Key Takeaways:
- Netflix posted 33.4% operating margins and $27.1B in remaining buybacks
- Roku grew platform revenue 28% to $1.13B with advertisers more than doubling YoY
- Netflix trades at 21.6x earnings while Roku targets $1B free cash flow by 2028
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Netflix and Roku offer 2 paths to streaming exposure
Netflix Inc. posted Q2 operating margins of 33.4% and $27.1 billion in remaining buyback authority, while Roku Inc. grew platform revenue 28% to $1.13 billion as its ad business reached an inflection point.
"The results validate our content investment strategy and the growing contribution from our ad-supported tier," Netflix co-Chief Executive Ted Sarandos said on the July 16 earnings call.
Netflix reported earnings per share of $0.80 on revenue of $12.56 billion, a 13.4% increase from a year earlier. The EPS beat the consensus estimate of $0.79 by $0.01, while revenue came in slightly below the $12.58 billion analysts had expected. Operating margin held at 33.4%, and the company generated $1.53 billion in free cash flow during the quarter. Titles including "Apex" (131 million views) and "Swapped" (137 million views) drove engagement, while price increases in the US, Mexico and Spain took effect without measurable churn.
Roku's first-quarter results, filed April 30, showed platform revenue climbing to $1.13 billion from $882 million a year earlier. Advertising revenue rose 27% and subscription revenue gained 30%, while the devices segment declined 16%. Chief Executive Anthony Wood said the company delivered "an outstanding first quarter." Advertiser count on Roku Ads Manager more than doubled year over year, and the company is targeting $1 billion in free cash flow by 2028.
The two companies represent different bets on the streaming ecosystem. Netflix owns the screen with live sports — including an expanded NFL package covering Thanksgiving Eve and Christmas Gameday — and creator deals with Ms. Rachel and Mark Rober. Its ad tier is on track to reach $3 billion in revenue. Roku owns the ad feed, integrating with DV360, Amazon DSP and The Trade Desk, and its platform economics are compounding as advertiser adoption accelerates.
Netflix shares closed at $68.53 on Wednesday, down 26.9% year to date, with a price-to-earnings multiple of about 21.6. The sell-off has brought the stock near its 52-week low of $65.08. Roku reports second-quarter results on July 30; Polymarket traders assign an 87% probability of an earnings beat.
For holders, Netflix offers stability at a compressed valuation with $12.5 billion in expected full-year free cash flow and a $27.1 billion buyback program providing a floor. Roku offers more torque if platform margins expand toward the $1 billion free cash flow target by 2028. The key risk for Roku is memory chip supply constraints pressuring device margins, while Netflix faces $1 billion in debt maturing in 2026. Investors will watch Roku's Q2 print on July 30 for confirmation that platform revenue growth is accelerating.
This article is for informational purposes only and does not constitute investment advice.
