Roblox Earnings: Disappointing Engagement and Weak Forecast for Profitability Improvement

Key Morningstar Metrics for Roblox

• Fair Value Estimate: $45.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Very High

What We Thought of Roblox’s Earnings

Roblox’s RBLX bookings growth declined significantly in the fourth quarter to 21% year over year. Daily active users, or DAUs, and hours of engagement both declined sequentially at record rates. The firm offered disappointing 2025 adjusted EBITDA guidance on a deceleration in bookings growth.

Why it matters: Though the fourth quarter is typically seasonally weaker than the third, the sequential step-down in DAUs and hours on the platform were atypically large. Roblox’s growth need not be linear, but at their current valuation, share prices have a long runway of user growth.

• Sequential growth and hours engaged in the US, which makes up over 60% of bookings, were weakest, with DAUs dropping 9% and hours declining 17%. It appears the outstanding third quarter was an anomaly rather than an indication of acceleration in the business.

The bottom line: We have become skeptical about Roblox’s ability to maintain very high growth in DAUs. Roblox must start monetizing DAUs better to maintain high booking growth, but the company has been slow on this.

• We reduced our fair value estimate to $45 per share from $55. We believe that the firm benefits from a network effect that underpins a narrow moat, but while this can help maintain engagement with core users, we question whether it will attract users not already drawn to Roblox’s ecosystem.
• The high end of Roblox’s 2025 outlook implies adjusted EBITDA growth of only $85 million. In 2024, the increase was $350 million as the firm swung to profitability. We also believe margin expansion must come faster to justify the share price.

Long view: Average daily bookings per DAU grew 2% in 2024. This is not a bad result, considering the much larger and faster-growing user base outside the more lucrative US market.

• We believe the firm needs to increase this metric to support our valuation. We think selling more advertising will drive it. However, Roblox has been slow to generate material advertising revenue.