Roblox shares plummeted over 20% in early trading

 

Roblox shares plummeted over 20% in early trading after the gaming giant reported slowing player spending and dialed back its growth forecasts. Despite a 17% year-over-year increase in average daily active users (DAUs) to 77.7 million, analysts say Roblox needs to prove new sources of revenue growth to impress Wall Street.

Roblox's devoted fan base is mostly teens, so the company is working to attract both younger and older players. CEO David Baszucki said, "Our teams have been hard at work identifying opportunities to drive DAUs, hours, and bookings growth rates back to 20% year-over-year... Based on results since mid-April, we believe these steps are yielding positive results."

Some analysts remain optimistic, citing new revenue streams, brand interest, and good timing. Roblox has evolved since its 2006 launch and now blends gaming and social media elements. It's succeeding, with users spending an average of 2.5 hours daily on the platform. About half of US youth aged 12-17 use Roblox monthly, and it's growing overseas, especially in Asia.

The company's vision is for Roblox to be everywhere, and it's making progress. New features include immersive video ads for players over 13 and a developer subscription offer to monetize experiences. Brands like Ralph Lauren, Nike, and Lego are engaging with users, and Walmart has joined the Roblox metaverse.

However, Roblox faces challenges from Epic Games' Fortnite and its Unreal Editor for Fortnite (UEFN), which enables creators to build experiences and publish them directly into Fortnite. Epic is also partnering with Disney to create open games and entertainment connected to Fortnite.

Despite these challenges, some analysts believe Roblox's user growth and emergence as a public company align with interest in artificial intelligence and extended reality (XR). Roblox introduced an AI chatbot for real-time communication and plans to expand AI tools for creators. With the right advertising and timing, Roblox could become the communication and collaboration platform it strives to be.