Roblox shares jump 25% after strong earnings in Q4 2022

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Shares of gaming platform Roblox jumped by 25 percent on Wednesday after reporting better-than-expected earnings for the fourth quarter of 2022, year-over-year revenue growth of two percent to $579.0 million. Throughout last year, the company’s revenue grew by 16 percent to $2.2 billion.

The platform also reported a 48 cents loss per share, better than the initial estimate of 52 cents per share loss.

According to Roblox’s earnings report, the company had 58.8 million average daily active users (DAUs) as of the last quarter. The number represented a 19 percent increase compared to the same period in the previous year.

Overall, Roblox gained 56 million average DAUs in 2022, which was a 23 percent annual hike. The company said January’s average DAUs had risen to 65 million or up 19 percent on an annual basis.

“Bookings accelerated meaningfully in December and January, with year-over-year growth exceeding 20% in both months.”

Michael Guthrie, Chief Financial Officer of Roblox

Analysts said investors “were particularly happy” with the company’s booking figures, which increased by 17 percent within a year to $899.4 million, or up 21 percent on a constant currency basis. Investors initially expected the bookings to be at $884.71 million for the fourth quarter.

Throughout 2022, Roblox bookings went up by five percent to $2.9 billion, up nine percent on a constant currency basis. Roblox estimates its bookings rate in January 2023 to be in the range of $267 million to $271 million, a 19 percent increase compared to the same month last year.

“Growth was strong across all geographies and age groups with particular strength among users above 17 years old,” Roblox chief financial officer Michael Guthrie said.

Roblox and the metaverse

Roblox is popular among the younger generation not only because of its game options — like Jailbreak, Adopt Me!, Meep City and others — but also due to the ease of interacting with other users.

Analysts said Roblox had developed its user base to include teens and young adults after mostly catering to children in its earlier phase. The user demographics likely contribute to the company’s financial growth as they have more resources to purchase Robux.

Experts added that the more diverse demographics showed Roblox’s ability to retain some of its users that should have grown out of the platform’s experience.

Roblox also reported that its users were engaged with its games for longer periods. Engagement hours went up by 18 percent year-over-year in the fourth quarter to 12.8 billion. Meanwhile, throughout 2022, the engagement rate increased by 19 percent to 49.3 billion.

The platform saw exponential growth during the COVID-19 pandemic as school children had to stay home. However, once pandemic restrictions eased, the company’s earnings took a hit.

Last year, Roblox CEO David Baszucki reported to investors that while the company’s absolute numbers maintained an upward trend, its growth rate had declined because it had to compare the numbers with the double or triple growth that happened during the pandemic.

Roblox also dealt with several issues, like content moderation and concerns about the exploitation of young developers creating games for the platform. Analysts said the latter is a prevalent issue, not only for Roblox but also for the entire tech industry.

Despite being a Web2 platform, Roblox has dipped its feet into the metaverse. Roblox chief business officer Craig Donato said the company focuses more on the social aspect of the metaverse instead of the VR and AR technologies.

Roblox has worked with various brands to offer numerous metaverse experiences to its users. For example, it recently hosted a free virtual Super Bowl concert featuring American rapper Saweetie. Roblox also partnered with the NFL for another project, offering a metaverse experience where users can manage their own NFL teams.

Recent reports suggested that Roblox might be looking to compete directly with Meta’s Horizon Worlds.