Morningstar

Roblox Earnings: Eye-Popping Sales and User Engagement, but Our Long-Term Questions Remain

We plan to raise our fair value estimate of Roblox stock.

The application app of the online gaming platform Roblox can be seen on the display of an iPhone.
Silas Stein/picture alliance via Getty
Securities in This Article
Roblox Corp Ordinary Shares - Class A
(RBLX)

Key Morningstar Metrics for Roblox

What We Thought of Roblox’s Earnings

Roblox RBLX had an amazing second quarter, with impressive growth in users and paying users. However, the strength was driven by so-called viral hits, which could lead to unevenness in future growth. Management now expects much higher bookings in 2025, and these hits will boost future profits.

Why it matters: While management raised its full-year bookings outlook by more than 10%, to about $5.9 billion, it reduced its outlook for adjusted EBITDA to be slightly negative from slightly positive prior. Profits stemming from this quarter’s bookings will be recognized over time.

  • Bookings strength flows immediately to free cash flow, which grew to $177 million, from $112 million a year ago. Management now forecasts more than $1 billion in free cash flow in 2025, which would mark 60% growth in 2025 and is about $150 million more than it previously expected.

The bottom line: We plan to raise our fair value estimate to about $60 per share from $45 on a much-improved near-term forecast and an acceleration in reaching profitability. However, we question the durability of this growth surge. We expect more viral hits on Roblox, but not in a steady stream.

  • Roblox remains extraordinarily expensive, at about 100 times its revised guidance for 2025 free cash flow. We believe Roblox has a narrow moat and will continue increasing free cash flow and bookings rapidly, but we don’t believe this quarter or this year are indicative of a new norm.

Key stats: Second-quarter strength was evident across all regions and age groups, and particularly strong among users 13 years and older, which we think helped boost the number of paying users.

  • Grow a Garden was Roblox’s biggest viral hit, and it has attracted relatively older users. Daily active users older than 13 grew 17% sequentially—compared with 10% growth in users under 13—and management alluded to inroads with users older than 17.
  • Bookings rose 50% year over year, as paying users reached 23.4 million from 16.5 million a year ago.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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