Shares of Roku Inc. soared nearly 10% on Monday following the announcement of a new advertising partnership with Amazon.com Inc., a deal designed to deepen both companies’ reach in the fast-growing connected-TV (CTV) advertising market.
The stock gained as much as 11% during early trading, settling at $82.57 before paring gains slightly by mid-afternoon.
Amazon shares jumped by almost 2%.
The partnership will allow marketers to buy ads across both Roku and Amazon platforms through Amazon’s demand-side platform (DSP), combining their reach into an estimated 80 million US connected-TV households.
Advertisers will gain access to inventory on Amazon Prime Video, The Roku Channel, and a range of streaming services available on Roku and Fire TV devices.
Advertisers to gain wider access and better targeting
The integration is expected to enhance targeting capabilities for marketers.
According to Roku and Amazon, early tests of the integration showed that advertisers reached 40% more unique viewers.
Analysts say this is a significant step for Roku as it looks to expand its advertising footprint and monetize its inventory more effectively.
Benchmark analyst Daniel L. Kurnos said in a research note that the partnership represented Roku’s “most significant pivot towards expanding their buying platform across the CTV universe,” although he noted that the impact could be difficult to quantify immediately, given the deal doesn’t start until the fourth quarter and could take time to scale.
Analysts at JPMorgan said in a research note that the partnership with Amazon allowing advertisers to buy Roku inventory through Amazon’s demand-side platform, will give advertisers more comprehensive platform level data, and thus better targeting capabilities.
They also said the advertisers will have visibility into every channel on the Roku platform.
Revenue impact to start by year-end; deal to help Roku meet profit goals by 2025-26
Though the partnership will officially go live in the fourth quarter of 2025, analysts believe some revenue gains will begin appearing in Roku’s top line before year-end.
However, the financial impact is likely to be gradual.
“The partnership will go live during 4Q, meaning that some revenue will hit Roku’s top line this year. However, the boost is likely to be a gradual ramp and not a step-function increase,” JPMorgan analysts said.
Wedbush analysts said the tie-up supports Roku’s broader ambitions to meet profitability goals by 2025 and 2026, even amid macroeconomic uncertainties.
They reiterated an “outperform” rating on Roku stock with a $100 price target.
CTV ad market gains momentum
The deal also marks a strategic response to shifting advertiser preferences in the streaming landscape.
Free ad-supported TV (FAST) platforms like The Roku Channel are gaining popularity over ad-supported video-on-demand (AVOD), due to lower ad prices and broader reach.
Analysts had long anticipated some form of collaboration between Roku and Amazon, given their dominance in the CTV space.
“Within CTV, Free Ad-Supported TV channels are likely to gain more ad dollars than Ad-Supported Video on Demand, thanks to their lower costs,” Wedbush analysts noted.
Roku’s low and steady ad prices on its FAST platform give it a strong position even as Amazon’s large inventory has pushed prices down elsewhere, Wedbush said
With this agreement, both firms have signaled their intent to accelerate the shift in ad dollars from traditional television to streaming platforms.
As Roku deepens its advertising infrastructure and leverages Amazon’s reach, investors are betting the company is well-positioned to benefit from the evolving dynamics in digital television.
Whether that optimism translates into sustained earnings growth will depend on how quickly the partnership scales and delivers measurable returns.
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