Roku’s Illusions

Roku, that purveyor of digital distractions, has enjoyed a momentary resurgence. The market, it seems, is ever eager to be captivated by shiny objects, even those constructed on foundations of questionable solidity. A surge in quarterly earnings, they proclaim! One might almost believe it signals genuine prosperity, rather than a temporary reprieve from the inevitable.

The company’s true business, it’s said, isn’t the devices themselves—mere conduits for the endless stream of content—but the advertising that clings to it like barnacles. A clever strategy, certainly. To profit not from providing amusement, but from interrupting it. It’s a commentary on our age, wouldn’t you agree?

For the last quarter, revenue ascended by a modest 16% to $1.39 billion. A respectable figure, perhaps, if one overlooks the fact that growth, like youth, is fleeting. Earnings per share, a metric so beloved by those who mistake numbers for reality, reached $0.53, a marked improvement over last year’s loss. Though, one suspects, the analysts were easily pleased; their expectations are rarely ambitious.

Platform revenue, the engine of this particular illusion, climbed 18% to $1.22 billion. Driven, of course, by video advertising and the allure of premium subscriptions. The addition of HBO Max, they boast, has bolstered their numbers. As if the masses require another avenue for indulging in vicarious experiences. It is, to put it mildly, a rather sad spectacle.

The device division, predictably, remains a source of loss—a charmingly consistent performance. A loss of $33.9 million, to be precise. One wonders if they maintain it purely for the sake of appearances, a theatrical prop in their grand performance.

Adjusted EBITDA doubled, they proclaim, to $169.4 million. A dazzling number, until one delves into the accounting trickery. It excludes, you see, stock-based compensation—a rather large sum, totaling $85 million. To ignore such a significant expense is akin to pretending one’s debts have vanished. A convenient delusion, but hardly sound financial practice.

	Revenue	Revenue Growth (YOY)	Gross Profit	Gross Margin
Platform	$1.22 billion	18%	$646.7 million	52.8%
Device	$170.9 million	3%	($39.9 million)	(23.3%)
Total	$1.39 billion	16%	$606.8 million	43.5%

Looking ahead, they project revenue of $5.5 billion by 2026. Optimistic, certainly. As if the future were a blank canvas upon which one could paint any desired outcome. They anticipate adjusted EBITDA of $635 million and net income of $325 million. Such precise predictions! One almost suspects they consult a fortune teller.

For the coming quarter, they foresee revenue of $1.2 billion, a 18% increase. And, naturally, more promises of profitability. It’s a comforting narrative, isn’t it? The relentless pursuit of growth, regardless of the cost.

They speak now of artificial intelligence, as if it were a panacea for all their woes. It will lower content creation costs, they claim, and increase engagement. As if mere technology could compensate for a lack of genuine artistry. The notion is, frankly, rather absurd.

Is it too late to buy the stock?

From a valuation perspective, Roku trades at an enterprise value-to-EBITDA multiple of about 18 times 2026 estimates. Reasonable, perhaps, if one weren’t burdened by the inconvenient truth of stock-based compensation, which consumes more than half its adjusted EBITDA. The current obsession with such metrics, fuelled by the recent software sell-off, is a curious phenomenon. Roku, it seems, has a particularly acute case of this affliction. Therefore, I would not chase this fleeting rally. To do so would be to mistake a mirage for an oasis. And in the desert of the market, one must be exceptionally discerning.

2026-02-17 19:54

Is it too late to buy the stock?

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