Roblox Corp Q2 FY2025 Earnings Call

Good morning. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Roblox Q2 2025 Earnings Conference Call. I will now turn the call over to Stefanie Notaney. You may now begin your conference.

Thank you, Rebecca. Good morning, everyone. Thank you for joining our Q&A session to discuss Roblox's Q2 2025 results. With me today is Roblox's Co-Founder and CEO, David Baszucki; and our Chief Financial Officer, Naveen Chopra. Our shareholder letter, press release, SEC filings, supplemental slides, and a replay of today's call can be found on our Investor Relations website. 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 is 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. 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 press release and supplemental slides. With that, I'll turn the call over to Dave.

Thank you, and good morning, everyone, and thank you for joining us today. I'm sitting here side by side with our new CFO. Welcome, Naveen. It's great to have you here. And I would like to shout out and thank Mike Guthrie for such an incredible tenure at Roblox. We wish you all the best. Naveen, we're really excited for you to be in the seat here. And I think everyone will quickly see why we picked him. So welcome. Let's get started. Eighteen months ago, we shared with everyone a focus on performance and quality, discovery, economy, and live operations, and shared the notion of creating the conditions for growth powered by our creator community. Fast forward today, and our community has produced solid growth in Q2, with several viral hits, great velocity on new content, and metaphorically, just as we created the conditions for growth, 'Grow a Garden', also very similar metaphorically in creating conditions for growth, has set all-time records. It's an elegant metaphor just as we have, and we're going to continue to focus on targeting 10% of the global gaming content market on the platform with some great results we'd like to share with you. In Q2 2025, we had revenue of $1.1 billion, which was up 21% year-on-year. Our Q2 bookings were $1.4 billion, up 51% year-on-year. Bookings growth was strong across all regions. The U.S. and Canada saw bookings growth of 43%, APAC grew 75%, driven by strength in strategic markets across the region. Here are some notable call outs on year-on-year Q2 bookings growth: Japan, over 50%; India, over 90%; Philippines, approximately 100%; Korea, over 120%; Indonesia, over 150% year-on-year. Our Q2 DAUs were 111.8 million, up 41% year-on-year, with growth across all regions. The U.S. and Canada DAUs grew 21%, APAC grew 76%. On the age demographics, DAUs over 13 grew 54% year-on-year. Over 64% of our total DAUs are now over 13. On hours engaged in Q2, we had 27.4 billion hours, up 58% year-on-year, with similar trends to DAUs. The U.S. and Canada grew 35%, and APAC grew 95%. Here are some call outs: Japan saw hourly year-on-year growth of 61%, and Indonesia saw 170% year-on-year. Strong growth over 13, with 72% year-on-year, and over 66% of total hours are from users over 13. Monthly unique payers in Q2 were 23.4 million, up 42%, which is a new all-time record. We also had a record number of new monthly unique payers at 4.6 million. At the same time, this drove higher average bookings per monthly payer, which were up 6%. In Q2, DevEx was $316.4 million, up 52% year-on-year, another new all-time record, nearly double the amount of DevEx from the same period two years ago. Our strength in Q2 was broad-based across the platform, but we do want to emphasize the breadth of new viral hits that have appeared on the platform. As of July, we have five experiences with over 10 million DAUs, including hits such as 'Grow a Garden', 'Steal a Brainrot', 'Brookhaven', '99 Nights in the Forest', and 'Ink Game'. Four out of five of these experiences have been launched in the last 12 months. As a result of this, we raised our fiscal year 2025 guidance, and you'll hear more about that from Naveen as we progress to our goal of capturing 10% of the global gaming content market on our platform. The scale and speed of the creator success on our platform isn't an accident. We've been creating these conditions for viral content. So once again, let's reiterate the investments we're making in platform performance, discovery, and our economy. Among other things, we now have a large audience, over 111 million DAUs of all ages, genders, and geographies. This audience is growing faster than the industry as a whole. We've put enormous emphasis on our global infrastructure and network, both in terms of scalability, reliability, performance, and our ability to efficiently run this global infrastructure. We're continuously working on personalization and discovery, making them more transparent and better at connecting new content to our individual users while promoting long-term ecosystem health. I want to highlight that in search and discovery, we focus on long-term health, not short-term health, in how we connect people on our platform with content. Finally, our economy is being built to help creators thrive and earn; for example, in the last 12 months, 18 creators earned over $10 million on the platform. There's a lot of momentum in new content in our ecosystem, affecting creators both big and small. I want to highlight a couple of the viral hits that we believe are having positive effects through the rest of the ecosystem. For instance, in Q2 2025, more than 75% of 'Grow a Garden's' DAUs engaged with at least one other additional experience on the same day they played, highlighting the healthy interconnected nature of our platform. We've seen that, even when excluding the success of 'Grow a Garden', our inexperienced spending across the platform grew by 36% year-on-year, which highlights the depth and robustness of the content on the platform. I want to highlight some momentum we're building for the future. In September, we're going to host our RDC Annual Developer Conference, showcasing a wide range of technology and innovation that we believe will enable us to build on this momentum. I want to highlight some innovations we've mentioned in our letter. Regarding our safety platform, we continue to innovate, establishing standards for online safety for people of all ages, including introducing Trusted Connections and age estimation in July. We expanded privacy tools and screen time management, and we introduced RoGuard 1.0, an open-source safety toolkit to help establish guardrails around large language models. As we make these tools available within live experiences on Roblox, our vision has always been to lead in online safety, and there will be more to come in this space. Our IP License Manager and Catalog was launched in July. We have partners including Lionsgate, Netflix, Sega, and Kodansha. This connects creators on the platform with leading IP holders, systematizing licensing and connections. We think this is the future of how our extensive creator platform can connect with significant IP. In our brand and ads group, we've integrated our Rewarded Video with Google efforts, and we're in beta now, seeing strong interest. We've also expanded eligibility of who can access this data. Some exciting activations we've seen on the platform include 'Grow a Garden', which was integrated with Travis Kelce, who participated with the creator in a live Q&A within the game last weekend. FIFA partnered with one of our most popular soccer games, 'Super League Soccer', and Google just wrapped up another campaign—the third activation in less than a year—most recently with Google Play. We've released the next iteration of our Cube 3D generational foundational model, highlighting Cube 3D, which is now live within Roblox experiences. We've made significant improvements in accelerating inference for our 3D generation. We've generated over 1 million 3D models, not just in studio, but within games themselves, highlighting our infrastructure for what we believe will be future aspects of games, including AI on demand, whether for 3D or text generation. On our genre expansion efforts, we've seen early traction in targeted genres we've shared, such as RPG, sports, racing, and battle shooter games, and we expect Roblox spending in these target genres grew by 66% from Q2 2024 to Q2 2025. We'll keep focusing on these key genres and will discuss more about technology and progress in our roadmap. One final note, in our press release, we shared that Manuel Bronstein has decided to move on from Roblox. Manuel has been with Roblox for more than four years, significantly contributing to our growth and maturation, building incredible teams across product and partnerships. He plans to take a break before pursuing personal and entrepreneurial ventures, but he will stay with us through the end of September. On behalf of everyone at Roblox, Manuel, we thank you for your lasting contribution. With that, I'm going to turn it over to Naveen.

Thank you, Dave. It's awesome to be here. I also want to echo your thanks to Mike, who has spent a lot of time helping me get up to speed, and I'm very grateful for the world-class team he has built. I'm looking forward to working with everyone here at Roblox. Before we take questions, I thought I would share some quick thoughts on what attracted me to Roblox and add some color on both the Q2 results and our guidance for the balance of the year. Look, I came to Roblox not just because of the amazing business that exists today, but really because of its future potential. As most of you know, Roblox is a highly scaled consumer platform with massive engagement and what I view as an enviable financial model. We're talking 110 million DAUs, with engagement and bookings that have grown at strong double-digit growth rates over the past two years. Over that same period, the business has generated almost $1.4 billion in free cash flow and now has a balance sheet with close to $4 billion in net liquidity. I particularly love that it’s a team that embraces a long-term orientation and intentionally chooses to tackle hard problems. Looking forward, I believe Roblox can capitalize on multiple tailwinds, including inertia in the UGC creator economy, which is pervasive in social, video, and now gaming. Tailwinds from AI should accelerate Roblox platform development, reduce friction for our creators, and enhance our economy. Additionally, there's market headroom present; despite tremendous growth to date, we're just scratching the surface of a very large and lucrative gaming market. Lastly, financial scale will lead to opportunities for incremental operating leverage and cash flow generation. As that expands, the company will be able to pursue multiple paths to growth and shareholder value creation. Now, let's discuss our reported results and guidance. First, regarding Q2. The main point I want to emphasize beyond what Dave noted and what's in our letter is the performance of non-top 10 experiences—in other words, the broader robot platform. Let me share some stats. For experiences ranked #11 and below, growth in in-experience hours was 47% year-on-year. This engagement is powering broad-based spending growth. More than half of the growth in experience spend came from non-top 10 titles, which translates to significant earnings for creators of all sizes. Over the last 12 months, our top 1,000 creators averaged nearly $1 million in Roblox earnings, and the top 10,000 creators averaged more than $110,000. I want to underscore that our growth comes from both viral hits and broader ecosystem growth. For the rest of the year, as you've hopefully read, we've significantly raised our full-year 2025 revenue and bookings guidance. Revenue guidance is now 22% to 25% year-on-year. Our bookings guidance calls for year-over-year growth of 34% to 37%. At the high end, that's a bookings increase of $610 million, or over 11% to our prior annual guidance, most of which is still to be delivered in the second half of the year. Regarding the individual quarterly flow, I want to note a couple of things. Although momentum has continued in July, for guidance purposes, we conservatively assume that engagement and spending in recent viral hits will revert toward underlying growth trends during Q3. Year-over-year growth rates will also face tougher comps in August and September, as prior viral hits peaked during those months in 2024. Regarding Q4, we believe some conservatism is warranted. To be clear, everything we're observing is positive and healthy, but it's too early to generalize Q2's extraordinary trends over a prolonged period. Additionally, our Q4 forecast carries uncertainty given that a significant portion of Q4 bookings typically comes from the last days and weeks of the period. In summary, what we're witnessing in 2025, with 34% to 37% full-year bookings growth, reinforces that Roblox is well-positioned to capture 10% of the $180 billion global gaming content market. I am incredibly excited to be on this journey as we build out one of the great global consumer internet platforms. With that, let's open up the call for questions.

I just had one quick question. I would appreciate it if you could provide a little color about how much capacity the system has to absorb the recent surge in demand. Because I know you guys are very focused on the long term. A couple of years back, I believe you increased CapEx to enhance the platform's capacity and resiliency. Can you provide some insight on your thinking about CapEx and the platform itself?

Great question. I want to highlight that we are pushing numbers above 30 million concurrent players at the same time, and 'Grow a Garden' in the past few weeks has gone over 20 million concurrent. Prior to that, the Guinness Book of World Records stated that the peak concurrent of any game was 14 to 15 million. So we're reaching some really significant numbers. What you're seeing behind the scenes is an optimal mix for spending that includes both our bare metal infrastructure and burst capacity from cloud providers. For 4 to 8 hours, we ramp up additional cloud servers and mix that with our continuous bare metal infrastructure. This combination has worked very well and allowed us to absorb this increased demand without incurring constant CapEx expenses.

Before I start, congratulations on what are objectively very impressive results. I think maybe, Dave, if we take a step back from the print and consider the ecosystem implications, it's hard for me to imagine that professional developers aren't taking note of the platform changes, the earnings opportunities, and the increased distribution for non-top 10 developers. As Naveen noted, you're also reducing friction with onboarding and creation. How does this not translate into a faster run rate of growth for Roblox in 2026 and beyond? We've seen proof points for how developer investment and the discovery engine translates to bookings growth, so I'm curious where there could be incremental friction.

Yes, I want to emphasize that we're on track with the vision we started detailing six quarters ago, which focuses on raw performance, scalability, technology, discovery, the economy, and live operations. We still believe there's a lot of technology to deploy to fully achieve our vision. Moreover, there remains a range of experiences that we believe will positively impact growth. Our goal is to support a single build from a creator that works on any device and scales from a low-end Android phone to a high-resolution gaming PC. We're not quite there yet, so we do want to concentrate on technology. We expect this will boost genre expansion.

Maybe a follow-up to Clark, just honing in on the developer side. Are experiences like 'Grow a Garden' serving as a promotional launchpad for new developers? Could you provide an update on developer growth and insights from the community? Furthermore, looking past 'Grow a Garden', could you speak about why we're witnessing such high rotation in the top 10 experiences? Is it due to search and discovery? Is there a halo effect from 'Grow a Garden', or is there something else? Can you discuss the durability of these dynamics?

I do feel news travels fast; when a game exceeds 20 million concurrent players, most creators in gaming take note. 'Grow a Garden' illustrates the opportunities present when conditions are conducive to growth. It’s unique in its acknowledgment of asynchronous play; for example, the garden continues to grow even when users are not logged in. This presents opportunities for fresh experiences on the platform. We're seeing widespread engagement; indeed, 5 experiences have over 10 million DAUs. However, what Naveen highlighted regarding growth down to the 1,000 creator mark is compelling, demonstrating our potential to expand into underrepresented genres.

Dave, I had two for you. Understanding you've been working on several initiatives over the past 18 months, could you attribute all these viral hits happening in a compact time frame? Additionally, regarding geography, APAC has experienced really strong growth this quarter—could you expand on what's resonating in that market?

It's interesting; through our history, we've often attempted to attribute growth to a single or two major factors. However, every analysis leads us back to the understanding that we're executing on hundreds of fronts simultaneously. Our array of initiatives—ranging from engine improvements to creator tooling, discovery, apps on all devices, and enhanced auto-translation—work in unison to fuel our success. The viral hits present today are a result of this collective effort. In APAC, we've focused on improving the quality of auto-translation and performance, adding server capacity in Singapore and other areas. Our infrastructure performance in APAC has improved significantly over the past year.

I appreciate all the color. When considering the long-term monetization of the platform, could you discuss how you envision transitioning from product-specific models to a broader platform approach? How do you see the building blocks for commerce evolving in terms of advertising, and perhaps even subscriptions as part of the business model? How should we think about the mix of monetization as the platform evolves?

I'll go first, and then Naveen can chime in. We're building an ecosystem and platform where individual creators have an array of monetization options to choose from and optimize. As we introduce Rewarded Video ads, some developers might focus heavily on these, while others may continue with a virtual economy model. Ultimately, we want to provide the best range of tools, including freemium, virtual currency, paid access games, and advertising to empower creators. This includes opportunities for physical goods, where some creators now generate substantial revenue through tangible item sales. The goal is to stimulate genre expansion and engagement growth across various domains.

I would like to emphasize the cyclical nature of this process. All those monetization models are enhanced by continued user growth and engagement growth. Everything we've discussed today about what we've accomplished in the past few years is focused on driving those metrics, enhancing engagement, user growth, and monetization under our current model. As this accelerates, it will become easier for both the platform and our creators to explore alternative monetization avenues.

Naveen, it's nice to be back in touch. Congratulations on the new role. Following up on Eric's inquiry, could you talk about where you are with the Google partnership on advertising, its implementation timeline, and how we should view the opportunities for ad monetization? Additionally, how does third-party demand factor into your plans?

Yes. I'll note that we opened up the window for creators to offer Rewarded Video, and we've been focused on monitoring that product's performance on both iOS and Android to ensure that we maintain performance and scale, even on low-memory devices. The internal results regarding the growth rate of Rewarded Videos show strong and continued adoption. We have a range of creators experimenting with this, and I'm excited about the growth opportunity it presents. As we envision capturing 10% of the global gaming content market, this will naturally form a monetization component for many developers whose experiences suit this model.

Regarding your question about additional partners, we do indeed envision incorporating more as we scale the business. As Dave mentioned, while we’re in relatively early stages, the interest from creators in integrating Google capabilities has been promising. We're currently onboarding nearly 100 publishers, so stay tuned for more developments on that front.

Can you discuss the Creator Rewards Program mentioned in the shareholder letter? How do you see this shifting incentives for creators compared to the old engagement-based payouts? Will this lead to a significant uptick in the amount of DevEx paid? Additionally, regarding discovery, at what point do you plan to aggressively implement sponsored tiles? That seems like a clear commercial opportunity in your discovery engine.

Great perceptive questions. Let's start with Creator Rewards. We're a systems company and support a complex set of incentives. As you pointed out, the new Creator Rewards system aims to optimize the alignment of incentives with behaviors that foster long-term platform health. This shift from engagement-based payouts—which sometimes rewarded raw time—will incentivize creators to drive organic traffic to the platform. Our goal is to reward those who direct users to Roblox rather than their own external sites. On the discovery front, I want to emphasize our commitment to driving the platform's long-term health, which translates into being careful and deliberate about the rewards we associate with discovery. We're becoming more transparent about what we reward for discovery, and this encourages creators to align with those signals. Over time, we envision a significant future for sponsored tiles as they provide a cost-effective way for creators to drive traffic to their games.

Regarding the financial impact of Creator Rewards, I think you asked about that too. In the short term, I don't anticipate a significant impact from transitioning away from the engagement-based system. However, we hope to share significant incremental earnings with our developers through Creator Rewards over time. This aligns with our broader strategy to increase creator earnings as we capture greater operating leverage in other business areas.

Could you talk about customer acquisition during the quarter? How impactful was 'Grow a Garden' in acquiring new customers? Do you believe the impact is sustainable? Additionally, regarding 'Grow a Garden,' how sticky can that game be? Can you provide insights on the behavior of new players relative to previous cohorts? What does the age demographic look like? Are you seeing any trending towards an older audience? I know you've been attempting to age up for some time.

Certainly, there's nuance here; our vision is to create a platform for all ages globally. We have noted growth in the older demographic over 13, which is reflected in the recent statistics. Interestingly enough, we’ve launched several major hits specifically targeting users over 13. Both 'Dress To Impress' last summer and now 'Grow a Garden' have been successful in bringing older users onto the platform. Our creators perceive these opportunities and will likely produce similar hits accordingly. 'Grow a Garden' is drawing in new users, which is one of the reasons we've restructured Creator Rewards to encourage experiences that bring new users to Roblox.

We've observed some interesting distinctions with 'Grow a Garden' compared to the platform overall. From a perspective of age and user tenure, we noted that our user base skewed slightly older compared to the platform average. This presents compelling audience expansion. Regarding the durability of 'Grow a Garden,' it's still early, but there are promising early signals that suggest it can maintain high levels of engagement. One metric to consider is retention; our data shows that a significant portion of players engage with multiple experiences, indicating organic discovery and leveraging platform capabilities.

To add onto what Naveen mentioned, for those of you familiar with gaming history, there have been social asynchronous games like gardening that have sustained well over time. Historical patterns suggest that experiences like this can indeed prove to be quite sticky.

Following up on the last question, 'Grow a Garden' isn't just breaking records in terms of concurrent users, but also in the speed at which it climbed in the first 100 days. Could you discuss any algorithm changes that made this speed possible? How repeatable is this across other titles? Naveen, could you speak to how you're retaining or transitioning first-time Roblox players from 'Grow a Garden' to other experiences?

The discovery that occurred with 'Grow a Garden', was driven by our recommendation system, should be repeatable, as it leverages algorithmic factors that estimate the long-term value of properties for individual users, not just in the short term. We're refining this process continuously, striving to create a more transparent environment for creators so that they can align their experiences with our key signals. So yes, I do believe it is repeatable and intrinsic to the platform.

We’re confident that as users spend more time on the platform, they will naturally discover new experiences. In the case of 'Grow a Garden', it's driven tremendous engagement, evidenced by the fact that 75% of its DAUs also engage with at least one other experience on the same day. This organic discovery exemplifies the platform's capabilities, with 'Grow a Garden' being a prime case.

I want to thank everyone for joining us today, and I'm going to turn it back to Rebecca to close out the call.

Thank you. And that does conclude today's conference call. Thank you all for your participation. You may now disconnect.