Earnings Call Transcript - ROKU Q4 2025

Operator, Operator

Hello, and thank you for being here. Welcome to the Roku Fourth Quarter 2025 Earnings Conference Call. I will now hand the call over to Conrad Grodd, Vice President of Investor Relations. Please go ahead, sir.

Conrad Grodd, Vice President of Investor Relations

Good afternoon. Welcome to Roku's Fourth Quarter and Year-End 2025 Earnings Call. Joining us on today's call are Anthony Wood, Roku's Founder and CEO; Dan Jedda, our CFO and COO; Charlie Collier, President Roku Media; and Mustafa Ozgen, President Devices. On this call, we'll make forward-looking statements, which are subject to risks and uncertainties. Please refer to our shareholder letter and periodic SEC filings for risk factors that could cause our actual results to differ materially from these forward-looking statements. We'll also present GAAP and non-GAAP financial measures. Reconciliations of non-GAAP measures to the most comparable GAAP financial measures are provided in our shareholder letter. Unless otherwise stated, all comparisons will be against our results for the comparable 2024 period. With that, operator, our first question, please.

Operator, Operator

Our first question comes from Shyam Patil with Susquehanna.

Shyam Patil, Analyst

Congrats on the strong 2025 and 2026 outlook. I have a couple of questions. The first one, can you help us bridge the 1Q revenue outlook of over 21% growth to the full year outlook of about 18% growth? And then I have a follow-up question.

Anthony Wood, CEO

Shyam, this is Anthony. I'll kick this off and then turn it over to Dan, who can talk more about the outlook. So let me just start by taking a minute to reflect on our execution over the past several years. In 2023, our priority was to rightsize our cost structure and reach adjusted EBITDA breakeven in 2024, and we achieved that goal a full year ahead of schedule. And this early progress positions us to invest further in our platform monetization initiatives. As a result, in advertising, we deepened integration with leading demand-side platforms and scaled our measurement and performance capabilities. In subscriptions, Q4 was our biggest quarter ever for premium subscription net adds. We expect to add more Tier 1 partners and roll out bundles this year, and we plan to expand how to beyond Roku and take it to additional platforms. So these initiatives are paying off for us. We grew platform revenue 18% in 2025, and we accomplished all of this while growing our streaming households, both in the U.S. and globally. Looking ahead to 2026 and beyond, we're confident in our ability to sustain double-digit platform revenue growth while continuing to grow profitability. So with that introduction, let me turn it over to Dan.

Dan Jedda, CFO and COO

Thanks, Anthony, and thanks for the question. Let me just add a little bit to what Anthony said. Exactly 2 years ago, when we were entering 2024, we said that now that we rightsized our cost structure, we would relentlessly focus on growing our platform revenue, improving our monetization, and driving profitability, including free cash flow. In Q4, we grew platform revenue over 18%, surpassing $1.2 billion. We achieved adjusted EBITDA of $169 million and net income of $80 million, all were records for us. For the full year, we also grew our platform revenue 18%, achieved adjusted EBITDA of $421 million, which represents a margin expansion of 255 basis points, and we generated free cash flow of $484 million, also a record for us and over 100% year-over-year growth. With our strong free cash flow, we purchased $150 million of Roku stock through our share buyback program and achieved near 0% dilution for Q4. The lowest dilution we have ever reported. This year, our outlook for platform revenue growth is more than 21% in Q1 and 18% for the full year as we continue to execute on our monetization initiatives. Our full-year adjusted EBITDA guidance of $635 million represents over 50% year-over-year growth and margin expansion of 267 basis points to 11.6%. I expect that free cash flow will again be above adjusted EBITDA as we remain CapEx light. And it's also worth noting that we have over $1 billion of a deferred tax asset which will keep our cash taxes low for many years. I see our free cash flow continuing to be strong and outpacing EBITDA beyond this year. In fact, I see a path to over $1 billion in free cash flow by the end of 2028, if not sooner, which will be a significant milestone for us. We have incredibly strong momentum going into 2026, and our focus is on sustaining growth. So to get to your question specifically on Q1 versus full year. A few factors are shaping our Q1 outlook. First, Q1 last year was our easiest comp at just under 17% year-over-year. Second, Q1 of this year includes the full benefit of Frndly. As you recall, we closed that acquisition in Q2 of last year. And I guess, finally, we have stronger visibility into Q1 versus the second half of the year. So as we gain better visibility into political and into H2, we'll provide updated guidance.

Shyam Patil, Analyst

It was really helpful. I did have a quick follow-up. Can you comment on your retail distribution strategy for 2026 given that Walmart is switching its House TV to VIZIO's operating system.

Anthony Wood, CEO

Shyam, this is Anthony again. Yes, let me take that. So as Walmart focuses more on VIZIO OS for their House brand, we're focused on broadening and diversifying our retail distribution. We remain extremely well positioned in the market with hundreds of millions of dollars a year of investment in distribution, we have flexibility in how we invest this budget and we'll continue to optimize this investment across both our retail and our OEM partners. We're already widely distributed, obviously, including at Walmart, and I'll share a few examples of how we're expanding our distribution. At Best Buy, we expanded with the addition of Pioneer Roku-made TVs, which we recently launched. At Target, we expanded with Hiro Roku TVs, and they're doing extremely well. At regional and national retailers like Amazon, we have expanded our presence. And in addition to retailers, TV OEMs are key strategic partners for us. And we have expanded our licensing and distribution agreements with two of our largest and longest-term Roku TV partners, TCL and Hisense, as well as several others. We also have first-party TVs. And for our first-party TVs, we expect sales to increase after shifting our TV production to Mexico, which will help us lower our cost. And then, of course, we expect streaming players to continue to be a meaningful contributor to overall Roku OS distribution. So those are some of the things we're doing in 2026. This work has started, but we expect to see the impact predominantly in the second half of the year as these cycles take time to scale. So in addition to this work that I just outlined, I want to take a second and just talk about some of the strategic assets that we have to create a strong foundational competitive advantage for Roku that are really important. One is, of course, the Roku brand. It's a brand that consumers love and ask for by name and has resulted in Roku being used in over half of U.S. broadband households. Nearly half of all TV streaming in the U.S. happens on the Roku platform. And importantly, we're best-in-class at monetization, which gives us a lot of flexibility to invest in building scale and distribution. We're also globally scaled, and we have successful Roku TV partnerships with dozens of TV partners, factories, and retailers. And then one of the main ways we've achieved our success is with the Roku OS, which is a purpose-built operating system designed specifically for TV. It's the only purpose-built OS for TV. It has a lot of intrinsic advantages. One of those is the lowest BOM cost in the industry. And one of the reasons for that is we have the lowest memory footprint in the industry. And as everyone knows, memory prices are going up right now. And so as memory prices continue to go up, that's a cost advantage that accrues to us and keeps growing as memory prices increase. So the number of Roku TV units sold, it may go up or down from quarter-to-quarter, but overall, we expect to continue to grow our scale of streaming households in the U.S. and globally, and we're on track to surpass 100 million streaming households this year.

Operator, Operator

Our next question comes from the line of Cory Carpenter with JPMorgan.

Cory Carpenter, Analyst

So generative video, the advancements have really caught investors' attention of late. We saw Cadence yesterday, Google Genie, both recent examples. I think one interpretation from this we're hearing is that it's likely to significantly increase the amount of content available, perhaps shift time spent more to short-form videos. So Anthony, the question for you really is I thought it would be helpful to hear how do you think AI could impact the streaming landscape? And what do you think it means for Roku?

Anthony Wood, CEO

I'm really excited about AI and its potential impact on content. To address your question directly, I believe AI will significantly lower content costs over time, including for long-form content. As these costs decrease, we expect to see increased engagement on our platform, which is central to our business model. On a broader scale, we see AI as a vital opportunity for Roku and a strong advantage for our business. We're incorporating AI throughout our technology to enhance discovery, boost engagement, and create new monetization opportunities. For viewers, AI personalizes their experience, making it easier to find what to watch, which in turn increases engagement. We're improving recommendations and introducing new features to highlight trending content. Additionally, we're generating informative summaries for content that go beyond just plot outlines, and we've enhanced Roku Voice to support more conversational questions about entertainment. On the advertising front, which is critically important for us, AI is transforming our approach. It's helping us create a more effective connected TV advertising platform and has opened up new markets for small- and medium-sized businesses through our Ads Manager. This segment was previously inaccessible to TV platforms, but AI has changed that. AI simplifies the process of creating high-quality video ads, enabling more advertisers to participate. We're also automating various workflows that used to be manual, like reviewing ad formats. Internally, we're leveraging AI to improve efficiency and productivity. Overall, AI strengthens our platform, enhances monetization, and boosts our business performance.

Operator, Operator

Our next question comes from the line of Michael Morris with Guggenheim Securities.

Michael Morris, Analyst

I wanted to ask about how the third-party ad demand partnership that you have with Amazon is impacting the business so far and how you expect it to progress throughout the year? Is it additive to growth yet? Or has it cannibalized revenue in any way as it has come online? And then if I could just briefly on the platform gross margin, you provided the 51% to 52% range for '26, which is very helpful. What are you expecting for the first quarter? And how much variability do you expect in this quarter-to-quarter throughout the year?

Anthony Wood, CEO

Michael, Charlie will take your first question on third-party ad demand partnerships.

Charlie Collier, President Roku Media

Great. Thanks, Anthony. Michael, look, just stepping back for a second. Our strategy has been to be open and interoperable and be deeply integrated with all the DSPs so really that we can meet clients anywhere they want to transact. So the Amazon partnership was natural in that context. And really, overall, we strive to be the most performant CTV ad platform in the industry. So I'd say to your question of impact this year, it's early innings. Amazon is working hard to bring new clients over to its DSP. And the combination of our TV OS footprints make for an impressive offering. To put it in context, over the last year, we've added dozens of ad tech partners, Michael, from the Yahoo! DSP to AppLovin and Wurl to Magnite. And then once they're onboarded, just like with Amazon, we begin deepening our relationships with each of them, and they start to ramp, and that will continue, and that's the case for all of them. So our goal with all these partnerships is to drive greater outcomes and greater performance for our marketing partners. And we're bullish about our position, not just as the open interoperable partner in a marketplace with so many walled gardens, but the ability of this to grow as we deepen the integrations. Dan, do you want to?

Dan Jedda, CFO and COO

Yes. I would like to add that regarding its impact on the business this year, we are fully integrated and ramping up as expected with Amazon DSP, although growth will take time. We feel confident about our performance across all DSPs, and as Amazon DSP succeeds, so will we. However, it will take time for these to develop, and we don’t usually provide detailed breakdowns. That said, we believe it's tracking as anticipated and will contribute more over time. For platform gross margins, our guidance was 51% to 52%, and we ended the full year of 2025 at 52%. I don’t foresee significant variability from quarter to quarter, as it depends on the mix of our activities in the platform business. We saw stabilization in M&E in Q4, which positively impacted margins and this stability is continuing into Q1. As M&E progresses, we are pleased with what we are observing, but I do not anticipate much variability. We have various activities growing at different rates, and I recognize that we don’t share many details. We are working on providing more insight into our activities and their margin profiles and I hope to present more information on that next quarter.

Operator, Operator

Our next question comes from the line of Jason Helfstein with Oppenheimer.

Jason Helfstein, Analyst

In your prepared remarks, you mentioned the success with international viewership and the early stages of monetization. Can you provide insight into the potential opportunity for the platform business compared to the early days of Netflix, where we saw international markets potentially being much larger than the U.S.? Additionally, how does this relate to where you see the biggest opportunities in your business, particularly in terms of comparing international advertising revenue opportunities to other areas you are currently exploring?

Anthony Wood, CEO

Jason, Dan will take that question.

Dan Jedda, CFO and COO

We've discussed our international efforts in key countries, and our progress varies by region. For instance, in Canada and Mexico, we have achieved scale and are beginning to enhance monetization. In Mexico, we have significant scale and are focusing on revenue generation. In Brazil, the advertising market is still developing, so we are concentrating on building our presence there. Our efforts are progressing in the U.K. as well. Monetization is gaining traction in both Mexico and Canada for different reasons. Canada has a strong digital market, and our average revenue per user is robust there, driving growth in streaming households. In Mexico, the ad market has yet to fully transition to digital as it has in the U.S., but we anticipate that change over time. Our scale in Mexico is impressive, comparable to that of the U.S. We are prioritizing monetization of both subscriptions and advertising across all international markets. Recently, we introduced premium subscriptions in Mexico and plan to expand to other countries. Our strategy focuses on maximizing our subscription model internationally, which presents a significant opportunity. I believe that, in the future, international revenue will represent a larger share of our overall platform earnings, although we are still in the early stages, indicating substantial growth potential in these international markets.

Jason Helfstein, Analyst

How do you rank that against the current growth opportunities you are exploring? Is there a standout one?

Dan Jedda, CFO and COO

The international market presents a tremendous opportunity for our growth. As I mentioned, subscriptions alone represent a significant chance for us. The Roku Channel is performing exceptionally well in our international markets, and engagement is increasing considerably. In Brazil, where we have a strong presence, we recently launched a FAST service that is also doing remarkably well. Therefore, I believe this presents a substantial opportunity. The challenge lies in how digital ad markets evolve on a country-by-country basis, but subscriptions, including avenues like Howdy, can thrive well in these regions, representing a major opportunity for us.

Operator, Operator

Our next question comes from the line of Steven Cahall with Wells Fargo.

Steven Cahall, Analyst

Dan, just following up on the platform guide in the first quarter. I don't know how much kind of political or Frndly is in both the current Q1 and the prior Q1, but it seems like there is a little bit of a deceleration in kind of same-store sales in platform from Q4 to Q1 and the comp is slightly easier. Just wanted to know if that's conservatism. Is there some natural deceleration because you've gotten to such big scale or am I doing the math wrong there? And then also, if we just think about your revenue and platform outlook for 2026, just curious how you're thinking about the contribution of political dollars in there? I think you did about $90 million in '24. That kind of came out of nowhere. So wondering what you're thinking for '26.

Dan Jedda, CFO and COO

Thank you for the question, Steven. Firstly, Q1 generally lacks significant political factors, so I wouldn't say it has a substantial impact for that quarter, although it may be more influential in the second half of the year. Frndly does make a difference for Q1, contributing a few points. In terms of comparing Q1 to the second half or the full year, as I mentioned earlier, we have more clarity regarding Q1. We are still assessing how the political landscape and spending will develop. I believe that if the market conditions in the midterms mimic those of the general elections, we will perform well in that area. Charlie and the team have established a robust political sales funnel and are effective at targeting, making our platform an excellent choice for advertising. It's mainly about having better visibility in Q1 compared to H2 and understanding how the political dynamics will unfold. We will keep you updated as we progress. Therefore, I concur that our outlook for the second half appears slightly more cautious given the insights we have for Q1.

Operator, Operator

Our next question comes from the line of Laura Martin with Needham.

Laura Martin, Analyst

Congratulations on really great numbers. I want to follow up on one of the GenAI questions asked earlier. So Netflix is telling us that they are going to put short-form video and user-generated content on their platform because they think engagement is what they are solving for. Anthony, you just said something similar in an earlier question, that engagement is your like North Star. However, I think one of the reasons you get so many really high-quality brand advertisers is that your top-of-funnel premium-only video. So how do you think from a judgment point of view of balancing and driving engagement, which would mean vertical video and adding user-generated content even short form compared with protecting your ad environment so that you continue to get high-quality advertisers? That's my first question.

Anthony Wood, CEO

Yes, I'll share my thoughts and then see if Charlie has anything to add. We offer short-form content on our platform and are constantly testing various types of short-form content and its placement in our user interface. We engage users mainly through our user interface and personalized experiences, as well as the content available. Primarily, we are a platform for big screen TVs, which typically means longer-form content is favored since that's what users generally consume. While we do have some short-form videos, and we expect that to increase, our primary focus remains on long-form video, as that's what audiences usually seek when they watch TV. I firmly believe that as content costs decrease, consumption will rise, leading to increased engagement with long-form video, which presents a significant opportunity for us. As for advertisers, I’ll let Charlie answer that question.

Charlie Collier, President Roku Media

Sure. Laura, it's a good question. One thing I think we have a few real advantages. One is our FAST channel environment has been really powerful. And so for example, Mr. Beast launched his own FAST channel and it premiered on Roku. And because of our scale, of course, that did really well, and we got to see the type of viewers who consume that content. And that last point is really one of our advantages. We really do understand the cohorts of viewers, and one of the things we've been able to do is curate content around different interests. And I think as we get more into short-term when we do, as Anthony said, we do it against specific cohorts and really try to super-serve audiences that we understand. We are known for premium content. And in the foreseeable future, it's going to be the majority of what we do and do well. But I very much like the ability of our platform to figure out what the viewer wants to watch and how. Some of the examples of that beyond just the content creators you might be thinking about or even in places like our sports zone, where we'll do shoulder content. They'll go into watch the game. They'll get short-form clips, they'll get short-form commentary and other information. And we do that with the league. So there's all sorts of ways you can do it, and Roku is really good at putting it in context.

Laura Martin, Analyst

Super helpful. My second question is on upfront versus SMB. Just a similar judgment question, which is a lot of the letter is talking about your investments in Ads Manager and your focus on SMBs because it is a large market. But what we hear from MOUNTAIN, which is 100% performance CTV, is that those types of advertisers are really 100% focused on performance like within 3 days, like super short-term performance. And my recollection is you guys do more than $1 billion in upfront guarantees, which is like 1/4 of your total revenue. So as you think about investing in this bottom of funnel, making yourself a full-funnel CTV option for advertising, over time, do you think you're going to pivot from like towards the more performance-oriented, which I would think would have lower margins than top of funnel? But correct me if you think I'm wrong on that thinking.

Charlie Collier, President Roku Media

Sure, Laura, this is Charlie again. I believe different strategies are needed for different scenarios. Let me clarify what I mean. We do a significant amount of guaranteed business with enterprise clients at the top of the funnel, and these clients are highly effective. They measure different metrics, including quick conversions. However, the transition to performance marketing and opening our platform to small- and medium-sized businesses is definitely advantageous, and we can approach it in a unique way. We've discussed extensively in previous calls how our platform is uniquely positioned to adapt pricing to different market demands. In this framework, you will see us effectively manage the opportunity to deliver results while serving high-end clients. To illustrate, we price our inventory differently. At the high end of the pricing spectrum, we have specific offerings such as sponsorships, Roku Originals, sports placements, home screen units, or extensive digital integrations that carry a premium. Conversely, there are advertisers with distinct needs who engage at lower price points, but they miss out on the higher-quality inventory and unique offerings I mentioned earlier. We are the largest player in the Connected TV space and have thoughtful strategies to expand our inventory as we grow. Our capability to adjust pricing based on demand allows us not just to thrive in the current CTV landscape but also to strive to be the leading performance-driven CTV platform while inviting small- and medium-sized businesses. These businesses are projected to spend $600 billion on advertising this year. If the enterprise trend continues, combining the visual effectiveness of television with the performance capabilities of digital, Roku Ads Manager is uniquely positioned to excel in this shift, and we will appropriately price our offerings across the spectrum.

Anthony Wood, CEO

This is Anthony. I want to add a few comments. Generally, we're hearing from all our advertisers, from traditional top-of-the-funnel brand advertisers to lower-funnel advertisers, and they are all focused on performance. Our key strategy is to be the most efficient connected TV platform in the industry. We are investing significant effort into this and incorporating generative AI technology to help us succeed, and the results are encouraging. Roku Ads Manager is performing very well in its early stages, and we are experiencing strong growth that demonstrates our strategy is effective. The entire advertising sector is shifting towards performance-based metrics. Different advertisers define and measure performance in various ways, but there is a clear trend towards prioritizing results, and we are witnessing advertisers begin to migrate towards this approach.

Dan Jedda, CFO and COO

Yes. I think I'll just add one more thing, Laura, to your point. I agree with everything Charlie and Anthony said, but your comment on the pivot towards lower margin and more performant ads doesn't apply to us. We are very much not in a position where performance-based ads that focus on site visits, return on ad spend, or clicks are lower margin for us. So you should not think that as we focus on the SMBs, it drags down margins; it does not.

Operator, Operator

Our next question comes from the line of Rob Sanderson with Loop Capital.

Robert Sanderson, Analyst

I wanted to ask a little bit about just expanding your advertising opportunity on the home screen outside of M&E and into the much larger advertising landscape. I'm sure there's lots of interesting things you can do here. But any color on the types of ad formats you might be thinking about? Is it something that we're likely to learn more about through 2026? And then just thoughts on go-to-market. These would be completely unique and probably require some education of advertisers, maybe not something your third-party demand partners could help you with. Is that something that you think you'd have to take on a direct basis? Or anything you can sort of share on go-to-market?

Anthony Wood, CEO

Rob, Charlie will take that question.

Charlie Collier, President Roku Media

Yes, it's already happening, Rob. We've expanded well beyond media and entertainment over the last few years. If you look at the home screen right now, Roku City, which is our interactive world inside your television, features the Olympics and many of our sponsors that are not primarily media and entertainment. We've also added video to the home screen in our marquee unit, which is performing well across various categories. We're testing different designs for the home screen, and it's clear that they drive more engagement and viewer satisfaction. You'll see us doing more of this. As for whether it's programmatic, it is not at this time. There are several factors involved; our enterprise clients and advertising agencies are focused on these unique, high-performing units, and you will see more of these in the future.

Anthony Wood, CEO

And Rob, this is Anthony again. In terms of new ad units, we have a new home screen design that we're working on, which is one of our major initiatives. It's currently in testing with several different variations, and the results are positive. We are seeing increased engagement and viewer satisfaction. We believe this will lead to higher monetization over time, whether that involves getting viewers to subscribe or encouraging them to watch more ad-supported content. We aim to roll it out sometime this year. The new home screen includes numerous improvements, one of which is that we're testing new types of ad units. We're also exploring various methods to increase impressions and click-through rates of our existing ad units.

Operator, Operator

Our next question comes from the line of Vikram with Baird.

Vikram Kesavabhotla, Analyst

I wanted to ask about the Howdy launch as well as the Frndly acquisition. Could you talk more about how each of those integrations is going so far? And what are your plans for those businesses in 2026?

Anthony Wood, CEO

Both endeavors are progressing well. While we haven't disclosed specific numbers, I am very pleased with the launch of Howdy, as subscriber growth continues to be strong. For those unfamiliar, Howdy and Frndly are part of Roku's owned and operated services portfolio, which began with the Roku Channel. Adding Howdy and Frndly represents a strategic move into subscriptions that will generate additional revenue. We're leveraging our platform and user experience to enhance engagement for both services, and we've seen notable increases in engagement and sign-ups for Frndly since we took it over. The platform is also key to launching and developing the Howdy business. Frndly is already available on platforms beyond Roku, and we plan to launch Howdy on additional platforms as well. I'm quite excited about both initiatives, particularly Howdy, which I believe has significant potential to grow into a major service for us over time.

Operator, Operator

Our next question comes from the line of Matt Condon with Citizens Bank.

Matthew Condon, Analyst

I just wanted to ask, as Netflix is pending the acquisition of Warner Bros., and this is changing potentially the broader streaming landscape can you just talk about if they become more guarded about how to distribute their content, how this could potentially impact Roku both on the advertising side and the subscription side? And then maybe just a quick follow-up, Dan, just mid-single-digit OpEx growth going forward. Is that the right way to continue to think about this? And if revenue growth comes in above expectations, how do you just think about reinvesting some of that growth back into the business?

Anthony Wood, CEO

Matt, this is Anthony. I'll just say in the U.S., as we've said before, we're in more than half of broadband households and half of all TV streaming happens on the Roku platform. I mean that's a lot of scale. This makes us an essential partner to every content owner and streaming service, and we don't anticipate that changing regardless of how the industry consolidates or how that consolidation plays out. In any scenario, the streaming sector remains extremely robust, it's continuing to grow quite nicely, and we remain well positioned to help our streaming and content partners drive engagement, find viewers and sign up customers. And I'll let Dan take the question on...

Dan Jedda, CFO and COO

Thank you for the question, Matt. When it comes to operational expenses, we are committed to executing with discipline and ensuring we invest in areas that yield the best returns. In 2025, our operational expenses increased by 3%, which was slightly lower than my expectations, but we are making effective investments in the initiatives we have detailed in the shareholder letter and discussed in this Q&A. I anticipate that our operational expenses will continue to grow in the mid-single digits range. As we’ve mentioned several times, we expect our platform revenue to grow by double digits, and I provided clear guidance on gross margin, which we believe will remain stable without major declines, expected to be between 51% and 52%. This stability should lead to improved EBITDA margins over time, reinforcing our path to achieve $1 billion in free cash flow by 2028. We are indeed investing, particularly by increasing our headcount in engineering to support our key initiatives. Additionally, one factor contributing to our operational expense growth is the reduction in stock-based compensation, which we have managed effectively. From 2025 to 2026, we expect this trend to continue, helping our operational expenses remain within that mid-single-digit range.

Operator, Operator

Our next question comes from the line of Tom Champion with Piper Sandler.

Thomas Champion, Analyst

We can see from your discussion around '26 expectations, a pretty solid top line revenue guidance. But I think you've been sort of indicating that you see a path for a very solid multiyear CAGR in revenue growth and you've talked about some of the near-term drivers. But I'm just wondering if you could talk a little bit about maybe more intermediate or longer-term dynamics in the business that would give you confidence in sort of a solid growth trajectory beyond this year in '26? Any thoughts would be welcome. And then maybe for Dan, just a clarification, is it $250 million that remains on the buyback?

Anthony Wood, CEO

This is Anthony. I'll begin and then pass it on to Dan. Regarding what is fueling our growth, our two main segments, advertising and subscriptions, are both performing well. On the advertising front, we've been working on strengthening our partnerships with third-party DSPs and there is still potential for further development in that area. A significant amount of traditional linear ad spending is shifting to streaming, and we are capturing more than our fair share of those funds, which contributes to our growth. We're also launching new initiatives like our updated home screen, which I believe will enhance monetization over time based on our testing outcomes. In terms of subscriptions, a major trend in the industry is the aggregation of streaming services. It seems that in the future, only a few services will be able to sustain a profitable model independently, while those that leverage platforms like Roku's premium subscriptions can distribute their services more profitably. This is why we are seeing many major streaming services, aside from the top few, signing up for premium subscriptions—it makes good economic sense and attracts more subscribers at a lower cost. I believe that premium subscriptions will be a significant growth driver and a lasting trend in the industry. Additionally, our Ads Manager is opening up new advertising markets that were previously unavailable on TVs. These markets are now accessible due to AI, which can generate video content quickly and affordably, along with offering targeted ads and detailed self-serve options for a wide range of advertisers. We are also engaged in other undisclosed projects and research that present further opportunities in the streaming sector. Overall, there are many avenues for us to enhance monetization on our platform, while we continue to expand our reach both domestically and internationally. Dan, do you have anything to add?

Dan Jedda, CFO and COO

Yes. I'll answer the second part of your question. We purchased $50 million in Q3 and $100 million in Q4. So yes, there's $250 million remaining on the buyback. I will say like as we noted in the shareholder letter, we see a clear path to offsetting dilution for FY '26, and we have very strong free cash flow as our guide contemplates of the $635 million of adjusted EBITDA. And my comments with respect to, we believe free cash flow will be above adjusted EBITDA for the year.

Operator, Operator

Our next question comes from the line of Robert Coolbrith with Evercore ISI.

Robert Coolbrith, Analyst

Just wanted to go back to Ads Manager maybe for another follow-up. Can you talk about maybe the performance orientation or some of the ways that the product is different from OneView? Or do you use OneView as a base and try to sort of make more performance into the platform? Just anything you could tell us about the starting point for Ads Manager and how you're attempting to serve the needs of performance-based advertisers? And then secondly there, if you could talk a little bit more about maybe the go-to-market for how you identify maybe your high-value SMB prospects, how you reach out to them, how you onboard them or get them into the funnel and then onboard them into the platform? Anything more you could tell us about that would be really helpful.

Anthony Wood, CEO

Robert, this is Anthony. I'll address the first part before handing it over to Charlie for the next section. To begin with, OneView was a technology platform as well as a business strategy, and I believe it's the business strategy that has undergone a change. The OneView technology remains integrated throughout our platform, including elements within Roku Ads Manager, along with various proprietary technologies. Our advertising stack was not solely composed of OneView; it was just one component. The original strategy centered around making OneView our exclusive demand-side platform, but that shifted a few years ago. We decided to move away from having OneView as the sole DSP on our platform and instead work with all the major DSPs that our customers are already using and wish to continue using. This prompted a complete shift in our strategy toward collaborating with third-party partners. We began deeper integrations with Trade Desk, Amazon, and other partners in the industry. This strategy change has proven to be highly effective for us. Charlie, do you want to take it from here or add anything?

Charlie Collier, President Roku Media

Yes, it's a distinctly different sales process compared to our enterprise approach. In my career, it brings me great satisfaction to engage at every level of the sales funnel. Currently, we are focusing on the bottom of the funnel with our Ads Manager product, aiming to enhance performance. As Anthony mentioned earlier, performance can be interpreted in various ways. We have formed several partnerships, such as with iSpot, AppsFlyer, and Incremental, all of which relate to measuring performance. While I won’t go into detail about how we pinpoint high-value small and medium-sized business prospects, I can share that we’ve developed a unique sales team and approach, which includes extensive lead generation and targeted marketing. Interestingly, the strongest advertisement for our services is the performance results themselves; unlike our enterprise clients who have predetermined budgets, when our solution works, customers tend to keep using Ads Manager and return for additional support. In our recent communications, you heard about a client with specific goals who achieved a strong return on ad spend and continues to return, driving interest from other advertisers in their sector as well. This approach represents a very effective form of advertising, where we invest, optimize results, and subsequently improve performance, leading us to establish new partnerships. I am genuinely enthusiastic about the growth potential here, as we aim to expand our advertiser base from hundreds to thousands, and eventually to tens of thousands.

Anthony Wood, CEO

This is Anthony again. I want to point out that while Ads Manager is performing well for us, it is not the only option. We are collaborating with other third-party partners who are targeting the same customers, specifically small and medium-sized businesses. For instance, tvScientific is one of them. However, I believe there are notable competitive advantages to developing our own self-serve platform. By integrating it more closely with our existing platform, we anticipate better performance. One of the reasons we are pursuing this ourselves is our confidence in creating a superior product through this integration.

Operator, Operator

Ladies and gentlemen, due to the interest of time, I would now like to turn the call back to CEO, Anthony Wood for closing remarks.

Anthony Wood, CEO

I'd just like to thank our employees, customers and advertisers and content partners, and thank you for listening.

Operator, Operator

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.