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Roblox Shares Plummet Over 20% After Forecast Cut

Roblox shares plummeted by more than 20% during trading, indicating a shift in consumer spending behavior
May 10, 2024

Roblox adjusted its annual bookings forecast, signaling a shift in spending habits within its gaming platform amid economic uncertainty and rising inflation.

The company's shares plummeted by over 20% in Thursday's trading session.

This adjustment is the latest in a series of pessimistic reports from the gaming industry, which has seen numerous layoffs and studio closures this year in response to declining demand. Electronic Arts also recently issued a weak revenue forecast.

Roblox now anticipates full-year bookings to range between $4 billion and $4.10 billion, down from the previous forecast of $4.14 billion to $4.28 billion. Additionally, its second-quarter bookings forecast of $870 million to $900 million fell short of estimates.

The company attributed its conservative second-quarter forecast to the timing of the Easter holiday, traditionally a period of high engagement on its platform. This year, Easter fell in the first quarter, whereas it occurred in the second quarter the previous year.

The gaming industry is facing decreased engagement, with growth in the PC and console market expected to remain below pre-pandemic levels through 2026, according to research firm Newzoo.

Although the number of hours spent by gamers aged 13 and older on Roblox's platform increased by 19% in the first quarter, it marked the lowest growth rate for the company in about two years.

Roblox's Chief Financial Officer, Michael Guthrie, stated that this slower growth is not unusual, explaining that the company is attracting more older gamers who take longer to become regular users and spend more time on the platform.

In an effort to diversify its revenue streams, Roblox has turned to digital advertising. Earlier this month, it began displaying virtual billboards featuring content from brands like Walmart and Warner Bros Discovery to its platform users.

Guthrie revealed that Roblox plans to establish the infrastructure for the ad platform in 2024 and will start providing revenue forecasts for advertising in 2025.

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