ROKU - NASDAQ

Good day, and thank you for standing by. Welcome to Roku's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Conrad Grodd, Vice President of Investor Relations. Please go ahead.

Good afternoon. Welcome to Roku's Third Quarter 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 the results for the comparable 2024 period. With that, operator, our first question, please.

Our first question comes from Cory Carpenter with JPMorgan.

Anthony, hoping you could expand on the trends you saw this quarter in the platform business and how you're thinking about the growth drivers in 4Q in 2026? And Dan, maybe a question for you. You bought back 50 million shares this quarter. So I thought it would be helpful to hear your latest thoughts on capital allocation priorities given your cash balance.

And I would say very good outlook. We feel good about our outlook and also feeling good about next year. And so what's driving our platform revenue growth, in 2024, we outlined our key monetization initiatives, the general buckets of areas we're focused on to grow our platform revenue. And that strategy is working. You can see it in the results, and I think we'll continue to see it for quite a while. And the results and the success of our strategy just gives us a lot of confidence that we're going to maintain double-digit platform revenue growth, while increasing profitability in 2026 and beyond. So just to recap, the 3 areas that we're focused on to grow our platform revenue. 1 is making better use of our home screen, which is a key strategic asset for us. Another one is growing ad demand and the third is growing our subscription revenue. So in terms of our home screen, like I said, it's a key asset for us. Every Roku customer, which is half of broadband households in the United States, they turn on their TV and they start their viewing experience with their home screen. It's how they discover what -- and decide what to watch and we're always actually working on improving our home screen. We're always testing changes. And when those changes result in a better viewer experience or better monetization. We roll those changes out and that's ongoing. For example, we added the recommendation row to the top of our home screen recently and that's working well for us. But we have -- as we've mentioned before, we are working on a larger update to our home screen. That's in testing. It hasn't rolled out yet. But the testing has gone really well, getting a lot of positive feedback we're being very thoughtful about that. It affects a lot of viewers. So we want to make sure that it's both a big improvement for all of our viewers as well as an improvement to engagement and monetization. But I think we'll see that based on the testing results we're seeing so far. I think that's going to roll out in 2026. So home screen, continuous home screen improvements and UI improvements are one of the ways we grow our platform revenue. Another is we're focused on growing our ad business and our ad demand. Our goal is to -- our strategy there is to work with all the major platforms, including all the major DSPs. We announced the relationship with Amazon recently deeper support with the Amazon DSP. That's just turned on. So it's a little early to say. But so far, it's looking good. And I'm still very excited that's going to be a contributor to our business, but it hasn't really ramped up yet. It's just starting to ramp up. Also on the ad side, we're focused on improving measurement. We announced, for example, this quarter integration with AppsFlyer. Another area we're focused on is Ads Manager, which is our self-serve platform for small- and medium-sized businesses, but also really focused on performance marketing. It's a business that's growing fast. It opens up a big new area of advertisers, a big new category of advertisers, a different class of advertisers as well as performance marketers. So that's a big area that we're focused on. We're putting more resources behind that. So -- and I think overall, we believe we can be the most performing connected TV platform. We have a lot of data. We have the highest engagement by far in the United States and it's an area we're investing in improving the performance of our ad platform. And then subscriptions are doing well for us. Premium subscriptions, particularly doing well. And in Q3, we continue to improve the premium subscription experience. We also added new services, we're always adding new premium subscriptions, but we can add more services in the quarter and we'll be launching more Tier 1 subscription services and premium subscriptions in 2026. And then, of course, there's Howdy, which is our latest owned and operated service, which is $3 a month with no ads, an SVOD service, and it really taps into a large underserved market, a scenario of the market that's not really targeted with a particular SVOD service. And I think it's a very large opportunity for us. So that's also still early. But just like we grew the Roku Channel into a large business over time using our platform, I believe we're going to do that with Howdy as well. So that's an area that I'm excited about, but it's still early as well. And then in terms of capital allocation, let me turn it over to Dan.

Thanks, Anthony, and thanks for the question, Cory. Let me just start by saying a few things about our financial position and capital allocation. We have $2.3 billion of cash and short-term investments on our balance sheet, a very strong position. We achieved a positive operating income in Q3. That's the first time since fiscal 2021. Our outlook for Q4 on adjusted EBITDA at $145 million is our highest ever for adjusted EBITDA. For the full year, our EBITDA margins are expected to be a 200 basis point improvement year-over-year to approximately 8.4%, and we expect similar improvement next year. And I think, I've said several times, we are and we'll continue to be CapEx light and we're growing our free cash flow faster than our EBITDA. And all of this has resulted in a trailing 12-month free cash flow of over $440 million. So we're very strong in terms of free cash flow generation, and we're going to clearly grow from there. Also, in early 2024, we initiated our net share settlement program offsetting about 40% of gross dilution. And last quarter, as you mentioned, we repurchased $500 million of our stock under our $400 million share repurchase program. So -- and total dilution for Q3 was 130 basis points. That's the lowest dilution we've had in any quarter. So all this is a way of saying, we're very focused on dilution, share buyback, free cash flow. We have a goal of offsetting 100% share dilution over time, and I certainly see line of sight to that. So we'll continue to look at opportunities to expand our business and maximize shareholder value through disciplined capital allocation. And we're investing in all the platform revenue initiatives that Anthony just addressed and talked about, but we're doing so mostly through reallocation of capital. And we'll continue to look at maximizing our ROI as we continue to generate this positive free cash flow.

Our next question comes from Brent Navon with Bank of America.

Just want to look -- in your shareholder letter, you cited progress from third-party DSPs and Roku Ad Manager for advertising. Any way to frame how big each of those businesses are and what their underlying growth rates are? And then just to circle back to the opportunity in '26 for you guys. It seems like you guys are growing 20% organic ex political, ex-ASC 606 and 3Q. Your guide implies somewhat similar to 4Q. It seems like there's a lot of irons in the fire that you just mentioned. Are there offsets that we should also be contemplating or tough comps because it seems like you have momentum in Ad Manager. You have the Amazon DSP ramp, a political year, potential improvements in M&E. So I just want to make sure we're thinking through all the pieces correctly?

Brent, I think Charlie will answer that question.

Sure. Why don't I take the DSP portion and Ad Manager portion of the question, then I'll turn it over to Dan. Brent, stepping back, our strategy remains that we want to be open and interoperable and be deeply integrated with all DSPs, so that we can meet clients anywhere they want to transact. So it was totally natural that we would do what you said, which is deepen our integrations across the board. And of course, we announced the Amazon integration as well. And to put it in context, we've added dozens of ad tech partners over the last few years from the Yahoo! DSP or AppLovin Wurl to Magnite on the SSP side. And last year, we really continue to deepen our relationships with each of them. At the heart of your question on third-party DSPs, I think the best comparison is last year, we discussed on these calls quite a bit about our UID integration with -- the Trade Desk and the deepening of our existing relationship with Amazon is very similar to that, that we talked about last year with Trade Desk. So our goal with all these partnerships, Brent, is to drive greater efficiency and performance, and we are very bullish about our position as the open and interoperable partner in a marketplace with so many walled gardens. In terms of ads manager, in the macro, the shift to proof of performance or performance marketing to CTV is a tailwind we love. And we like what we're seeing, but I should say, it's early days. So generally speaking, there's a market push towards automation and more sophisticated proof of performance and Ads Manager, which is our self-service platform. And that and many of the performance innovations we're building to prove that Roku is the most performance CTV platform. All those are providing tailwinds. But it is very early days. We do like what we see. We see new advertisers coming. We see them staying because their Roku campaigns are performing. And in third quarter, approximately 90% of advertisers on Ads Manager were new to Roku, which we very much like as well. Dan, do you want to take the back half of that?

Yes. Thanks, Charlie, and thanks for the question, Brent. So to answer your question on thoughts on 2026? And are there any offsets, but let me just address Q3 and Q4 for a minute, so -- in Q3, we came in at a very strong 17%, actually, slightly over 17% growth rate. And our guide is at 15% growth rate, inclusive of political and friendly. And if you back out political and friendly for Q3, that number is 19% year-over-year. And if you back out political and friendly for Q4, it's actually a slight step-up from the 19%. So we feel really good on how we're going to finish this year. We're going to finish this year very strong. To your question on 2026, obviously, we'll provide further guidance on 2026 after next quarter. But Anthony just went over, many initiatives. Charlie just touched on many initiatives. You're right. We have a lot of irons in the fire, many of them are launched and working. Some of them are yet to be launched. Anthony talked about the home screen, which we're very excited about and the entire UI, which we're very excited about. We have Ads Manager. We have a lot of new ad products that that are performing well. We have premium subscriptions in our overall subscription business performing very well. And so I would just say, I feel very good about entering 2026. I'm very excited for the year.

Our next question comes from Justin Patterson with KeyBanc.

Great. Could you expand a little bit more on what this new home screen means for the business? How should we think of it influencing engagement and monetization versus the existing home screen. And then stepping back just around the deeper DSP integrations. There have been a lot of investor questions around just what comes after the DSP integration. So would love to hear about just what other ad product innovation you have going forward? And how you can -- how you think that will help sustain platform revenue growth?

Justin, this is Anthony. In terms of the new home screen, I would say, first of all, we have a very iconic home screen. It looks different. It feels different. It feels simpler. It is simpler to use than our competitors. We're very proud of that. And it's also a fun, a lot of delight built into our home screen. So an important goal for us is to maintain and improve that. We want to keep it iconic. We want to keep it differentiated. We want to make it more delightful. But we also want to make it more useful. Our current home screen -- I mean, customers love it. It's very useful, but we can make it even more useful. So that's a big goal. So we want to increase customer satisfaction with our home screen, but we also want it to drive more monetization. So there's lots of things that we're testing that testing does show it drives more engagement, increases monetization, whether it's helping get viewers to sign up for more subscriptions or to watch more ad-supported content, those are all important goals or whether it's more promotion. So those are the 2 goals for the business, higher viewer satisfaction, more engagement, more monetization. And testing -- our testing has shown that we're achieving both of those. So we're still testing optimizing. And like I said, we'll hope to roll that out in 2026. And then in terms of DSP integrations, what comes next, I mean, I'll just say, like, we're not done with DSPs like we do integrate with most -- with all the major DSPs. But I still think there's lots of room to continue to deepen those integrations to increase our business, create stronger business relationships with those partners. So we're -- we continue to work on that. And then in terms of ad products, there's a whole suite of ad products under development. I mean, I would say kind of high-level categories. 1 is we're very focused on performance, delivering on -- we already have a platform that is very performant, very measurable focus on performance and targeting. But we're doing things like integrating next-generation generative AI into our ad system to make it even more performance-oriented. So just the overall being by a wide margin, the most performant Connected TV platform, a lot of our ad work is going into that. And then our traditional ad business is brand advertisers, agencies, that's a big and important business for us. But looking at small- and medium-sized businesses, businesses that traditionally advertise on social media are more digital-first type advertisers. Those are big markets, and we're building products to address those markets as well. So I don't -- I think I covered it, but I don't know, Charlie, if you have anything?

You nailed it. I'll say, Justin, this is Charlie. Really you asked what comes next. I'll tell you what comes before it is equally important, too. If you think about -- Anthony mentioned we're in half the broadband households in the country. Authentication leads everything. I mean, literally all else follows. So if you start to think about the fact that Roku has high fidelity signals, we have an ability to drive results for marketers in authenticated premium content. That's where it starts. And then everything Anthony talked about is exactly right. We're going to continue to refine our integrations with each of these partners. And I think what the best thing is, is we'll drive outcomes for our marketers and be able to actually continue to refine to meet their needs. Dan, I don't know?

No, I don't have anything except to say that the question was around sustainable revenue on ad product. And I think Charlie and Anthony answer that. We also have a subscription business, which is driving a lot of revenue growth and is, in fact growing faster premium subscriptions is doing exceptionally well. We had a Tier 1 launch last quarter, we'll have more Tier 1 launches in the coming months that we feel very good about. So we have a whole other business in subscriptions that is also growing exceptionally fast and we fully expect that to continue. In addition, to the ad revenue that Charlie and Anthony just discussed.

Our next question comes from Laura Martin with Needham.

My 1 for Anthony is on data. So I understand that all these new revenue streams you're working on used Roku's best-in-class data. Do you have any updated feeling about licensing your best-in-class data to the LLM, which you're spending at Meta $72 billion this year and Gemini at $85 billion this year, and they're running out of data, these LLM, -- so you guys have, I think, revenue stream that is really valuable that you're not utilizing at all? And then for Charlie or Dan. Lots and lots of -- so there's auction density that you're working on. There is subscription revenue you're working on, and you didn't mention shoppable. Is that sort of the order you see in terms of driving upside from these, let's call them, ancillary or newer revenue streams over the 1 to 2 years? First would be getting the sellout rate higher? Second would be the subscription. And then third would be Shopping?

Laura, thanks for the question. Great to hear from you. On data, I'll just say that, yes, that's right. I mean our first-party data is an extremely important asset. We use it in a lot of ways, we use it. It's what powers our ad -- targeted advertising, it powers our AI behind all our performance marketing. It's how we personalize our home screen, recommend, make recommendations to users. So the primary way we use it is we use it to sell more ads, sell more subscriptions, deliver a better experience for our viewers. But we are -- we do -- we are, I'll just say, always looking for ways to get better monetization out of our data. And I mean, working with LLM is certainly something that we've thought of and are considering, but it's not something that we're doing today, but it's certainly something that we're investigating, I will say. And then there's other -- I mean there's other opportunities to monetize our data as well that we're also looking at. So Charlie, Dan, do you want to take that question?

Laura, it's Charlie. In terms of the order, I think they're all important. I'll address your shoppable question. We're bullish on Shoppable, and it's one of those opportunities that I think is early but working from some original programming where we've integrated product and made the products in the show Shoppable to the far larger opportunity, which is to teach America how to shop on TV. I think Roku will be the best place to do that simply because of our scale. But in terms of behavior, I think it is slightly early days. We do see, obviously, great performance metrics across our platform and certainly with some of our ads, including our Shoppable ads, but it wasn't mentioned because it's early days not because we don't have great interest in pursuing it. And we have lots of partners, who are working with us on that.

Our next question comes from Michael Nathanson with MoffettNathanson.

I have 2, Charlie, Dan. Charlie, as more and more sports content moves to streaming, it feels like you guys have a major opportunity here with sports experiences. Can you talk a bit about what you're seeing to date? Is it driving revenue growth? And then longer term, do you envision at a time, when I can actually watch all my sports in 1 experience zone, right? So instead of going to different apps, can I just have 1 centralized aggregation place to watch my sports, that's for you. And then for Dan, I just want to confirm, you said distribution revenues are growing faster than advertising and you had 1 new launch. But I think we had both Fox and ESPN launched in the quarter. So is there a timing issue because those are the 2 major launches? Just want to confirm that.

Michael, it's Charlie. Good to hear from you. Look, the fact that every NFL game is now available in streaming is nothing but a tailwind for Roku, which again represents half the broadband households in the country. We have tremendous opportunities with sports for a number of reasons. #1, if you think about it, and we talk a lot about being the lead into television. And when the last Olympics came, we took great pride in being the fact that we were the front door to everything you wanted to experience and we help drive that with NBC as our partners, and we'll do the same for the World Cup that's coming and other opportunities because, frankly, in -- Anthony talked about simplicity of the home screen, the simplicity and delight of us getting people to what they want to watch, especially their favorite sporting experiences through our destinations like the sports zone, I think we're really just scratching the surface of what that can be. And as a sports fan myself, you see in Major League Baseball, how your team travels from site to site and we -- or excuse me, from app to app throughout the very same week. And of course, the sports experiences we create, make that really simple. So it's a long-term vision of having a time where you can watch them all in 1 place. I think -- that is a vision every sports fan would like. You know well the reality of these rights fees and how they are ending up behind paywalls. But I will say, regardless of how it settles out, the best experience for watching sports will be on Roku, and we're really refining the way to help sports fans operate in a confusing landscape. Dan, do you want to take the back half?

Yes. Thanks, Charlie. The short answer to your question is no, it's not a timing issue with revenue associated with FOX and ESPN. We would have -- you back out any partner launch, you back out M&E we're still growing incredibly fast, faster than the market. It's not a timing issue.

Faster than advertising.

Yes.

This is Anthony. I'll just add. Look, on the sports thing, I mean, Charlie answered that, but just to be super clear, it's a big opportunity for us, the fact that sports is and will continue to be fragmented across a lot of apps is a big opportunity for us with products like our sports zone to create a simplified experience that allows viewers to find the sports they want to watch. So it's an area that we're focused on. It's also an opportunity for marketing and promotions and advertising and sponsorships as well.

Our next question comes from Vasily Karasyov with Cannonball Research.

Dan, I have a question for you. Now that we have had a few quarters in a row of very steady growth in platform revenue. And you just outlined -- you and Anthony and Charlie outlined the growth drivers for the years ahead. Can you help us think in terms of ARPU growth, given where your user base is growing and the platform revenue growth is that -- if I were to think sort of in the ballpark terms, would ARPU grow at double the rate of the platform revenue growth in the midterm, just if you could help us dimensionalize that trajectory would be really great.

Thanks for the question, Vasily. It's a good question. And I would say several years ago, I know we had an ARPU when we actually had that KOM is roughly flat. And we talked a lot of mix. I will say that -- in the U.S. and globally, platform revenue continues to grow. That's -- we've talked about the overall platform revenue growth of 17%. The guide is at 15%, we are growing our streaming households as well. We've grown them well internationally. We've grown them in the U.S. They continue to grow in the U.S., but overall ARPU is growing I expect that to continue. I think I mentioned in a prior call at some point, like I truly believe our ARPU can get a significantly higher with all of our monetization initiatives. And while we will grow streaming households, like I strongly believe we'll hit 100 million streaming households and in 2026, our ARPU is going to grow faster because our platform revenue initiatives are simply going to grow faster. So it is a good story on both U.S. and international ARPU.

I'm sorry, you said faster, faster than the active accounts growth or then the platform revenue growth?

It's going to depend on the country. I will say that -- the U.S. is -- we're growing both the numerator and the denominator of the -- of that equation. But because of the platform revenue growth -- because of our constant -- as we said, we're going to continue to grow double digits and again, 17% growth in Q3 is very steady. I do believe ARPU will grow. And I think the more important point is I think our ARPU can go up significantly higher from where it is per account or per streaming household today. Again, we're going to continue to grow streaming households, but ARPU is going to grow fast.

Our next question comes from James Heaney with Jefferies.

I know, it's been under pressure for a while now, but is there anything you can say about M&E vertical this quarter and in Q4? And separately, how do you think about the consolidation in the media industry and how that potentially can influence your position as a distribution partner for streamers? And then I had a follow-up.

James, this is Anthony. I'll take the second question on consolidation first and then turn it over to Charlie for -- to discuss M&E. I guess I would just say that as we said many times in the U.S., more than half of broadband households use a Roku to watch television. That means half of all streaming -- TV streaming happens on our platform. And that, of course, means that we're an essential partner to every content owner and streaming service. And I don't -- however, whatever consolidation happens in the industry, that's not going to change. I mean, we're going to remain an essential partner. The streaming sector is robust. It's growing. It continues to grow nicely. And I think that, that's just creating a lot of opportunities for us to continue to grow our business. And then on M&E, Charlie.

Sure. Yes, I think that's right. It is easy to see, obviously, that the M&E industry is still figuring itself out as a whole, I'd say how many companies are still focused on profitability. And as such, there remains some general challenges in CTV. Our advertising business is doing remarkably well despite some of those headwinds. We got some benefit from the new launches this quarter, but the industry remains pressured. So inside M&E for us, there is quite a bit of good news. The theatrical side of M&E as a category is really starting to perform. And we're seeing those advertisers invest in the benefits of some of our unique units like our custom home screen takeovers and the video in our marquee unit, which has been very popular. I'll say, James, we have been focused on both diversifying and growing our platform business. And today, we're less reliant on any 1 vertical than we've ever been, including M&E and because we're so big, we're in half the U.S. broadband households, we do remain the best place to spend on M&E to attract and engage and retain subscribers and to measure ROI. So while we're not relying on M&E to drive our growth improvement in the industry at any time will represent upside for us. And when -- and if the segment really rebounds, it will be a tailwind for us because we're really good at building the M&E business, and we -- I believe we're the best place for an M&E advertiser to invest their dollars.

Great. And then maybe just a quick follow-up on just overall macro environment in the quarter and so far in Q4, like anything stand out that's been particularly strong or weak anything on the call out there, maybe for Dan.

I think -- well, maybe Charlie wants to take the top of the macro environment as it relates to ads and then I can talk a little bit after Charlie. Charlie, do you want to take that one.

Sure. Thanks, Dan. James, I like what we're seeing trend-wise. I really do. And Roku has some unique attributes that allow us to take advantage of today's ad trends. I think that's equally important. One of them is you got to remember that as a platform, Roku, and I said it earlier, is the lead into all of television, and that comes with some real advantages in this market. Also, we've been diversifying demand across our platform and our streaming service, and we built programmatic excellence and numerous third-party relationships that allow us to meet our clients as I say, wherever they wish to transact. So Roku's seen the benefit of the market as a platform and as a publisher. If you think about it, I want to say publisher, I mean an owner and operator of the Roku Channel, which -- you look at the Nielsen Gauge, we're a top 5 streaming service and on our own platform, we're #2 in terms of engagement in the U.S. So as a platform, the value of our home screen engagement has allowed us to benefit from our ad product evolution, among other things. An example of this is, like I said, our marquee ad unit, which is now very popular and it's now a video unit. That's been great. And in terms of diversifying demand and the programmatic excellence I just mentioned, we're seeing positive impact of both heading into fourth quarter and moving forward. Actually, Dan mentioned, our platform revenue grew 17% year-on-year that's due in part to strong performance in video advertising. And of course, that means we're growing faster than the U.S. OTT and digital ad marketplaces. And then if you look at that ex-political and ex-friendly third quarter platform revenue grew 19% year-on-year. So to answer your question, James, the trends are positive, and Roku is really uniquely positioned as both the platform and a leading streaming service to compound the value of these market trends. Dan, did you want to...

The only thing I would add, I think on upfront pricing, Charlie. Like I think I'll just say that the 1 trend going into Q4 is we're pretty happy with our upfront in terms of pricing. Maybe you want to touch base on that as a trend because I think that is a change.

Yes. So you're right, with October comes to the new upfront schedule starting to run, not only do we have a really powerful upfront, but we saw pricing stability. And I -- if you want me to go deeper on pricing, it's really interesting how pricing affects different services in different ways. And the headline, I suppose I'd leave with, Dan, is that we have multiple levers to pull, and that's consistent with what I just said. And on pricing, we don't have a supply issue so we can price up and down a demand curve and use that to our advantage. So we're doing really well, both in volume and I think our pricing approach really is distinct in this market.

Yes, exactly. So pricing is positive for us in Q4, at least as part of our upfront, which is different than last upfront. So that's a good positive trend for us. In terms of other trends, like our guidance that we provided, which was roughly 15% per platform, and again, backing out political and friendly, it's above the Q3 growth rate of 19%. It actually implies 20% growth on an ex-political ex-friendly basis. Just would imply that a lot of the trends that we're seeing in Q3, we expect to continue. And again, it is advertising, for sure, on everything Charlie just said, but it's also our subscriptions business, which is performing incredibly strong, including our premium subscription business, which is growing very well.

Our next question comes from Ross Walthall with Cleveland Research Company.

I just wanted to ask a little more detail on the Amazon DSP partnership. I know it's early days, but can you talk to you what the rollout looks like from here? Any customer feedback and whether this could be a material driver going into either Q4 of '26?

Ross, this is Anthony. I'll start. I don't know if Charlie will have anything to add. But I'll just say that, as you said, it's still early on the Amazon. I mean it's live now, but it's just basically gone live recently. So I would say there's strong interest from customers. I mean there's a lot of customers that are very interested in using the Amazon DSP. And we're obviously a key partner for them in that. There's a lot of customers, obviously, that want to use Trade Desk, but also these days, also Amazon. So I'd say there's strong -- there is strong customer interest. The signs we're seeing so far are good, but it's just a little early to say. I don't know beyond that, Charlie, did you -- is there anything else or...

I think you did -- you mentioned Trade Desk. You saw in the Trade Desk integration last year, it takes some time to roll out. But I like what we're seeing so far. We're seeing clients ask us the right questions about how to use it. We know there's a general push towards outcome-based buying and measurement of performance and our strategy to be everywhere, including now Amazon at depth has us in a good position. And I do think it will ramp well into '26.

And then I don't know, Dan, do you want to same thing on Q4 '26?

No. I guess I would just say that I'm going to reiterate both Anthony and Charlie's point is we just turned it on the first of this month here. We're in very, very early days. We like what we see. It is contemplated in our Q4 guide. And we're going to have a lot more visibility as we exit the year and go into 2026, and we'll update you at that point in time.

That's great. One other question on the self-serve business. Do you think you have the right tech and partnerships in place to really scale this, like are all the pieces in place? Or are there like additional capabilities or partnerships that you need to add? And just ultimately, like where can this business go long term?

So this is Anthony. I'll start and then see if Charlie has anything to add. I mean I think that -- I mean it's -- so the short answer is, yes. We have everything we need. We've got the partnerships we need, but it's also early in the evolution of this business. So we'll be -- we're still investing in R&D. We're still building more partnerships. I mean we have our own self-serve platform called Ad Manager but there are other businesses that are doing something similar and we're working with those companies as well. We're not wedded to our -- just using our own platform for this -- to serve this market. I mean it's a big market. And it's a large market. It's a market that's multibillion dollars, it's as large as -- it's almost as large as the traditional brand advertising business. So it's a big business. And I mean, the other thing we're really focused on is integrating generative AI into our platform to do an even better job on targeting and performance-based marketing. So I think that there's nothing that we're missing, but there's a lot more evolution and growth to come. But Charlie, I don't know, if you want to add?

Yes. That's right. We have everything we need, and we're going deeper. I mean, it's so funny. We talk about deepening these integrations. We continue to do the same with our own products and look for ways to refine and improve more and more performance. One thing that's unique about our product, obviously, is that these small and medium-sized businesses will now have access to authenticated premium content. And so, when they see that they're able to, we said in the early days, democratize television and access our platform, I think we have a really compelling and differentiated offering. And of course, because we have the scale that we do we're going to perform really well. And what's great about these platforms, which is different than our traditional business is that when we improve ROI, people will leave it on as long as there's a positive return. So I like these advertisers. I like how many new advertisers are coming to the platform, and I think there's a lot of opportunity ahead that we're poised for.

Yes. And I'll just add. I mean, I think it's kind of -- it's probably evident self-evident, but -- this is a large business that exists in -- like it's what caused the growth of social media platforms in terms of their advertising business. What's unlocked for platforms like for Roku is basically generative AI that allows a business to create a video ad for free basically with a single click of a button, producing a very high quality, high production value professional-looking video ad. And so that now makes video platform like Roku as easy to use as a social media platform for performance marketing.

Our next question comes from Robert Coolbrith with Evercore ISI.

2 questions, please. First, on performance, I wanted to ask maybe about some of the advantages that you may have to sort of deliver on that, the platform player, your ability to provide feedback loops or certain types of consumer interactions with ads on your platform. And then also I wanted to ask sort of related to that as well, your ability or your interest level in perhaps launching new pricing models like cost per action or something along those lines? And then second, I just wanted to quickly touch on the streaming hours. It looks like you had a bit of a deceleration there. I wanted to just ask, if there were any comp factors or anything else to be aware of on that?

Okay. So just on performance, let me start and maybe Dan will have something to say. So I think the advantages of our platform include extremely large scale, a lot of first-party data on a very advanced technology platform, including a lot of AI. So like these are the things, these are the key -- a user experience that has a lot of places to promote and place ads as well as video ads. So I mean these are the things that are sort of the base capabilities that we build our performance on top of. So -- and I think we're unique in our scale and the amount of data that we have and we have a world-class, I would say, probably the best TV engineering team in the world. So we have all the pieces and we're putting them together. In terms of our interest in new pricing models, I don't know, Charlie, do you want to take that one?

Well, the answer is you were asking about CPA. I think that performance is in the eye of the beholder, right? And you have some large packaged goods company, who just want to see incremental reach. And then you've got some other businesses who have a very specific KPI, and we can help them reach all of them. It's interesting. When I step back I think about the use cases we can meet and there are many. But ultimately, they all sort of fit into 1 of 3 buckets, which is planning or activation or measurement and we've got tools and we have Roku Data Cloud and all sorts of other ways to help people maximize the efficacy of their media across the largest streaming platform in America. And so the answer to your question is directionally, absolutely, we will meet people not just where they want to transact, but we'll start to prove ROI in deeper and deeper ways. And then our platform in terms of the ads manager platform will really make it easy for them to do so and continue to see a return on their investment. In terms of streaming hours do you?

Yes, I'll take that one. On streaming hours, it was a slight decel from prior quarters, but really, there's nothing there from a monetization standpoint. What you're just seeing is -- these numbers are just getting very large. And so we still are growing well into the double digits in streaming hours. I think it's also really important to note that here see streaming hours and monetizable hours, which is something I look at across the platform is actually growing very well, and we're actually gaining traction not in terms of acceleration of percentage hours, but any -- the TRC continues to be the #2 app on our platform by streaming hours. And it's actually -- it's gaining ground from other apps in that perspective. So -- nothing on streaming hours is concerning in any way. It's just very, very large numbers, hundreds of billions of hours that are being streamed here. So the decel from quarter-on-quarter is nothing that is of any concern and in fact, like I said, monetizable hours, especially with our premium subscription growth and our TRC growth as it continues to do very well and it's very strong.

Yes. As a head of ad monetization, it is a nonissue. I -- this is Charlie. I think it's actually -- we have what we need to come to market, and we're maximizing that inventory opportunity.

Our next question comes from Alan Gould with Loop Capital.

I've got 2, please. First, on the Amazon, just 1 quick follow-up. What are the key features and functionality that Amazon provides at the other DSPs in addition to diversification is the key issue there, the frequency capping. And then for Dan, when I look at 3Q and 4Q platform, growth and you back out friendly and political. If you were to also back out ASC 606, would the numbers be north of 20% and would 4Q still be growing quicker than 3Q?

Alan, Charlie will take your first question and then Dan will take your second.

Great. Thanks, Alan, for the question. Look, the easiest way to talk about it probably is that we're powering audience addressability, frequency management and closed-loop measurement. As I said, we actually, again, tend not to advise a client on which DSP to use. We actually are everywhere they want to be, and we -- we're very proud of this Amazon deal. But at the highest level, that's what we're working on with that DSP integration. Dan, you want...

To your question. Sorry, I'll take the second part of your question. You're right, it would be slightly north of 20%. Actually, it's slightly north of 20% just ex-ASC 606 -- ex-political and friendly for Q4, it would be closer to 21% on an ex-ASC 606 basis. And yes, you would still see that slight step-up on ASC 606 basis. And again, that's ASC 606, just to be clear, that ASC 606 from 2024 we have not booked any ASC 606 in 2025, nor do I expect to.

That concludes today's question-and-answer session. I'd like to turn the call back to Anthony Wood for closing remarks.

All right. Well, I want to say thank you to our employees, customers, advertisers and content partners, and thank you for listening.