Lawrence Nga, The Motley Fool
5 min read
In This Article:
-
Roblox has been growing well over the last few quarters.
-
The gaming company is riding a few tailwinds.
-
However, its stock is priced at a premium right now.
Roblox's (NYSE: RBLX) stock has been unstoppable of late, up by 185% in the past 12 months. A series of strong financial results have caught investors' attention, causing many Roblox observers to change their view on the game developer's prospects.
But as the stock price has almost tripled, what is the right thing for investors to do now? Let's explore further.
Roblox has been executing on a high level in recent quarters. Initially, it demonstrated the sustainability of its growth and business model by returning to its growth trajectory after a brief slowdown in 2022, following the reopening of the economy after the height of the COVID-19 pandemic. It then went on to deliver accelerating growth rates in the coming quarters, which has completely surprised investors.
It has grown its daily active users (DAU) for its gaming platform from 66.1 million in the first quarter of 2023 to 97.8 million in Q1 2025. Particularly, users above 13 years old grew at a much faster pace than those below 13 years old, suggesting that Roblox has been successfully expanding its reach. Understandably, quarterly hours engaged surged from 14.5 billion to 21.7 billion during that period.
Solid growth in the user base led to sustained improvements in revenue, with quarterly revenue increasing from $655 million in Q1 2023 to $1.035 billion in Q1 2025. It's also worth noting that quarterly free cash flow increased from $82 million to $427 million during that period.
Roblox has also made some strategic moves that could be game-changing in the long run, including its partnership with Google Ads and the introduction of its generative AI system, Cube 3D, which enables creators to generate 3D assets from simple text prompts in seconds. No wonder investors are excited!
Roblox might have been delivering some solid performance, but investors care more about the sustainability of its growth. For that to happen, Roblox must continue to expand its content, attract and retain an ever-growing user base, and diversify its monetization strategies.
To this end, the tech company is surfing a few tailwinds that could help sustain its growth ambition. First, it has been expanding its user base beyond its young cohort to include older users. It could do so by retaining its young users as they grow older, and also diversifying its content offerings to cater to the different needs of this cohort.
