Full Comment:
"Roblox has seen DAU, engagement, and bookings growth accelerate over recent quarters as AI-powered search & discovery improvements have supported a variety of global viral hits such as Dress to Impress, Grow a Garden, and Steal a Brainrot. Additionally, strategic investments aimed at creating a more vibrant economy and improving app performance have led to accelerating user activity and monetization in key international growth markets. However, shares of RBLX have been under pressure since the company’s Q3 earnings report despite this operating momentum, as the company provided cautious FY26 commentary on the call regarding (1) uncertainty for the potential impact on short-term engagement from its implementation of AIbased facial age estimation technology for all users on the platform in order to use chat functionality, and (2) the potential for a y/y decline in margins as the company ramps its infrastructure investments to support heightened engagement levels and ongoing product innovation aimed at genre diversification. We expect Roblox DAU will grow 70% y/y to 145M in Q4, well ahead of consensus but down 6.2M sequentially due to typical seasonality. We forecast 58% y/y Global GBV growth and 50% y/y net revenue growth in Q4, both well ahead of consensus and the upper end of the guidance ranges, as the aging up of the user base and deeper engagement with an increasingly diverse & complex set of experiences fuels robust monetization. Our covenant adj. EBITDA estimate for $597M in Q4 is also well ahead of expectations, with operating leverage from the strong growth offset by greater infrastructure investments. Roblox announced new advertising formats and tools at CES in January as the company looks to continue scaling its advertising platform, including (1) a new premium ad unit embedded on the app homepage that displays video content in an immersive 3D environment, and (2) additional programmatic advertising partnerships, including Amazon DSP, Magnite, and PubMatic."