Roblox Corporation Q2 2026 Earnings Call

Good afternoon everyone. My name is Regina and I will be your conference operator today. Welcome to Roblox second quarter 2020 Earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you'd like to ask a question during that time, simply press star. Then the number one on your telephone keypad. We ask that you limit your initial question to one. I will now turn the call over to Jaime Morris Roblox, Head of Investor Relations. Jaime.

Good afternoon everyone. Thank you for joining us to discuss our Q2 2026 results. With me today is Roblox Co-Founder and CEO David Baszucki, and our chief Financial Officer, Naveen Chopra. Before we begin, I would like to remind you that our commentary today may include forward looking statements which are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those described in our forward looking statements. A description of these risks, uncertainties and assumptions are included in our SEC filings, including our most recent reports on form 10-K and form 10-q. You should not rely on our forward looking statements as predictions of future events, and we disclaim any obligation to update these statements, except as required by law. During this call, we will also discuss certain non-GAAP financial measures. Reconciliations between GAAP and non-GAAP metrics can be found in our shareholder letter and supplemental materials, which are available on our Investor Relations website. With that, I'll turn the call over to Dave Thank you. Good afternoon, and thank you for joining us today. I'll start with a few remarks about the quarter, and then I'll turn it over to Naveen to discuss results and guidance.

And then I'll conclude with some important updates about how we plan to achieve our long term goals. We. Steadfast in our goal to capture 10% of the global gaming market and an even greater share of the US market. Against the backdrop of the incredible growth we delivered last year. In Q2, we delivered healthy year over year growth in users hours and cash flow and well bookings growth fell within our guidance range. It was below our internal goal, which we will discuss in detail on today's call Before I hand it over to Naveen, I want to give some updates on the business First, let's talk about safety. In the first part of this year, we made the decision to age check everyone on our platform and to limit chat only to those users who have age checked We've made significant progress this quarter, and as a result, age check penetration has increased to 5,057% globally. And in the first countries where we rolled it out. Australia is approaching 80%. And the US and UK are at 70%. With the under 18 segments, we're making enormous progress with the US under 18 at 75%. And in addition, of course, to our filters industry leading safety.

We don't allow image sharing in chat and in conjunction with age check, we implemented age banded communication. We've also introduced new comms products. We'll share a bit more about that. And on the content side, in June, we. Successfully rolled out age based Roblox kids and Select accounts We believe accurate age data amplifies our conviction in the long term growth potential for the platform. On the discovery side, in the last few months, we shared with our community our strategic decision to focus our discovery algorithms directly on measured, long term retention. We have seen this impact monetization primarily in the US under 13 cohort. And this has been exemplified by a lower frequency of impressions with games that emphasize short term monetization rather than long term retention. It's still early, but our data shows a positive lift in quality, stickier engagement games, and the benefits of higher retention. We believe outweigh the near-term impacts we're seeing as improved retention and engagement. Compound into future growth. I'm going to now turn it over to Naveen to address some specifics, and then I'll be back to talk about our future plans.

Thanks, Dave. I'm going to share a few details about the quarter, and then also discuss updates to our outlook for the. Quarter revenue grew 36% to 1.5 billion and bookings grew 8% to 1.6 billion. As Dave mentioned, this was at the low end of our guidance and we'll discuss more about that in a moment. We finished the quarter with 123 million doors, up 10% year over year. And ours grew 5% to 29 billion in. Addition to building on the existing scale, we have. In the United States, we continue to see strong year over year growth in many international markets. For example, Daus in Japan grew 67% and dose in India grew 64%, and similarly, our growth in Japan and India was 61 and 59%, respectively. We also saw users in Russia come back online as we were unblocked there late in the quarter. On the bottom line, operating cash flow was up 60% year on year to 318 million. And free cash flow of 294 million was up 66% year over year. From a content perspective, our platform is getting more diversified. While maintaining a steady velocity of new content Case in point three years ago, our top ten games accounted for about 30% of all the hours engaged on Roblox.

Today, the top ten games account for approximately 20% of hours, and in terms. Of user metrics. New users sign up activity improved throughout the quarter. Benefiting from seasonality and the reinstatement of Roblox in Russia. Retention. Of existing users remained stable and. Payment hours were in line with our expectations. Monetization. However, as measured in bookings per hour, was below our forecast, particularly with under 13 cohorts and was the primary factor impacting our bookings performance. We attribute the unforeseen monetization shortfall to a greater than expected shift of engagement from high monetizing 2025 vintage viral games to a combination of new and evergreen experiences with lower hourly monetization. This underlying mix shift was compounded by changes in our recommendation algorithm, which optimizes for long term retention and is therefore providing more impressions for highly retentive games. At the expense of near-term monetization. And in Q2, the bookings impact of this trade off on younger users was greater than we anticipated. Although these discovery changes add to the variability of our business, our testing suggests that the long term benefit to retention will more than offset the short term monetization hit, particularly as we continue to improve the algorithms by doing things like using high tech data to better target recommendations by region and age cohort, which over time should help mitigate the monetization headwind we saw in Q2.

Another, albeit less significant factor in the monetization shortfall was the impact of our decision to disable the sale across experienced game passes. Looking ahead to Q3, we expect sequential Dau trends to benefit from seasonality. The. Unblocking of Roblox in Russia and our discovery changes. But. Monetization weakness is likely to continue and as a result, we forecast Q3 bookings to be between 1.58 and 1.65 billion, which, given the tough comparisons, translates to a year over year decline of 14 to 18%. From a margin perspective, the reduction in bookings will result in fixed cost deleveraging Additionally, investments in AI powered initiatives like build Roblox Reality and Moments are expected to result in higher infrastructure costs. For Q4. Increasing variability and continued updates to our platform lead to a wide range of potential outcomes, and therefore, we are not providing revised full year guidance at this time. While. Our expectations for the remainder of the year have changed significantly, we have conviction that we're making the right trade offs to continue our role as an industry disruptor. Investments in AI content diversification. Long term retention, and safety. Though creating near-term friction position us to maximize our share of the global gaming market.

With that, I'll pass it back to Dave to talk about some of our future plans.

Thanks, Nadine. Since we started the company, we've been on a mission to support play around the world, and we believe the world needs more play. We can all see it right now. Given in light of really everything going on in the world. And this fundamental need is part of what gives really, all of us conviction in Roblox ability to deliver long term growth in excess of 20%. We set. Out our goal of expanding play everywhere, with a target of 10% of global gaming running on Roblox and in the US, we've shared that our goals to go well beyond 10%. Today we estimate that 20% of USA. Under gaming revenue. Flows through Roblox. We've done this through the power of our platform and the creativity and diversity of user generated content. And in this cohort, we validated the power of our ability to unify discovery economy. Tools, engine safety, and cloud infra. Well, we did experience softness in our younger users monetization this quarter. We believe our monetization system is fundamentally strong and will compound over time with additional levers, including subscription and advertising revenues We've established, unlike really any other company at our scale, our commitment to setting the global standard for safe digital engagement.

And with younger users in particular, long term, we believe this is a tremendous benefit to have such strength among younger cohorts. And this will contribute, we believe, to fuel long term growth. The. 18 and over market is 80% of the $200 billion global gaming market, and we believe we're uniquely poised to expand play in this 18 and over market. In the same way we have for under 18. Today in the US, our 18 and up cohort represents nearly one third of our now aged checked daily active users, and our US 18 to 34 cohort daily active users and ours are growing at approximately 40% year on year, and our 13 and up cohorts around the world continued to show strong growth In addition to our viral growth worldwide in under 18, we have the opportunity to power 18 and up growth with increasing paid acquisition as we continue to improve product market fit. And besides safety, the majority of our product and technical investments support supporting growth in 18 and up. Also benefit younger audiences. We've. Launched three initiatives that will support our continued growth in the 18 and up market segment. First, as we shared, we're removing self-imposed limits on the types of games we support on Roblox.

Second, we've redefined our app to align with physical play, including discovery. And third, we're reconnecting with our core promise that anyone can be a builder First off, we want all types of gaming on Roblox. We're not that far away from having the technology in place to support the vast majority of games that people play online. On one end, one end of the spectrum, we believe players are looking for multiplayer experiences that will ultimately mirror physical reality. Even since our start, we've had the goal of photorealism and unlimited multiplayer scale, and with our announcement of Roblox reality, we're well on our way to being the first company to bring photorealistic multiplayer to life and to the masses. We see a future where games really will become indistinguishable from movies for certain types of games, and we can see this quality today in offline AI video tools. We believe we'll soon see this in real time with Roblox reality. Now, gaming is also simultaneously spontaneous and single player and 2D for many people. And up until today, we've been focused on 3D and we've held back on initiatives to support high performance 2D tooling and gameplay. Going forward, we're doubling down on our support for everything from 2D puzzle games to strategy.

With Roblox reality and a focus on 2D performance. We're expanding the bookends of what we believe will be possible on Roblox. This week, we've announced a unified vision of our app that includes bringing video discovery and creation front and center to all users. We've announced this week we're integrating moments into our home page for 16 and up users, and we've begun testing for 16 up users in Canada, New Zealand, and Singapore. We're expanding the moments feed to include short form influencer video in addition to game captures, and we believe ultimately moments will be available for