Roblox is shedding its meta shell to become a budding Wall Street darling

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Roblox’s (RBLX) virtual coins are turning into more real-life sales.

The online gaming platform, which reported its third quarter earnings this week, clocked a massive beat in bookings. Bookings — virtual currency sales from in-game purchases — is a key metric for the company, suggesting that users aren’t only using the platform, they’re spending more money once there.

Roblox, famous for its pull and popularity with kids and teenagers, has been working to age up its user base in a roller-coaster year for the company. While its stock is up about 40% year to date, its shares saw a notable decline in August after a tough earnings report.

However, this quarter’s beat may mark a turning point. In Q3, bookings growth picked up substantially — particularly in Europe and Asia — leading to a total of $839.5 million, compared to the $822.2 million analysts were expecting. The company’s shares shot up more than 10% in the hours following the Wednesday morning release, though it gave back some gains on Thursday.

Additionally, Roblox reported 70.2 million daily active users, a slight miss on analysts’ expectations of 70.21 million, but still representing a 20% year-over-year increase. The platform’s revenue came in at $713.2 million, compared to $686 million expected.

Making the core offering more attractive to older gamers — who have dominion over their wallets — is crucial to Roblox’s future. The aging-up strategy, which includes increased investment in better graphics, has been a key driver to in-game purchase growth.

“Greater fidelity, in turn, attracts more high-definition gamers, leading to increased spending per user from those aged-up gamers with more income,” said Joe Ferencz, CEO of leading Roblox game developer and brand strategist Gamefam. “So, I think they need to continue investing in hardware and in the strength of the platform.”

As Roblox works to expand its audience, the company has been looking to shed the “metaverse” label, one that’s been made most famous by Meta (META) but was also popularized by the gaming platform itself. The term brings up images of legless avatars and clunky VR goggles, and has come to be associated with kitschy tech that no one wants.

Roblox gift cards are seen at a store in Krakow, Poland on July 5, 2023. (Photo by Jakub Porzycki/NurPhoto via Getty Images)

Roblox gift cards are seen at a store in Krakow, Poland, on July 5, 2023. (Jakub Porzycki/NurPhoto via Getty Images) (NurPhoto via Getty Images)

While moving away from its metaverse image, Roblox has inked a series of partnerships, from sports to music, to diversify its monetization. Fifa and the National Hockey League (NHL) are among the leagues that have created content for the platform, while Warner Music launched a social role play game that allows users to dabble in being DJs, producers, and more.

The company has also been trying to attract major brands to set up shop in its universe. Maybelline recently joined the platform, launching mini games and virtual lounges that lets users experiment with its makeup.

Looking to 2024, the company’s further building its ad and tech capabilities, including its own data center, which will reduce its reliance on third parties.

“We like RBLX’s launch of video ad platforms positioning it well for advertising revenue beginning in 1H 2024,” CFRA’s Shreya Gheewala wrote in the aftermath of earnings. “Lower capex is expected with its data center complete in 2024.”

And the platform has been trimming its fat. “We also slowed spending growth across most of our major expense categories,” CFO Michael Guthrie said in a statement.

Currently, Wall Street analysts’ recommendations for Roblox break down to 24 buys, 6 holds, 6 sells.

Ultimately, there’s still a ways to go before Roblox feels less foreign. That said, there are examples of other platforms that started out as uncomfortably new and have since become internet staples.

“I think it’s like the early days of YouTube — but more than 15 years later, YouTube is a pillar of content consumption,” said Ferencz.

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on X, formerly Twitter, at @agarfinks and on LinkedIn.

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