Key Moments
- Wells Fargo lowered Roku (NASDAQ:ROKU) to Equal Weight from Overweight and reduced its price target to $165 from $167.
- The firm now projects 2026 and 2027 revenues of $5.76 billion and $6.45 billion, lifting prior forecasts by 3.8% and 4.6%, respectively.
- Roku’s second-quarter platform revenue increased 25% year over year to $1.22 billion, with adjusted EBITDA of $254.3 million and free cash flow of $280.9 million.
Wells Fargo Turns Neutral on Roku After Rally
Investing.com — Wells Fargo shifted its stance on Roku (NASDAQ:ROKU) to Equal Weight from Overweight on Friday, citing a strong second-quarter performance that boosted its estimates but left little room for additional upside in the stock. The firm framed its view in the context of Roku’s progress toward a planned acquisition by Fox Corp.
As part of the rating change, Wells Fargo trimmed its price target to $165 from $167. Under the proposed transaction structure, the brokerage values Roku at $96 per share in cash and $69 in Fox stock. It expects the deal to close in the first half of 2027, characterizing the likelihood of completion as high with limited risk and no expectation of a competing bid. Roku shares finished at $154.08 on Aug. 13.
Revised Financial Projections
Following Roku’s latest results, Wells Fargo raised its top-line forecasts for the coming years. The firm now anticipates 2026 revenue of $5.76 billion and 2027 revenue of $6.45 billion, representing upward revisions of 3.8% and 4.6%, respectively.
On profitability, Wells Fargo increased its 2026 adjusted EBITDA projection by 12% to $761 million. However, it reduced its 2027 adjusted EBITDA estimate to $837 million from $869 million, pointing to expectations for higher operating expenses as Roku invests to drive device sales.
| Metric | 2026 Estimate | 2027 Estimate |
|---|---|---|
| Revenue | $5.76 billion (up 3.8%) | $6.45 billion (up 4.6%) |
| Adjusted EBITDA | $761 million (up 12%) | $837 million (down from $869 million) |
Second-Quarter Performance Outpaces Expectations
Roku’s second-quarter results exceeded Wells Fargo’s projections across several key metrics. Platform revenue increased 25% year over year to $1.22 billion, topping the firm’s estimate by 4%. Subscriptions and other revenue grew 25.6%.
Adjusted EBITDA came in at $254.3 million, significantly above Wells Fargo’s estimate of $175.9 million, while free cash flow reached $280.9 million.
| Second-Quarter Metric | Result | Wells Fargo Estimate (where given) |
|---|---|---|
| Platform revenue (year-over-year growth) | $1.22 billion, up 25% | 4% below actual |
| Subscriptions and other revenue (growth) | Up 25.6% | N/A |
| Adjusted EBITDA | $254.3 million | $175.9 million |
| Free cash flow | $280.9 million | N/A |
Advertising, Subscriptions, and Political Spend Outlook
Wells Fargo noted that advertising and subscription trends remained solid, with media and entertainment revenue continuing to recover. The firm estimated that political advertising could add about $161 million to Roku’s 2026 revenue.
It also pointed to sports content as a potential tailwind for subscription momentum in the second half, as the football season begins.
Margin Pressures and Cost Considerations
Despite the upbeat revenue and earnings trajectory, Wells Fargo highlighted several cost-related headwinds. It flagged pressure on Roku’s device margins stemming from higher chip and memory expenses.
The firm also suggested that sales and marketing outlays could rise in the second half to bolster distribution and channel sales. In addition, it observed that Roku’s second-quarter device gross-profit outperformance included an estimated $38 million pretax tariff refund.
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