Street Fight: Roblox gets both upgrade, downgrade following earnings

Roblox (RBLX) is receiving mixed signals from Wall Street after reporting quarterly results, as Goldman Sachs upgraded the stock to Buy and Benchmark lowered its rating to Hold. The former says the company is seeing strength in bookings, revenue, and daily active user growth. Meanwhile, Benchmark argues that Roblox is entering a “normalization phase,” with guidance pointing to a sharp deceleration in bookings growth and rising expense intensity that could pressure margins through fiscal 2026.

RESULTS: Roblox reported Q3 losses per share of (37c), versus consensus of (50c), and Q3 bookings of $1.92B, which was better than the expected $1.7B. “Our third-quarter results demonstrate the tremendous progress we’ve made toward our goal of capturing 10% of the global gaming market. Our platform and creator ecosystem are healthier than ever before, driven by broad-based strength, new viral hits, and our strategic investments in creator economics, platform performance, discovery, and the virtual economy. We are on track to expand age estimation to all Roblox users who access our communication features by early next year. We believe this initiative will establish a best-in-class standard for communication safety on social media and communications platforms,” said David Baszucki, founder and CEO of Roblox.

The company reported Q3 daily active users, or DAUs, up 70% year-over-year, monthly unique payers, or MUPs, up 88% year-over-year, and hours engaged up 91% year-over-year. Roblox sees Q4 bookings between $2B-$2.05B, with consensus at $1.83B, Q4 revenue of $1.35B-$1.4B and adjusted EBITDA of (20M)-$10M, with consolidated net loss of (375M)-(345M).

BUY ROBLOX: Goldman Sachs upgraded Roblox to Buy from Neutral with a price target of $180, up from $155, following the Q3 earnings report. The company is seeing strength in bookings, revenue and daily active user growth, and management is optimistic surrounding the long-term scaling of the platform, the firm tells investors in a research note. Goldman now sees upside the company’s forecasts, saying Roblox is positioned for long-term compounding and higher margins.

MOVING TO THE SIDELINES: Less bullish on the name, Benchmark downgraded Roblox to Hold from Buy and removed the firm’s previous price target following Q3 results and forward guidance. While stating that Roblox delivered “impressive” Q3 results and solid near-term execution, the firm noted that guidance points to a sharp deceleration in bookings growth and rising expense intensity that could pressure margins through fiscal 2026. Benchmark believes the company is entering a normalization phase after two years of extraordinary expansion, and that its near-term financial profile “no longer supports a growth valuation premium.”

COMMENTARY INTENTIONALLY VAGUE: Raymond James notes Roblox’s Q3 report and Q4 guide were both solidly ahead of expectations, though initial commentary on 2026 growth and margins disappointed investors. Following its callback with management, the firm suspects that there is a decent amount of conservatism is baked in, and it still believes that 20% year-over-year growth is a floor for outcomes. Further, Raymond’s conversations suggest that while infrastructure expense is increasing on a dollar basis given expanding capacity needs, it is not the primary driver of the company’s expected margin decline in 2026. It sees the DevEx raise as more consequential. Combined, the investments should continue to bolster Roblox’s position as the go-to platform for independent developers, allowing the company to establish its moat before competitors can build the same network effects, the firm adds, keeping an Outperform rating on the shares.

ENGAGEMENT TEMPERED BY INVESTMENT: Canaccord notes that Roblox reported strong Q3 results. Numerous AI-powered search and discovery improvements have supported several new viral hits over recent months, and strategic investments in creating a more vibrant economy and improved app performance have led to accelerating engagement and monetization in international markets. The company’s Q4 guidance was ahead of expectations, although shares of Roblox fell sharply given somewhat cautious commentary regarding next year, Canaccord says. The company is planning to ramp its infrastructure investments to support heightened engagement levels and ongoing product innovation aimed at genre diversification, and these investments, along with higher DevEx rates, may result in a slight year-over-year decline in Roblox’s operating margin next year depending on the level of bookings growth. The firm has a Buy rating on the name with a price target of $160 on the shares.

PRICE ACTION: In Friday afternoon trading, shares of Roblox have dropped about 1% to $112.35, adding to yesterday’s losses.

“Street Fight” is The Fly’s recurring series of exclusive stories that highlight a stock or sector that is in focus amid divergent views from Wall Street analysts.