Shares of Roblox(NYSE: RBLX) have soared by 42% year to date and are currently trading at a three-year high as of this writing. The gaming platform is more popular than ever, leveraging its category leadership and global expansion into strong growth. Simply put, users are spending more time and money on its platform.
With a path to more consistent profitability and an ongoing effort to diversify its revenue streams, Roblox should see its business continue to grow in the years ahead. Here are three reasons I believe the stock is a buy right now.
Image source: Getty Images.
1. Impressive user engagement
Roblox is more than just a video game -- it's a platform that combines social interaction, user-created content, and community development. For Roblox, its business model centers on the Robux digital currency, which users purchase to acquire virtual items, accessories, and in-game enhancements through a robust marketplace.
This model incentivizes creators to develop high-quality content, as they earn a share of Robux spending, driving a self-reinforcing cycle of engagement and monetization. In the first quarter, Roblox reported 97.8 million daily active users (DAUs), a 26% year-over-year increase, marking an acceleration from the growth in recent years.
More encouraging are the signs that users are spending more time and money on the platform. Hours engaged climbed by 30%, while bookings of $1.2 billion increased by 31% from the prior-year quarter, underscoring the healthy ecosystem and Roblox's success in scaling its user base. Management expects these trends to continue, citing recent initiatives such as artificial intelligence tools available to gamers and creators proving highly popular.
Metric
Q1 2023
Q1 2024
Q1 2025
DAUs (in millions)
66.1
77.7
97.8
DAUs growth (YOY)
22%
17%
26%
Bookings (in millions)
$774
$924
$1,207
Bookings growth (YOY)
23%
19%
31%
Data source: Roblox. YOY = year over year.
2. Increasingly diversified
An important development this year is Roblox's ongoing diversification of its revenue streams beyond Robux transactions, positioning itself for sustainable growth.
The company has launched strategic advertising partnerships, such as with Alphabet's Google Ads, to build a robust ad ecosystem that allows brands to engage users through immersive ads without disrupting the in-game experience. Roblox is also working with Shopify to enable creators to sell physical merchandise directly within the platform, expanding the business beyond virtual goods. While still a relatively small part of the overall business, this strategy is already supporting improved margins and higher quality cash flows.
International momentum is another key diversification driver, with strong growth in regions like Asia-Pacific benefiting from the availability of new languages. Roblox's focus on localized content and platform accessibility has fueled this expansion. Additionally, the platform is attracting older demographics, with 64% of engagement hours in Q1 coming from users aged 13 and up, up 40% from last year.
This shift broadens Roblox's appeal beyond its traditional younger audience and positions the company for sustained long-term growth as a global leader in the metaverse space.
3. A path to profitability
Roblox has struggled to reach profitability since its 2021 initial public offering, prioritizing growth and its global expansion with heavy investments in research and development. Yet, it now appears the company is on the right track as the expanding business scale drives operating and financial efficiency.
First-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $58 million reversed the $7 million loss in the prior-year quarter. Free cash flow of $427 million more than doubled from $191 million in the first quarter of 2024. For all of 2025, the company is targeting free cash flow between $885 million and $930 million, sharply higher than the $641 million result last year.
As long as the Roblox ecosystem remains vibrant with gamers and creators, there's a clear path to profitability, making Roblox well-positioned to reward shareholders.
Pricey, but worth it
Trading at 15 times sales and a price-to-free-cash-flow ratio of 61, Roblox is undeniably a pricey stock. Nevertheless, the market tends to appreciate companies generating hypergrowth, justifying their premium valuation. Roblox's self-reinforcing ecosystem, innovative monetization strategies, and new growth initiatives highlight what remains a significant long-term opportunity.
I'm bullish and view Roblox as a great option for investors to gain exposure to an industry leader with a bright future in digital entertainment.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Roblox, and Shopify. The Motley Fool has a disclosure policy.
