Key Takeaways:
Roblox reported Q2 revenue of $1.5 billion, up 36%, but bookings growth slowed to 8% as algorithm changes cut under-13 spending.
"We remain steadfast in our goal to capture 10% of the global gaming market," CEO David Baszucki said, while conceding the algorithmic shift "impacted monetization, primarily in the U.S. under-13 cohort."
Bookings of $1.6 billion landed at the low end of guidance and missed internal targets. Daily active users rose 10% to 123 million, hours grew 5% to 29 billion, and free cash flow jumped 66% to $294 million. Net loss narrowed to $185 million from $280 million a year earlier, while adjusted EBITDA reached $152 million, up from $18 million.
For Q3, Roblox forecasts bookings of $1.58 billion to $1.65 billion, a 14%-18% year-over-year decline against the prior-year quarter's $1.93 billion, and withdrew full-year guidance. Shares fell 13.83% after hours to $41.94.
CFO Naveen Chopra attributed the shortfall to a greater-than-expected shift in engagement away from high-monetizing viral games that drove 2025 growth toward newer, evergreen experiences with lower hourly spending. The company also changed its discovery algorithm months ago to optimize for long-term retention rather than near-term revenue, squeezing out titles with aggressive monetization loops. The impact concentrated in the under-13 cohort, with bookings per hour declining year-over-year even as total hours grew.
International markets offered a counterweight. Japan daily active users surged 67% and India 64%, while Russia was reinstated late in the quarter. Age-check penetration reached 57% globally, with the U.S. and U.K. at 70%. US & Canada bookings grew just 1% to $843 million, while Rest of World rose 31%.
Chopra said about half of Q3 margin compression stems from AI investments in model training for Build, Moments, and Roblox Reality, with the other half from fixed-cost deleveraging on lower bookings. He declined to say whether 2026 bookings would exceed 2025, citing "increasing variability and continued updates to our platform."
The guidance signals management expects monetization weakness to persist through the current quarter. Investors will watch the Q3 earnings call for signs that the retention benefits of the algorithm shift have begun to offset the near-term bookings hit.
This article is for informational purposes only and does not constitute investment advice.
