3 Reasons to Buy Roku Stock Like There's No Tomorrow

Roku's (NASDAQ: ROKU) stock performance has been a roller coaster since 2020. However, the streaming platform has continued to add households (now topping 100 million), driving strong growth in advertising and subscriptions.

This disconnect between the stock's decline and the business' continued growth is the kind of setup that can lead to solid returns for investors. Here are three reasons to buy the stock now.

Image source: The Motley Fool.

1. 100 million households and growing

Growth in user accounts, or households, is the clearest signal of Roku's ability to generate returns for investors. The more viewers on the platform, the more money it can earn from advertising, its primary revenue source.

Roku has shifted its business away from relying on device sales and toward monetizing users already on the platform. This is paying off: Total revenue was up 22% year over year last quarter, even as device revenue fell 16%.

Streaming hours on the platform grew 8% year over year to 38.7 billion, driving greater advertiser interest. Many users are also finding tremendous value in the company's exclusive content on the ad-supported Roku Channel -- now the second-most-watched app on the platform.

The long-term trajectory is clear. In 2025, streaming hours on Roku topped 145 billion, up from 87 billion in 2022.

2. Acceleration in advertising revenue

Roku is deepening integrations with top ad-buying platforms, which helped boost advertising revenue during a quarter that included major sporting events and strong viewer engagement.

In the first quarter, platform revenue, which includes advertising and subscriptions, surged 28% year over year to more than $1.1 billion. A big driver was Roku's expanded partnership with Alphabet's Google and its DV360 ad-buying platform, which helped increase the number of advertisers that can buy ads on Roku.

Over the last three years, platform revenue increased 63% to nearly $4.4 billion on a trailing 12-month basis.

3. Strong subscription growth

Roku also generates revenue when users sign up for other streaming services, such as Netflix or Apple TV, through its platform. Subscription revenue (included in platform revenue) surged 30% year over year to $519 million in the quarter, or 23% excluding additional revenue from the Frndly acquisition.

Subscription growth is an important signal of Roku's competitive position. It points to strong customer attachment and reinforces Roku's role as a TV operating system for households.

Q1 showed that Roku can attract viewers for big sporting events -- and that many of those viewers stick around and sign up for other services. That highlights the value of Roku's distribution and content discovery tools.

The main risk for Roku is a cyclical ad market, which tends to fluctuate with the economy. But over time, savvy investors know the digital ad market (estimated at around $800 billion by GroupM) should keep growing, providing a long-term tailwind for Roku.

Overall, growth in households, advertising, and subscriptions is a key performance indicator for Roku, and they all continue to trend higher. The stock has already doubled over the past three years, but it should offer more upside as the business continues to grow.

John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, Netflix, and Roku. The Motley Fool has a disclosure policy.