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Roblox's Lowered Bookings Forecast Sparks Industry Concerns

Roblox's revised forecast has led to a significant drop in its shares, marking the worst day for the company in over two years. The cut in annual bookings forecast reflects concerns about the video game industry's overall performance and users' cautious spending habits. Roblox expects full-year bookings to range between $4 billion and $4.10 billion, down from its previous estimate.

The company's decision to cut its annual bookings forecast has raised concerns about a potential downturn in the industry, as well as reflecting the cautious spending habits of users within Roblox's gaming platform.


The uncertain economic outlook and rising inflation have contributed to a decrease in spending on Roblox's platform. This comes in the wake of Electronic Arts, another major video game publisher, issuing a weak revenue forecast earlier this week. These developments have further fueled worries about the overall health of the video game industry.


Roblox now expects its full-year bookings, which serve as an indicator of future revenue, to range between $4 billion and $4.10 billion. This is a downward revision from its previous estimate of $4.14 billion to $4.28 billion. Additionally, the company's second-quarter bookings forecast fell short of LSEG estimates.


According to Roblox's Finance Chief, Michael Guthrie, the company took a conservative approach to its quarterly outlook due to the timing of the Easter holiday. The first quarter of this year, when engagement on the platform is typically high, coincided with Easter, whereas in 2023, it fell in the second quarter. Despite the boost from Easter, Roblox's bookings only grew by 19% in the first quarter, marking the slowest pace in over a year.


The number of average daily active users on Roblox increased by 17% to 77.7 million, which is the lowest growth rate since the company went public in 2021. Similarly, the number of hours spent by gamers aged 13 and above on the platform grew by 19%, the slowest growth rate in approximately two years. However, Guthrie reassured investors that this slowdown is not unusual, as the company is attracting older gamers who take time to settle into the platform and eventually spend more time on it.


The decline in engagement and bookings within Roblox mirrors a broader weakness in the video game industry. Major players like Sony Group and Microsoft have been forced to lay off hundreds of employees and close studios this year due to the lackluster performance of their games.


To diversify its revenue streams, Roblox has turned to digital advertising. The company recently started displaying virtual billboards featuring content from brands like Walmart and Warner Bros Discovery to its platform users. Roblox plans to provide forecasts for ad revenue starting in 2025 and expects this business segment to contribute to its growth in 2026 and 2027. Analysts estimate that Roblox could generate $3 billion annually in ad revenue once the ads are fully implemented.

 
  • Roblox's revised forecast has led to a significant drop in its shares, marking the worst day for the company in over two years.

  • The cut in annual bookings forecast reflects concerns about the video game industry's overall performance and users' cautious spending habits.

  • Roblox expects full-year bookings to range between $4 billion and $4.10 billion, down from its previous estimate.


Source: REUTERS

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