Roku

Roku just posted its best quarter ever. Second quarter revenue hit 1.35 billion dollars, up 22 percent, while platform revenue grew 25 percent to 1.22 billion dollars. Advertising climbed 25 percent to 673 million dollars and subscriptions rose 26 percent to 548 million dollars. In the US alone, more than half of all broadband homes use the Roku home screen before they decide what to watch, which is why advertisers keep showing up.

For years Roku grew users but lost money. That is over. Net income hit 164 million dollars this quarter, up from just 10 million a year ago, and free cash flow over the past year reached a record 704 million dollars. Gross profit jumped 35 percent and the advertising side now keeps 62 cents of every dollar it brings in, up from 56 cents a year ago.

Advertising is 673 million dollars of Roku's 1.35 billion in quarterly sales, and a chunk of the current boost is political ad spending tied to this year's election. That money fades once the election ends. If the economy also slows and brands trim budgets, Roku's growth can stall fast.

Device sales actually shrank 1 percent to 134 million dollars, and that business only looked profitable this quarter because of a one time tariff refund. Strip it out and devices lost money again. Net margins across the whole company are still thin at about 4 percent, memory chip prices are rising, and the stock swings roughly twice as hard as the market, so expect a rough ride.