Roblox Earnings: Daily Active User Growth Underscores Fantastic Performance on All Fronts

Key Morningstar Metrics for Roblox

• Fair Value Estimate: $55.00
• Morningstar Rating: 4 stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Very High

What We Thought of Roblox’s Earnings

Roblox RBLX reported stellar third-quarter results, beating net bookings guidance by 10% and making headway in all regions. The network effect that underpins our narrow moat rating was on display, as increased community-generated content and the success of sponsored events pushed engagement past 20 billion hours. Management raised full-year 2024 projections for the top and bottom lines. After adjusting our model to reflect stronger user growth, we are increasing Roblox’s fair value estimate to $55 per share from $53.

Roblox achieved a record $1.13 billion in net bookings (revenue plus the change in deferred revenue), growing 34% from the prior year. The summer was a boon for the firm, as its player base swelled to 89 million users, with the inclusion of Roblox on PlayStation effectively doubling the pool of potential console players. Consequently, Roblox’s daily active users increased 26.6% year over year, up 9.4 million sequentially and the largest quarterly jump since the pandemic.

In the United States and Canada, where bookings per DAU are materially greater than in other regions, the number of DAUs grew 25% year over year and the region accounted for 61% of net bookings growth. While Roblox is unlikely to maintain 25% growth in the US, we think licensing partnerships with media properties such as the NFL and the introduction of pay-to-play games can result in strong mid-teens growth for several quarters.

The adjusted EBITDA margin expanded to 19.8% from 9.7% a year ago, as revenue growth continued to outpace growth in expenses. Increased spending on research and development and trust and safety investments lifted total costs by 18.2% from a year ago. Content moderation remains a key regulatory and social issue, but the firm is investing aggressively in developer tools and parental controls.