446) | nm | ||||||||||||||||||||||||||||||||
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.
Income tax benefit increased by $5.4 million during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to the impact from the enactment of the One Big Beautiful Bill Act.
Liquidity and Capital Resources
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.
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.
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.
We believe our existing cash and cash equivalents balance, and our undrawn available balance under our Credit Agreement (as discussed below), will be sufficient to meet our working capital, capital expenditures, and material cash requirements from known contractual obligations for the next twelve months and beyond. Our future capital requirements, the adequacy of available funds, and cash flows from operations could be affected by various risks, uncertainties, including, but not limited to, those detailed in Part II, Item 1A, Risk Factors in this Quarterly Report and the effects of the current macroeconomic environment. While the current macroeconomic environment has not severely impacted our liquidity and capital resources to date, it has contributed to disruption and volatility in local economies and in capital and credit markets, which could adversely affect our liquidity and capital resources in the future.
We may attempt to raise additional capital through the sale of equity securities or other financing arrangements. If we raise additional funds by issuing equity, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of indebtedness, we may be subject to fixed payment obligations and also to restrictive covenants. Additionally, we may be unable to obtain debt or equity financing on terms that are acceptable to us.
Credit Agreement
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.
Our obligations under the Credit Agreement are secured by substantially all the assets of the Company and our subsidiaries that are guarantors under the Credit Agreement. We may prepay, and in certain circumstances, would be required to prepay, loans under the Credit Agreement without payment of a premium. The Credit Agreement also contains customary representations and warranties, customary affirmative and negative covenants, financial covenants requiring the maintenance of a minimum interest coverage ratio and a maximum total net leverage ratio, as well as customary events of default, the occurrence of which could result in amounts borrowed under the Credit Agreement becoming due and payable and remaining commitments terminated prior to its scheduled September 16, 2029 termination date.
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.
Cash Flows
The following table summarizes our cash flows for the periods presented (in thousands):
| Nine Months Ended | |||||||||||
| September 30, 2025 | September 30, 2024 | ||||||||||
| Condensed Consolidated Statements of Cash Flows Data: | |||||||||||
| Cash flows provided by operating activities | $ | 376,068 | $ | 138,753 | |||||||
| Cash flows used in investing activities | $ | (821,279) | $ | (22,603) | |||||||
| Cash flows used in financing activities | $ | (146,751) | $ | (56,732) | |||||||
Cash Flows from Operating Activities
Our operating activities provided cash of $376.1 million for the nine months ended September 30, 2025. Our net income of $7.9 million for the nine months ended September 30, 2025 was adjusted by non-cash charges of $514.6 million composed primarily of stock-based compensation, amortization of content assets, depreciation and amortization of property and equipment and intangible assets, and amortization of operating lease right-of-use assets. The negative impact from changes in our operating assets and liabilities of $146.4 million was primarily due to decreases in accounts payable due to timing of payments, payments made to acquire content, and payments made for operating lease liabilities and other longer-term liabilities. This was partially offset by a decrease in accounts receivable, a decrease in inventories, a decrease in other non-current assets, and an increase in accrued liabilities.
Cash Flows from Investing Activities
Net cash used in investing activities of $821.3 million for the nine months ended September 30, 2025 included purchases of short-term investments of $725.0 million, a purchase of business, net of cash acquired of $95.1 million, a purchase of a strategic investment of $7.0 million, and purchases of property and equipment of $4.2 million, partially offset by a repayment received from an investment of $10.0 million.
Cash Flows from Financing Activities
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.
Material Cash Requirements from Known Contractual Obligations
For a description of our purchase obligations and operating lease obligations, refer to Note 13 and Note 10 to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report, respectively.
Critical Accounting Estimates
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.
Business Combinations
We recognize, separately from goodwill, identifiable assets and liabilities acquired in a business combination at fair value on the date of acquisition. We use our best estimates and assumptions to determine the fair value of contingent consideration, and tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date. Critical estimates in valuing contingent consideration include the probability of achieving certain performance metrics and milestones, and the discount rate. Critical estimates in valuing intangible assets include, but are not limited to, the amount and timing of projected cash flows, customer attrition rates, royalty rates, and discount rates. We estimate the useful lives of intangible assets based on the expected period over which we anticipate generating economic benefit from the asset. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates, or actual results.
Roku Inc. published this content on October 31, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 31, 2025 at 20:07 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]