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Roblox set to release quarterly earnings amid soaring user and revenue growth

·4 mins

Many adults heard the phrase ‘Robux’ for the first time last holiday season when the virtual currency of gaming platform Roblox landed on the top of most wish lists.

Roblox – with a stunning 70 million users – has attracted a devoted fan base, especially among teens, with its wide offering of games, from simulations and adventure games to ones you design yourself or with friends.

This Thursday before the bell, Roblox will report its first quarter earnings. And it will have to prove to Wall Street there’s more growth up ahead.

In its fourth quarter of 2023, Roblox revenue was $750 million, up 30% year-over-year – but had a net loss of $323.7 million.

Investors have cooled. The stock has shuffled between $25 and $45 for many months after hitting a peak, just above $130 in 2021, the year the company went public.

Still analysts and investors remain moderately optimistic. Here are three reasons why.

Roblox has evolved since its 2006 launch and so has its growth strategy. The platform allows users to both play user-created games and create their own games and it also blends elements of a social media network, so people can make friends and talk to developers as they explore virtual worlds.

Last year, its CEO shared visions of Roblox becoming a place where people can date and form ‘real-life relationships’ within the next five years. In February, the company said 19.7 million new ‘friendships’ are formed every day on the site.

The company’s vision has long been for Roblox to be everywhere, and in many ways, it’s succeeding. The platform’s active daily users are using the platform for an average of 2.5 hours a day – and those numbers continue to grow. About half of US youth, ages 12 to 17, use Roblox in the US monthly; and it continues to experience growth overseas, especially in Asia.

Its biggest hits include Adopt me! (a pet simulator), Brookhaven RP (a functioning virtual town) and Tower of Hell. Although many of the games are geared toward teens, the company seeks to grow and monetize the number of older players.

A new developer subscription offer allows developers to create monetary subscriptions to unlock certain experiences, a feature some analysts expect could help the platform grow even more among other generations.

Brands have growing interest in Roblox, too. The company said it experienced the strongest brand engagements on its platforms during the fourth quarter of 2023, with more than 300 brand activations on the site including those from Ralph Lauren, Nike, Crocs and Lego.

Walmart has even joined the Roblox metaverse, adding an experience that allows users to buy physical items and receive them in the mail.

Although more brand involvement will likely continue this year, the company will need to ensure users don’t suffer from ad fatigue.

Roblox’s growth reflects budding interest in two buzzy industries: artificial intelligence and extended reality (XR), a term that covers virtual reality, augmented reality and mixed reality.

In February, Roblox introduced an AI chatbot that allows users to communicate with each other in real time, regardless of what language they speak. The tool works in 16 languages. The company also previously shared its vision for the expansion of AI on the platform with tools that will ’enable every user to become a creator.’

At the same time, major tech companies continue to invest in XR, with increased interest due in part to the launch of Apple’s Vision Pro headset. The metaverse is attracting renewed interest.

‘We can already start to see the performance of the company going up with these new strategy implementations, and I do believe that with the right advertising and the right timings, Roblox will soon be the communication and collaboration platform it is striving to be,’ said an analyst.

But Roblox also faces challenges from its chief competitor, Epic Games’ Fortnite, and that platform’s Unreal Editor for Fortnite (UEFN), a tool that enables creators to build experiences and publish them directly into Fortnite.

‘They’re definitely pushing hard to eat Roblox’s lunch, even though the Fortnite player base tends to be older,’ said a gaming industry expert.

Epic has also been taking steps to creep in on Roblox’s core user base.

In February, the publisher announced it is teaming up with Disney to create open games and entertainment connected to Fortnite, offering users the ability to play, watch, shop and engage with content and characters from Disney, Pixar, Marvel, Star Wars, Avatar and other franchises.

‘It’s clear that [Fortnite] intends to go after younger gamers in 2024 and 2025,’ said the expert.

Like Fortnite, Roblox also has a ‘payout to creators’ business model.

Last year, the company announced plans to update its Creator Store fees to enable asset and tool creators to keep 100% of the net proceeds from the sale of their items in Studio or Creator Hub, excluding tax and payment processing fees.

‘I think this aspect of gaming will keep growing over time and Roblox is well-positioned to benefit from this ‘gig economy’ trend,’ added the expert.