Roblox Guided Bookings Down as Much as 18% and Withdrew Its Full-Year Outlook. The Algorithm Change Behind It Was Deliberate.
Key Points
Roblox guided third-quarter bookings to $1.576 billion to $1.653 billion, a decline of 14% to 18% from a year ago.
The company also declined to offer a full-year outlook, accelerating a planned shift to quarterly-only guidance.
Management says an April change to its discovery algorithm, made to favor long-term player retention, is part of the cause.
- 10 stocks we like better than Roblox ›
Roblox (NYSE: RBLX) told investors Thursday to expect third-quarter bookings of $1.576 billion to $1.653 billion, a decline of 14% to 18% from a year ago. It also declined to offer a full-year outlook, accelerating a planned shift to quarterly only guidance.
Shares fell about 27% Friday, hitting a fresh 52-week low near $34.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »
Management says part of the damage is self-inflicted, on purpose.
In April, the gaming platform began updating its "Recommended For You" discovery algorithm to optimize for long-term player retention, judging games on 28 days of player behavior instead of seven. A separate change, disabling the sale of cross-experience game passes, added a smaller drag.
The company's shareholder letter says the change "intentionally provides more impressions for highly retentive games at the expense of near term monetization." And the hit landed hardest among younger players in the U.S. and Canada, where the falloff in spending per hour was larger than management anticipated.
Image source: Getty Images.
Still, the quarter itself was better than the reaction suggests. Revenue rose 36% year over year to $1.47 billion, because bookings from earlier quarters are recognized as revenue over time. But bookings, the measure of what players spent now, grew just 8%, at the low end of the company's own guidance.
Meanwhile, daily active users climbed 10% to 123 million, hours engaged rose 5% to 29 billion, and the net loss narrowed to $185 million from $280 million a year ago. Free cash flow grew 66% to $294 million, and the company holds $6.1 billion in cash and investments.
But with no annual outlook, each quarterly bookings number now carries the full weight of the story. Management's bet is that longer retention eventually more than makes up for the lower spending per hour, and it says internal testing supports that.
Until the reported numbers show it, though, the market is treating the strategy as a cost rather than an investment. The $6.1 billion in cash gives management plenty of time to make its case. The proof, however, will have to arrive one quarter at a time.
Should you buy stock in Roblox right now?
Before you buy stock in Roblox, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Roblox wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $394,601!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,197,093!*
Now, it’s worth noting Stock Advisor’s total average return is 895% — a market-crushing outperformance compared to 206% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of July 31, 2026.
Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Roblox. The Motley Fool has a disclosure policy.
Recommended Articles
