Roku Inc (NASDAQ:ROKU) heads into its Q1 earnings report with Jefferies raising estimates and maintaining a ‘Buy’ rating, lifting its price target to $140 from $135, implying about 40% upside.
The analysts see the setup as increasingly supportive of a stronger-than-expected earnings trajectory, driven by improving advertising trends and a more favorable revenue mix.
Jefferies increases its fiscal year 2026 Platform revenue growth forecast to 18.5% year over year from 18%, citing “strengthening ads trends and political contribution.” The firm also raised its Platform gross margin expectations to 51.8% from 51.5%, placing it near the top end of the company’s 51% to 52% guided range, and lifted fiscal year 2026 EBITDA by about 2% to $649 million.
On the Q1 setup, Jefferies describes the company’s guidance as conservative. The firm says Q1 guidance implies roughly a 500-basis-point organic deceleration from Q4, with growth stepping down from about 23% year-over-year in Q4 to about 18% in Q1 after adjusting for political revenue and other factors.
The firm sees upside relative to consensus expectations, with increasing confidence in a greater than 20% fiscal year 2026 Platform revenue growth case versus Street estimates of 18%. Jefferies’ upside scenario assumes a modest Q1 beat consistent with recent quarters, combined with normal seasonality through the year, which would imply roughly 22% Platform revenue growth in fiscal year 2026.
Advertising remains the central driver of the outlook. Jefferies highlights improving ad demand and increasing confidence that the 2026 midterms could contribute similarly to the approximately $90 million to $100 million benefit seen in the 2024 general election cycle. It also notes broader momentum in advertising trends across the platform.
Subscription revenue is another incremental support. The addition of Apple TV+ to The Roku Channel premium subscription offering is expected to lift revenue, with Jefferies highlighting that these revenues are recognized gross rather than net.
The firm also pointed to potential future additions of Tier-1 services, such as Peacock, currently available via Amazon Channels but not yet on Roku’s platform.
On profitability, Jefferies raised its fiscal year 2026 Platform gross margin expectation to 51.8%, arguing prior declines were driven by mix rather than competitive pressure. The firm expects greater disclosure, particularly separating advertising and subscription margins, to clarify underlying economics, and notes management is effectively establishing a floor around current margin levels.
EBITDA expectations are also revised higher, with Jefferies lifting fiscal year 2026 estimates to $649 million on stronger ad revenue and improved margins.
The firm highlighted several catalysts ahead, including the ramp of Amazon DSP, home screen improvements, additional subscription launches, the World Cup, and potential recovery in media and entertainment advertising.
Risks are described as limited by the analsyts, with geopolitical exposure characterized as second-order and the Hisense patent case viewed as a low-probability outcome likely resolved via settlement rather than operational disruption.
Roku is expected to report its Q1 earnings on April 30 after markets close.