Netflix (NFLX 0.36%) wowed the markets last week with a blowout quarter, and its stock jumped higher on the news. And savvy investors might see this as a win not only for Netflix, but also for streaming giant Roku (ROKU -2.96%). Let's go through the story and see why you might want to buy Roku stock right now.

Netflix's excellent results

Netflix reported spectacular fourth-quarter results last week, with its highest-ever quarterly add-ons at 18.9 million new subscribers. It added 41 million for the year. Sales were up 16% year over year in the quarter, and management is expecting 11% growth in 2025. Operating margin expanded, and fourth-quarter earnings per share more than doubled.

Although there have been times over the past few years when it wasn't clear that Netflix could compete with the major studios, the company has demonstrated firmly that it can. And although it looked like streaming had hit a roof after accelerating during the pandemic, it clearly hasn't.

And that's great for all the streaming companies, especially Roku.

How it benefits Roku

I think you get where I'm going with this. Roku is the top streaming operating system (OS) in the U.S., Canada, and Mexico, and it's pushing deeper into international waters. It has been reporting strong growth, and like Netflix, it's been in a rebound position after stabilizing from pandemic acceleration.

Being the top OS means that more people are engaging with its platform than any other. It has a double-sided model that includes selling devices for viewers to stream, including a wide array of hardware that connects to screens and fully connected screens themselves.

That business is reporting a loss even at the gross level, but it's how Roku brings viewers into its ecosystem. The benefit is that to stream with its devices, users need to become members.

Membership gives them access to whatever paid streaming subscriptions they have, and it gives them access to Roku's free streaming network. The Roku Channel is where a lot of its growth is happening, and viewing hours on the channel increased 80% year over year.

Roku makes most of its revenue -- 85% in the third quarter -- from its platform segment, much of which is from ads it shows on the free channels.

But higher engagement with premium streaming subscriptions can also lead to higher ad sales. Roku recently started monetizing its home screen, where all streaming starts, with ads.

For example, it features the Roku Sports Zone on its home screen, where it aggregates sports programming for viewers to choose. Part of Netflix's success in the fourth quarter was its livestream of the Jake Paul versus Mike Tyson fight, the most-streamed sporting event in history, and its livestream of the two most-streamed NFL games ever. This strategy is how Roku can get a cut of this kind of engagement.

As streaming heats up, users are going to buy more of Roku's devices and engage more with its platform. Its advertisers had pressed the pause button when inflation was booming, but as it moderates, higher spending is likely to land in Roku's lap.

Lastly, Roku also makes money by partnering with third-party paid subscription networks and offering services through its platform. Management said that in the third quarter, third-party distribution activities grew faster than overall platform revenue, which increased 23% year over year, mostly due to subscription price increases.

It offers Roku Pay for viewers to easily subscribe to streaming services through its platform, and it takes a cut of the subscription fee. Netflix just raised its monthly fee in the U.S. and several other markets, but that won't show up in Roku's fourth-quarter report.

Roku is already winning

There was strong momentum in its third quarter. Total sales increased 16%, streaming households were up 13%, and viewing hours were 20% higher.

Roku became briefly, and surprisingly, profitable early in the pandemic, and it has retreated back into net losses. But tghe company is moving more carefully forward, and has reported positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) as well as positive free cash flow for five quarters. It's expecting the net loss to improve in the fourth quarter, but positive net income is still out of reach in the near term.

Roku stock jumped slightly after Netflix's report, but Roku is still down about 10% over the past year and 83% from its all-time highs. Roku is climbing back up, and accelerated streaming engagement is another reason it could start to soar very soon.