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Roblox Cuts Forecast, Shares Fall 20% Amid Slow Spending

Roblox revises annual bookings to $4 billion-$4.1 billion amid economic challenges, shares plunge over 20%.

By Jack Wilson

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5/9, 09:50 EDT
Electronic Arts Inc.
Roblox Corporation
Warner Bros. Discovery, Inc. - Series A
Walmart Inc.
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Key Takeaway

  • Roblox shares plummet over 20% after cutting annual bookings forecast to $4 billion-$4.10 billion due to muted player spending.
  • Engagement growth slows, with a 19% increase in hours spent by users aged 13+, marking the lowest rate in two years.
  • Amid industry challenges, Roblox diversifies into digital advertising, targeting ad revenue forecasts starting in 2025.

Revised Bookings Forecast

Roblox announced a reduction in its annual bookings forecast, indicating a shift in consumer spending within its video gaming platform amidst an uncertain economic climate and high inflation levels. The company now anticipates full-year bookings to range between $4 billion and $4.10 billion, a decrease from the previously projected $4.14 billion to $4.28 billion. This adjustment comes as the latest in a series of cautious outlooks within the gaming sector, which has seen significant layoffs and studio closures due to waning demand. Notably, Electronic Arts also issued a subdued revenue forecast earlier in the week. Roblox's shares experienced a sharp decline of more than 20% in early trading following the announcement.

Engagement and Revenue Diversification

Roblox's engagement metrics showed a 19% growth in the number of hours spent on the platform by gamers aged 13 and older during the first quarter, marking the lowest growth rate in approximately two years. CFO Michael Guthrie commented on the trend, noting the addition of older gamers to the platform, who typically take longer to integrate and increase their time spent. In an effort to diversify its revenue streams, Roblox has initiated a foray into digital advertising. The company began showcasing virtual billboards with content from notable brands such as Walmart and Warner Bros Discovery to its users. Plans are in place to develop the infrastructure for this ad platform in 2024, with projections for ad revenue forecasts starting in 2025.

Industry Challenges

The gaming industry, including Roblox, is navigating through a period of reduced engagement, with expectations for growth in the PC and console market to remain below pre-pandemic levels until at least 2026, as per insights from research firm Newzoo. This downturn reflects broader challenges faced by the sector, including economic uncertainties and a shift in consumer spending habits. Roblox's conservative outlook for its second-quarter bookings, estimated between $870 million to $900 million, falls below market estimates. This cautious stance is partly attributed to the timing of the Easter holiday, which occurred in the first quarter this year, contrasting with the second quarter of the previous year, traditionally a period of heightened platform engagement.

Management Quotes

  • Michael Guthrie, CFO of Roblox:

    "That’s not unusual... we’re adding a lot of older gamers who take a while to get settled and spend more time on the platform." "Roblox will build the infrastructure for the ad platform in 2024 and start providing forecast for ad revenue in 2025."