Key takeaways
- Roblox shares fell approximately 27 per cent after second-quarter bookings, users and engagement missed expectations.
- Third-quarter bookings are forecast at US$1.58 billion to US$1.65 billion, representing a year-over-year decline of 14 to 18 per cent.
- Roblox said users are shifting from highly monetized viral games to newer and evergreen titles that generate less spending per hour.
- BMO Capital and Deutsche Bank downgraded the stock, cutting their price targets to US$45 and US$38, respectively.
- Revenue and free cash flow remained strong, but investors questioned how long the platform’s transition would weigh on monetization.
Roblox Corporation (NYSE:RBLX) shares plunged approximately 27 per cent Friday after the gaming platform issued a weaker-than-expected bookings forecast and reported softer user and engagement figures.
The stock fell to around US$35.60 after reaching an intraday low of US$33.89. The decline erased billions of dollars from Roblox’s market value and extended its year-to-date loss to more than 40 per cent.
Investors focused on evidence that changes intended to improve safety, content discovery and long-term user retention are reducing near-term spending on the platform.
Bookings growth slows despite higher revenue
Second-quarter bookings increased 8 per cent year over year to US$1.56 billion but finished at the bottom of Roblox’s guidance and below the approximately US$1.60 billion consensus forecast.
Bookings measure purchases of the company’s Robux virtual currency and provide a more immediate indication of user spending than reported revenue, which is generally recognized over the estimated lifetime of a paying user.
Revenue rose 36 per cent to US$1.47 billion, exceeding Wall Street’s US$1.42 billion estimate. Roblox reported a net loss attributable to common shareholders of US$183 million, or US$0.26 per share, compared with US$278 million, or US$0.41 per share, one year earlier.
Free cash flow increased 66 per cent to US$294 million, while operating cash flow rose 60 per cent to US$318 million.
However, daily active users reached 123 million, below the 128.71 million analysts expected. Users increased 10 per cent from a year earlier but declined 7 per cent sequentially. Hours engaged rose 5 per cent to 29 billion, also missing estimates.
Algorithm changes reduce spending per hour
Roblox attributed the bookings weakness to declining monetization per hour, particularly among younger users in the United States and Canada.
Engagement shifted away from highly monetized viral games released in 2025 and towards newer and established titles generating less hourly spending. Changes to Roblox’s Recommended for You algorithm added to the pressure by promoting games with stronger retention rates, even when those experiences produce less immediate revenue.
The company believes longer retention will eventually outweigh the reduction in hourly monetization. For now, management expects the weakness to continue.
“Monetization weakness is likely to continue,” Chief Financial Officer Naveen Chopra said during Roblox’s earnings call.
Age-verification and safety measures have also introduced additional steps during registration and restricted access to some communication features. Roblox said 57 per cent of users have now completed an age check.
The company is simultaneously targeting older players, who tend to spend more. Users over 18 represented 27 per cent of age-verified daily users during the quarter, while U.S. players in that category monetized more than 50 per cent higher than those under 18.
Third-quarter outlook alarms investors
Roblox expects third-quarter bookings of US$1.58 billion to US$1.65 billion, representing a decline of 14 to 18 per cent from the previous year.
BMO said the midpoint was approximately 12.5 per cent below Wall Street expectations. Roblox also forecast revenue between US$1.41 billion and US$1.49 billion, equivalent to growth of 4 to 10 per cent.
Free cash flow is projected between negative US$60 million and positive US$5 million as the company increases capital spending and invests in AI-related products.
Roblox also accelerated its transition to quarterly-only guidance and withdrew its full-year forecast. Management argued that annual guidance was no longer useful because platform changes and the timing of investments were producing a wider range of potential outcomes.
“Back to back guidance resets without insight into recovery has brought credibility into question,” Wolfe Research analyst Shweta Khajuria said.
BMO and Deutsche Bank downgrade Roblox
BMO Capital downgraded Roblox to Market Perform from Outperform and cut its price target to US$45 from US$100.
The firm expects engagement and monetization pressure to continue for several quarters. It also identified the launch of Grand Theft Auto VI as a potential competitive challenge during the fourth quarter.
Deutsche Bank lowered Roblox to Hold from Buy and reduced its target to US$38 from US$56. Analyst Benjamin Black described the third-quarter outlook as “disappointing” and said it “materially reduces” visibility into the company’s near-term performance.
Deutsche believes Roblox’s platform transition will require more time before producing financial outperformance, with execution risks increasing as competition for users’ attention intensifies.
Roblox continues to target long-term annual top-line growth above 20 per cent. However, investors are likely to demand clearer evidence that its safety, discovery and content-diversification initiatives can improve retention without causing a prolonged decline in spending.