Roblox 2026 Q2 Earnings Call

Jamie? Good afternoon, everyone. Thank you for joining us to discuss our Q2 2026 results.

With me today is Roblox's 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 remain steadfast in our goal to capture 10% of the global gaming market and an even greater share of the U.S. 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. While 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've age checked. We've made significant progress this quarter, and as a result, age check penetration has increased to 57% globally. In the first countries where we rolled it out, Australia is approaching 80%, and the U.S. and U.K. are at 70%. With the under 18 segments, we're making enormous progress, with the U.S. under 18 at 75%. 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. On the content side, in June, we successfully rolled out age-based Roblox Kids and Roblox Select.

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 U.S. 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 DAUs, up 10% year-over-year, and hours 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%, DAUs in India grew 64%. Similarly, hours 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 10 games accounted for about 30% of all the hours engaged on Roblox.

Today, the top 10 games account for approximately 20% of hours. In terms of user metrics, new user sign-up activity improved throughout the quarter, benefiting from seasonality and the reinstatement of Roblox in Russia. Retention of existing users remained stable, and engagement 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. 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 age check 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 of cross-experience 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. Monetization weakness is likely to continue. As a result, we forecast Q3 bookings to be between $1.58 billion and $1.65 billion, which given the tough comparisons, translates to a year-over-year decline of 14%-18%. From a margin perspective, the reduction in bookings will result in fixed cost de-leveraging. 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, 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-off 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. This fundamental need is part of what gives really all of us conviction in Roblox's ability to deliver long-term growth in excess of 20%. We set our goal of expanding play everywhere with a target of 10% of global gaming running on Roblox. In the U.S., we've shared that our goal is to go well beyond 10%. To date, 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.