Roku's Amazon Deal Revenue To Be A 'Gradual Ramp,' Not a Sudden Boost, Analyst Says

JP Morgan analyst Cory A Carpenter maintained an Overweight rating on Roku Inc. ROKU on Monday following the announcement of a strategic partnership with Amazon.com Inc. AMZN.The collaboration allows advertisers to purchase Roku’s advertising inventory through Amazon’s Demand-Side Platform (DSP).Following a call with Roku’s management, JP Morgan has released a note outlining key takeaways from this strategic alliance.Also Read: Roku Stock Surges On New Integration With Amazon: Details Of The DealCarpenter said the Amazon ads partnership is more deeply integrated than Roku’s partnership with The Trade Desk TTD. The analyst noted that Amazon is a platform-level integration, whereas The Trade Desk is a Roku-level integration.Roku ad inventory available on Amazon and The Trade Desk is similar, but the Amazon partnership provides advertisers with more comprehensive platform-level data and, thus, better targeting capabilities, the analyst mentioned.Carpenter noted that through Amazon, advertisers will have visibility into every channel on the Roku platform by matching data sets from Roku with Comcast and Disney (through a clean room), whereas The Trade Desk only provides this level of visibility into The Roku Channel.Amazon ads exclusivity is tied to the platform level integration, the analyst noted. He said the Amazon partnership does not prevent Roku from announcing additional DSP partnerships at the Roku level (i.e., a Google partnership similar to The Trade Desk).Carpenter noted that the platform-level exclusivity has a timing aspect, although the length of the exclusivity window is unclear.The analyst noted that Roku expects some revenue in the fourth quarter, but the Amazon partnership was not included in the 2025 outlook. The partnership will go live in the fourth quarter of 2025, but he said that similar to The Trade Desk, it will be a gradual ramp and not a step-function increase.The Amazon partnership was one of many initiatives that gave management confidence in providing a full-year outlook. Still, Carpenter noted that explicit revenue contribution was not included in the outlook.Price Action: ROKU stock is trading higher by 8.04% to $80.39 at last check Monday. Amazon Commits $13 Billion To Expand Australia’s AI Data Center Infrastructure Photo via Shutterstock