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Despite shares climbing about 45% last year and another 14% in 2026 so far, streaming TV pioneer Roku (NASDAQ: ROKU) still doesn't get the kind of attention its larger media and tech peers do. Based on the company's strong first-quarter results, however, some investors may be hoping that's about to change. The company's first-quarter 2026 earnings report, released Thursday, blew past expectations on both the top and bottom lines -- and management raised full-year guidance to boot.
But should investors buy after the latest results?
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Unfortunately, the answer isn't as clear-cut as investors would probably like. While the underlying business is firing on all cylinders, the valuation arguably doesn't leave much margin of safety for new investors.
Still, this arguably underfollowed growth stock is worth examining closely.
Roku's first-quarter total net revenue climbed 22% year over year to $1.25 billion, beating both management's $1.2 billion outlook and Wall Street's expectations. The more important story, however, sat inside the platform segment, which houses both advertising and subscription revenue. Platform revenue grew 28% year over year to $1.13 billion -- a notable step up from 17% growth in the third quarter of 2025 and 18% growth in Q4.
For the first time, Roku also broke out the two main streams within its platform segment. Advertising revenue rose 27% to $613 million, while subscription revenue jumped 30% to $519 million. CEO Anthony Wood said on the company's first-quarter earnings call that the quarter benefited from the Olympics and the Super Bowl -- both of which lifted media-and-entertainment ad spend and drove subscription sign-ups. Premium subscription momentum was further helped by the recent addition of Apple TV in March; Roku also announced Peacock after quarter-end as another tier-one partner.
Profitability also took a notable leap. Roku's net income reached $86 million, compared with a $27 million loss in the year-ago quarter. And its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped 165% to $148 million, while free cash flow came in at $148 million as well -- the company's second-highest quarterly total on record.
Even more, Roku crossed an important threshold in April, surpassing 100 million streaming households globally. Streaming hours rose 8% to 38.7 billion.
Looking ahead, management raised its full-year platform revenue guidance by more than $100 million, now targeting growth of nearly 21%. And management said second-quarter total revenue is expected to be about $1.3 billion, with platform growth of roughly 20%.
If the business is firing on all cylinders, why hesitate?
Valuation, mostly. As of this writing, shares trade at about 60 times analysts' average estimate for earnings per share over the next 12 months -- a steep multiple for a company that still operates a money-losing devices segment and faces an increasingly crowded landscape.
That last point is the real concern. Roku competes for streaming attention and ad dollars with deep-pocketed tech giants like Amazon and Alphabet, whose Fire TV, Android TV, and YouTube platforms have far broader ecosystems to lean on. Further, Roku is also somewhat dependent on these tech giants in some areas. Amazon, for instance, is both a partner (Roku recently announced an exclusive partnership with Amazon's demand-side platform) and a direct competitor through Fire TV. That's a tricky position for the long haul.
There are also softer spots in the quarter that could matter more later. The devices segment saw revenue drop 16% with a negative 16.3% gross margin. Further, Roku's subscription gross margin slipped to just above 40% (down from closer to 49% in the year-ago quarter), with management guiding for 41% to 42% for the rest of the year.
During Roku's first-quarter earnings call, chief financial officer Dan Jedda flagged limited visibility on the back half of the year, citing "the macro environment."
To be clear, there's plenty to like here. Roku's open, partner-friendly approach to advertising technology platforms positions it as a more open and interoperable connector in a connected TV market full of walled gardens.
But neutrality may not be enough of a competitive advantage. With these much bigger rivals either competing directly or controlling key parts of the ad-buying stack, the long-term picture carries real uncertainty -- and the current price already reflects a lot of optimism. For investors who already own shares, the latest quarter may be reason to stay put. For new buyers, however, waiting for a more reasonable entry point might make more sense.
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Roku. The Motley Fool has a disclosure policy.
This Often Underappreciated Growth Stock Is Holding Its Own Against Giants Amazon and Alphabet. Time to Buy? was originally published by The Motley Fool