Morningstar

Roblox Earnings: Awful User Metrics Lead to a Massive Guidance Cut

We’ve reduced 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

  • Fair Value Estimate
    : $55.00
  • Morningstar Rating
    : ★★★
  • Morningstar Economic Moat Rating
    : Narrow
  • Morningstar Uncertainty Rating
    : Very High

What We Thought of Roblox’s Earnings

A significant reduction in first-quarter daily active users and management’s expectation of further declines in the second quarter led Roblox RBLX to reduce its full-year bookings outlook from about 25% growth to about 10%.

Why it matters: The firm is coming off a wildly successful 2025, but its performance now looks fleeting rather than a big step forward that it can continue building on. Management attributed the weakness largely to the steps it is taking to verify user ages.

  • Daily active users declined sequentially across all regions, including by nearly 20% in Europe. All regions are still well ahead of the year-ago quarter in DAUs and monetization, resulting in first-quarter bookings growth of 43%, which is a deceleration from each of the past three quarters.
  • Some decline in DAUs after the 2025 frenzy, driven by games that went viral, and moderation in sales growth after the 55% rise in 2025 are understandable and should not be a cause for concern. However, management’s complete failure to forecast its results weakens its credibility.

The bottom line: We reduce our fair value estimate to $55 from $67, primarily due to a change in the weighted average cost of capital that we use rather than a change in our long-term forecast.

  • We have drastically cut our 2026 forecast, but we don’t expect the firm to be on a materially lower long-term growth trajectory. Rather, we expect choppiness like we’ve seen over the last year, with huge peaks and valleys in growth.
  • In light of the volatility, we have reassessed the firm’s risk profile and now use a WACC of 9.6%, up from 8.9%.

Key stats: The quirks of Roblox’s accounting mean its big reduction in expected bookings led it to raise its adjusted EBITDA outlook. Including the effects of deferred revenue and deferred cost of revenue, we expect much lower adjusted EBITDA in 2026 in light of the revised forecast.

  • Roblox is realizing significantly higher infrastructure, trust, and safety expenses.

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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