Roblox Shares Head for Record Decline on Weak Bookings Outlook

Cecilia D'Anastasio, Bloomberg News

A monitor displays Roblox Corp. signage on the floor of the New York Stock Exchange (NYSE) in New York, US, on Friday, Feb. 9, 2024. Mexican discount retailer BBB Foods Inc. priced its initial public offering at the top of a marketed range to raise about $589 million, adding momentum to a rebound in US listings. , Bloomberg

(Bloomberg) -- Gaming giant Roblox Corp. shares plunged the most in two years, after the company reported a forecast for bookings that fell short of analysts’ estimates, the latest sign of widespread struggles in the video-game industry.

The company forecast between $870 million and $900 million in second-quarter bookings, Roblox said on Thursday. Wall Street expected $902 million.

Across the industry, video-game businesses have been grappling with a drop-off in player engagement following the record surge during the pandemic. Companies have laid off workers and shut down studios in response to the softening demand.

The shares fell as much as 24% as trading got underway in New York, the most since February 2022.

For the first quarter, the total hours of engagement on Roblox came to 16.7 billion compared with estimates of 17.1 billion.

“We continue to see the general number of people on our platform being very strong,” Chief Executive Officer and Founder David Baszucki said on a call Thursday. “We don’t report the number, but we did see less growth in quarter one than we expected.”

Baszucki noted that during the second half of last year, the company rolled out a bunch of new in-game features, such as layered clothing and expanded voice controls, that might have caused some problems on low-end mobile devices. Additionally, he said, the company’s ability to highlight all the new Roblox content in the fourth quarter “was not optimal.”

The company reported 77.7 million daily active users in the first quarter in line with analysts’ expectations of 77.3 million. Revenue grew 22% over the previous year to $801.3 million surpassing estimates of $769.3 million.

Roblox’s gaming platform is available for free across smartphones, gaming consoles and computers. After years of steady growth with the goal of eventually attracting a billion daily users, Roblox is investing more in advertising. Brands like PacSun can now place digital ads inside of Roblox games.

The company has embraced automated ad buying, and since early May, players have been seeing video billboards on Roblox.

Roblox has yet to share granular data on the effectiveness of the ads. “It’s a compelling platform to be visible on,” said Wedbush Securities Inc. analyst Nick McKay, adding that “advertising is likely pretty close to immaterial to them right now.”

Last month, the company partnered with Walmart Inc. on an e-commerce effort in which players can buy physical goods from Roblox.

Recently, the demographic of Roblox users has been steadily growing older. Today, over half of Roblox users are over 13.

(Updates with share price move in first and fourth paragraphs and additional details from the earnings call throughout)