Roblox (NYSE: RBLX) warned investors to brace for a significant revenue slowdown, guiding third-quarter bookings to between $1.576 billion and $1.653 billion.
That projected range represents a year-over-year decline of 14% to 18%, a sharp reversal for a platform that had been growing steadily.
The company also declined to provide a full-year outlook, accelerating a previously planned shift to quarterly-only guidance.
Shares responded harshly, falling approximately 27% on Friday and hitting a fresh 52-week low near $34.
Management was candid about the source of the pain, acknowledging that part of the damage is self-inflicted and intentional.
In April, Roblox began overhauling its “Recommended For You” discovery algorithm, shifting from a seven-day player behavior window to a 28-day measurement focused on long-term retention.
The company’s shareholder letter stated the change “intentionally provides more impressions for highly retentive games at the expense of near term monetization.”
A separate move to disable the sale of cross-experience game passes added a smaller but meaningful drag on near-term bookings performance.
The spending falloff hit hardest among younger players in the U.S. and Canada, where the decline in spending per hour exceeded what management had anticipated.
Despite the grim forward guidance, the most recently reported quarter showed genuine underlying strength across several key metrics.
Revenue rose 36% year over year to $1.47 billion, reflecting the company’s model where bookings from prior quarters are recognized as revenue over time.
Bookings themselves grew just 8%, landing at the low end of the company’s own guidance range for the period.
Daily active users climbed 10% to 123 million, while hours engaged rose 5% to 29 billion, suggesting the platform’s audience remains engaged and growing.
The net loss narrowed meaningfully to $185 million compared to $280 million in the same period a year earlier.
Free cash flow grew 66% to $294 million, and the company reported holding $6.1 billion in cash and investments, providing significant financial runway.
With no annual outlook on the table, each quarterly bookings figure now bears the full weight of investor sentiment and scrutiny.
Management’s core argument is that longer player retention will ultimately generate more monetization than the old algorithm produced, and says internal testing supports that thesis.
The market, however, is treating the strategy as a liability until the reported numbers demonstrate otherwise, sending RBLX to multi-month lows.
The $6.1 billion cash position gives the company time to prove its case, but investors will be watching each quarterly result closely for signs the bet is paying off.
