I spent 2 weeks researching Roblox, and my summary is as follows:I like the business model (comparable to YouTube)The accounting has an interesting angle (booking vs. revenue) that deserves a lot of attentionI dislike the content (not great for the users)I’ll elaborate on all of them below.Subscribe now1.0 Introduction (and the business model)David Baszucki, one of the two co-founders, made 2D physics simulation software for schools. The observation was clear that students wanted to explore how physics works. They wanted to make cars and crash them into walls.Together with Erik Cassel (who passed away in 2013), they created Roblox in 2004. Their mission is to connect one billion users and capture 10% of the global gaming content market.There are 3 parts of Roblox:Roblox Client (the application)Roblox Studio (the free toolset allowing creators to build)Roblox Cloud (services/infrastructure that powers Roblox Client and Roblox Studio)This means the company is as independent as it gets. Comparable to YouTube, it doesn’t create games; it allows creators to do so and host the games on their servers, where players can access them.But unlike YouTube, Roblox owns the engine. A game built in Roblox Studio can only be executed on Roblox’s servers. The other big difference is that YouTube sells advertising, while Roblox sells a virtual currency to users who spend it inside games.1.1 Robux (the currency)Here’s when it starts to get interesting. Robux can be purchased through the App Store, Google Play, a console store, a browser, or a gift card. This is considered booking (NOT REVENUE). This booking is recognized as revenue over the estimated lifetime of a paying user - currently 27 months. So, the booking today will be recognized as revenue over the next 27 months, 1/27 each month.Accounting-wise, there’s logic to this. When the user buys the currency, the goal is to use it. The moment of purchase is not the moment of using the currency. But this also means bookings are a relevant KPI to track, and it shows where the revenue is trending.The app-store / payment processing cost, is also recognized over the same 27 months.The above two points are shown on the balance sheet as:Deferred revenue (the cash received for Robux used in the future)Deferred cost of revenue (the payment processing fee)When Robux is used inside an experience (a game pass, an avatar item, a private server, or a subscription), the creator earns Robux, and once above the threshold, it can be converted to cash via the developer exchange program. This is recognized in the period incurred.1.2 The dishonest conversionRight here, there is one claim that, although true, is dishonest.Their pitch to developers is that 70% of the Robux spent is passed to them. But then, this should be 70% of the revenue, right?Why is that not the case?Because the buy/sell price of Robux is not the same.A user buys 800 Robux for $9.99 ($0.0125 per Robux)The developer gets 560 Robux (70% of the currency), but when converted, it’s only $2.13 ($0.0038 per Robux).So, yes, 70% of the currency is passed to the developers, but the exchange rate is significantly worse, which translates to 22% of the cash that the user used to buy Robux.So the 70% is pretty much a marketing trick for developers to create content.Subscribe now2.0 The usersBefore I move into the financials and the KPIs, I think it’s important to acknowledge who the users are.Based on the self-reported age report (published in February 2026):35% are below age 1338% are 13-1727% are 18+With such a young audience, safety is crucial. Historically, Roblox has been criticized for not protecting users well enough. This has been improved over time, as the platform has introduced:Chat defaults (a chat can be turned off by default for younger children to block unwanted contact)Different tiers (Roblox Kids for ages 5-8, Roblox Select for 9-15)Age verificationLinked Controls (Parents can manage screen time, spending limits, and direct chat permissions)ROOST (“Robust Open Online Safety Tools”) provides free open-source safety infrastructure for online platforms (including open-source models). Besides Roblox, Discord, Google, and OpenAI are among the many founding partners.From Roblox's point of view, the young audience comes with low budgets. On the other hand, as the users grow older, their budgets will increase, and Roblox might get a higher allocation.About 1.3% of the daily active users are daily unique payers.2.1 User growthThe number of daily active users has been growing a lot, specifically in Q2 and Q3 last year, as a few games that were huge successes were launched (Grow a Garden, Steal a Brainrot, Brookhaven, 99 Nights in the Forest, etc).Personally, watching these games to understand the appeal was suffering. At the same time, I find it fascinating that this quality of graphics gets so many users.The growth is also reflected in the bookings (which later on become revenue). Based on the above, the average booking per daily active user (“ABPDAU”) can also be derived. The conclusion based on the chart below is that the spend per user doesn’t go up over time.If we look at it geographically, there’s a slightly different conclusion.APAC, US & Canada users do not spend more over time, but that isn’t the case for Europe and the Rest of the World. The graphs above show that 1 user in the US/Canada is worth as much as:3 users in Europe8 users in APAC8 users in the Rest of the World.3.0 Historical Financial PerformanceThe revenue growth from 2019 ($508m) to the last twelve months (ending June 30th, 2026 - $5.7b) is impressive.At the same time, their operating margin stands at -21% (-$1.2b).Starting at 100% revenue:22% goes to payment processing companies29% goes to developers; this cost is based on the actual Robux usage (not bookings), hence it’s higher than the 22% of bookings outlined in section 1.2.29% - Research & development23% - Infrastructure13% - General & administrative5% - Sales and marketing3.1 So, what now?One question that is important to answer is: what does the road to profitability look like?Part of it lies in the first segment, where the difference between bookings and revenue was explained. Last twelve months:Bookings: $7.4bRevenue: $5.7bWhen bookings turn into revenue, the operating loss will turn into operating income. With the current run-rate, the operating margin will be close to 2%.I see 6 important events that could help Roblox:Roblox Build was introduced a month ago (July 17th, 2026), allowing users to make their own Roblox games from their phone. Basically, vibe-coding a game. It will roll out gradually, and there will be paid tiers.Users get older —> More money to spend.Advertising - the ID verification will help to avoid targeting children, but only adults. This has potential to bring at least $0.5b in additional revenue/operating profit.Robux price increases (double-edged decision on first glance, will benefit the company if executed).Roblox employee reduction - There hasn’t been any restructuring, and just like any company that experienced fast growth, I do think Roblox has overhired, and eventually, restructuring will be in place.Short-form videos on the homepage (demand that’s proven to exist on many other platforms)Personally, I don’t like the impact that Roblox, but also the social media companies, have on the young audience. I am not against games, but I am against wasting time with content that has no benefit.4.0 The risksI think this deserves a separate section.Child safety, regulation, and litigation - With the majority of the population under 18, this will always be a risk.New releases - GTA VI release date is scheduled for November 19th. I am curious what the impact would be on Roblox.Virality dependence - For the company to grow, there has to be viral moments. As Roblox is not creating games, they’re not in charge of creating the viral moments. It is all about giving power to the creators.Bookings decline - After the viral moments, there’s a period of bookings decline. This is what Roblox is experiencing now in Q1-2026 and Q2-2026.The last two points are quite visible in the share price performance.The viral moments led to user growth and higher bookings in Q3/Q4 last year, and the share price went up 3x. Once the viral moment was gone, the share price went back to where it was.5.0 ValuationI do think Roblox has enough levers to grow revenue for a long period of time, and its operating margin will likely climb to ~20%.Below is my DCF model:Based on the above, my conclusion is that Roblox is overvalued today.For it to perform well in the long-run, a lot of what’s listed in section 3.1 has to materialize.This is NOT investment advice. Everything above is for entertainment, informational, and educational purposes. Do your own due diligence.The Finance Corner is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.