Roblox’s hottest new game is already cooling off

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If there’s a kid under 13 in your house, you’ve probably heard about Steal an Egg. It went from a brand-new Roblox release to one of the platform’s biggest games in a matter of weeks.

Hits like that are how Roblox makes money. Kids flock to a game, buy Robux to keep up, then move on to the next craze.

Roblox (RBLX) averaged 123 million daily active users in the second quarter, up 10%, and they logged 29 billion hours on the platform, according to the company’s earnings release. Bookings rose eight percent to $1.56 billion.

Management still believes in the long game. The company has “conviction in Roblox’s ability to deliver long-term growth in excess of 20%,” CEO David Baszucki said on its second-quarter call.

Investors haven’t been as patient. Roblox guided for third-quarter bookings to fall 14% to 18%, its first quarterly decline in four years, and shares fell nearly 30% on July 31, their worst one-day drop on record, Reuters reported.

According to a Bank of America research report shared with me, Roblox’s third quarter now looks better than feared, but the hit that saved it may already be fading.

Bank of America expects a Roblox third-quarter beat

Bank of America analyst Omar Dessouky raised his third-quarter bookings estimate to $1.70 billion from $1.64 billion in his Oct. 8 preview. That’s above the $1.62 billion Wall Street consensus he cited and the top of Roblox’s own guidance range of $1.58 billion to $1.65 billion.

The reason is engagement. Total platform hours fell seven percent from a year earlier in the third quarter, better than the 16% drop Dessouky had modeled, according to third-party data he tracks.

Strip out last year’s five breakout games, which have faded, and hours growth sped up to 37% from 20% in the second quarter, led by Steal an Egg.

The catch is in the weekly numbers. “This year’s most successful launch, Steal an Egg reached peak daily hours comparable to last year’s [Grow a Garden] and Steal a Brainrot, but engagement appears to have rolled over (-9%/-18% W/W in the last two weeks),” wrote Dessouky.

Dessouky kept his Neutral rating and $48 price objective, about five percent above the $45.56 price in his report. The stock has climbed back sharply from the roughly $34.50 it hit on July 31, 247 Wall St. reported.

Search changes and age checks reshaped player engagement

Roblox brought some of this volatility on itself. Baszucki pointed on the call to “our strategic decision to focus our discovery algorithms directly on measured long-term retention,” a shift that Reuters said steered players toward games with less spending built in.