Gaming metaverse operator Roblox (NYSE:RBLX) missed analysts' expectations in Q1 CY2024, with revenue up 22.3% year on year to $801.3 million. Next quarter's revenue guidance of $867.5 million also underwhelmed, coming in 7.6% below analysts' estimates. It made a GAAP loss of $0.43 per share, improving from its loss of $0.44 per share in the same quarter last year.

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“Our teams have been hard at work identifying opportunities to drive DAUs, Hours, and bookings growth rates back to 20% year-over-year. We began experimenting with changes in our AI-driven discovery algorithm and the positioning of various content types on the Homepage. We reintroduced platform-wide events like The Hunt: First Edition. And, we continued to improve the quality and performance of our app and experiences. Based on results since the middle of April, we believe that these steps are yielding positive results,” said David Baszucki, founder and CEO of Roblox.

Best known for its wide assortment of user-generated content, Roblox (NYSE:RBLX) is an online gaming platform and game creation system.

Video Gaming

Since videogames were invented in the 1970s, they have gradually taken more share of entertainment time. Ubiquitous mobile devices have powered a surge in “snackable” games that can be played on the go. Over time, games have developed more social engagement features where friends can play games together over the internet. The business models of games publishers have become less volatile due to digitization of distribution, in game monetization, and like Hollywood, an increasing dependence on surefire hit franchises. Covid driven lockdowns accelerated adoption and usage of videogames – a trend that has not slowed.

Sales Growth

Roblox's revenue growth over the last three years has been mediocre, averaging 15.2% annually. This quarter, Roblox reported decent 22.3% year-on-year revenue growth, falling short of analysts' expectations.

Guidance for the next quarter indicates Roblox is expecting revenue to grow 27.4% year on year to $867.5 million, improving from the 15.1% year-on-year increase it recorded in the comparable quarter last year. Ahead of the earnings results, analysts were projecting sales to grow 49.5% over the next 12 months.

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Revenue Per User

Average revenue per user (ARPU) is a critical metric to track for consumer internet businesses like Roblox because it measures how much revenue each user generates, which is a function of how much paying users spend on its games.

Roblox's ARPU has declined over the last two years, averaging 4.6%. Although it's unfortunate to see the company lose its pricing power, it was still able to achieve strong user growth. This quarter, ARPU declined NaN% year on year to $10.31 per user.

Key Takeaways from Roblox's Q1 Results

We struggled to find many strong positives in these results. Its full-year bookings guidance missed analysts' expectations. On top of that, the company announced it would start calculating adjusted EBITDA differently, raising some questions. Overall, the results could have been better. The company is down 29.3% on the results and currently trades at $27.6 per share.

Roblox may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.