Roblox (RBLX.US) 2025 Q4 conference call: If entering the Chinese market, it will adopt a segregated deployment strategy.

Recently, Roblox (RBLX.US) held a conference call for the fourth quarter financial report of 2025. Roblox stated that they will continue to maintain a good partnership with Tencent and see huge opportunities in the Chinese market. The company has reevaluated their view on the Chinese market: if they enter the market, they will use a segmented deployment approach. The design of the company's infrastructure is unique and can be abstracted and deployed in multiple locations. Regarding age verification and estimating age details, firstly, this highlights the scale of Roblox becoming a cultural phenomenon. Although the age verification shows slightly lower ages than self-reported by users, this actually proves the success of the platform. The company mainly focuses on two aspects: first, the growth rate of users aged 18 and above exceeds 50%; second, the technological advantages used to expand users under 18 are the same as those used for users above 18from cloud services to applications, to content discovery, social graphs, and other vertical integrations, the company firmly believes that these technological advantages are equally applicable. More importantly, technology continues to support an increasingly real user experience. Therefore, the company remains confident in the prospects for the development of users aged 18 and above. Q&A: Q1: Can you provide detailed explanations on factors influencing the annual booking revenue outlook? How about the visibility of content timetables and releases, as well as the views on opportunities for users aged 18 and above and the latest developments in AI games? A: We have many internal leading indicators that we can see, which are somewhat correlated with system health. This includes content diversity, content distribution, content velocity, and hitting different age groups and types of content. We see all these aspects as healthy. We saw an increase in content diversity in Q4. The shareholder letter mentioned that growth outside the top 10 experiences accelerated faster than in Q3, in terms of engagement and booking revenue, and we also saw a similar trend in early 2026. We like the diversity and freshness of the content. Even without blockbusters like Grow a Garden or Steal a Brainrot, we see healthy growth in new titles, which gives us confidence in the platform's strength. I also mentioned user quality in 2025. There was some uncertainty during this high-growth period: were these low-quality users? But when we look at what is happening on the platform, the behavior of new users in Q3 and Q4 is very similar to our core userstheir engagement, spending habits, retention. This gives us confidence in the business for the next few quarters. Nevertheless, there is still uncertainty about predicting the position of the business 12 months from now. That is why we believe annual guidance is not the right method in the long run. For 2026, we used a slightly wider range of guidance, reflecting this uncertainty. It is important to note that we did not assume another virus-like blockbuster such as Grow a Garden or Steal a Brainrot in the guidance. We remain optimistic that such events may occur again, but due to unpredictability, they were not included in the guidance. Regarding the future of AI, we are optimistic about the expansion of gaming defined by AI. Let me go back to our mission: connect 1 billion people every day in an optimistic and civilized way. I emphasize the word "connect," meaning bringing multiple people together to play, learn, work. Since we went public, we have been sharing the vision blueprint we are building: having many people gather to play in a physical simulation environment. We have begun adding the concept of NPC and humans to make these environments more realistic, and making them places where people can create, modify, and change in real-time. As we showed yesterday at X, we are beginning to use AI throughout the tech stackmaking scenes more vivid through 3D upsampling, training NPCs using 130 billion hours of video data and real 3D world data. We particularly highlight the breakthroughs of the internal world modeling teamthey not only use video data but also integrate internal Roblox data to build the world model. This innovative approach can be used for content creation and meet other scenario needs. I want to emphasize that this is crucial for our technological solutions. We are developing multiplayer platform technology focused on creating social features that facilitate user interaction. Most products on the market are still operating in the realm of video generation models and not asynchronous 3D multiplayer cloud spaces. I recommend that investors carefully consider the difference between these two and see our recent updates on the X platform. Nevertheless, we remain optimistic about building a tech stack that integrates various AI components. Q2: In the evolution of the platform discovery feature over the past 12 months, what are the opportunities ahead based on understanding the evolution of discovery features? How does this align with the strategic priorities of the platform or individual products in the coming years? A: "Discovery" feature (game recommendations) is a challenging problem to get right, and we believe transparency is crucial. We try to optimize discovery for long-term gains rather than short-term gains, which includes long-term gains in user engagement, platform health, and creator health. Any short-term optimization of "discovery" actions may not be the most optimal for long-term enterprise value and ecosystem health. So we have always focused on how to personalize recommendations for each user in a way that can connect great users with great content in the long term. The results we have seen are more great content reaching more great users, an increase in content diversity, and some future opportunities. Keep an eye on Moments (discovery feature), as we believe that browsing in-game experiences will increasingly complement our discoveries for many users. This is a long journey, and we will continue to improve. Q3: The quarterly gross margin is the second highest since 2020, is this improvement related to direct payment transfers? Can you update us on the progress of direct payment measures? And what are the differentiating factors of Roblox against AI threats that may come from other companies? A: Regarding the quarterly gross margin, I would point out two factors. First, as you assumed, we did receive some tailwinds from COGS. As we have discussed in the past, we are trying to guide users to purchase Robux on platforms with lower costs within the product. This performed better than expected in Q4, which was very helpful for profit margins. Second, another source of expansion in the quarterly profit margin is the growth in booking revenue. Booking revenue exceeded expectations, providing strong leverage for fixed costs. Looking ahead, we continue to expect an improvement in COGS rates as we can move more and more business to lower-cost platforms. This may not be linear, but in the long run, we believe this is a source of business profit margin expansion. Regarding the AI threat, this is a great question. I would like to share how we internally view this issueopportunities for disruption in the opposite direction, namely the opportunity for Roblox's vision to expand from gaming to the future mix of entertainment. 10 years ago, many people were discussing how videos could become interactive, but these experiments were very challenging. Another way to think about it is how games can expand and become a part of entertainment. We are confident in what we are buildinga multiplayer technology running in the cloud that can load faster and be consumed in smaller blocks. World modeling is very interesting, and we actually think they have the opportunity to be used for walking and painting worlds, offering a very interesting opportunity to think about where videos end, snapshots end, and interactivity begins. So we are developing our own models in that area, but the core of our technology will continue to be the very challenging problem of 3D synchronous cloud and building communication technologies. Q4: How does Roblox view equity incentive costs in 2026? How does the flexibility of equity incentives help with long-term strategic investments? A: Internally, we have been operating a wide equity incentive model within a broad range of stock prices for many years, and we operate the business in a way that we are comfortable with. So we do consider these things and build multi-dimensional models. I will say we view this issue from a fairly long-term perspective. Due to stock price reasons, incentive costs may peak at certain points. But ultimately, we believe we will create shareholder value, which will reduce incentive costs over time. If you look at what has happened in the past few years, this is definitely the case. So while this is something we are mindful of, we are more focused on the operational results of the business, as this issue will be resolved through that. Q5: How are the latest developments in the advertising business? How will advertising contribute to growth in 2026? And what are the details of promoting age verification? A: We are very excited and proud of the way age verification promotion is going and optimistic about its results, which we believe broaden our team's unique thinking on how to become a platform that can safely serve all age groups in the long term. We have set an ambitious goal for the internal team to eventually promote this feature without friction. By doing so, we have discovered many other optimization opportunities, and I am very satisfied and happy with the way the promotion is going. Regarding advertising, we expect healthy growth in the advertising business in 2026. However, it is still small. It is not a major contributor to revenue. As you have heard me say in the past, it will take some time to grow. I think the long-term opportunities are very exciting due to the scale and engagement of the platform, but it will take some time. We are cautiously executing, building advertising products, integrating technology into the platform, cooperating with creators to expand inventory, and we will continue to very carefully ensure we build this business in the right way. Q6: There have been reports that Roblox may be interested in expanding its presence in China. Could you comment on this? Also, with regard to user age, more younger users than previously reported, does this mean younger users are harder to age up than expected? A: Regarding China, we continue to maintain a good partnership with Tencent and see huge opportunities in the Chinese market. We have reevaluated our view on the Chinese market: if we enter the market, we will use a segmented deployment approach. We believe our unique design of infrastructure can be abstracted and deployed in multiple locations. Regarding age verification and details of estimating age, there are a few points to clarify. Firstly, this highlights the scale at which Roblox has become a cultural phenomenon. Although the age verification shows slightly younger ages than self-reports by users, this actually proves the success of the platform. I mainly focus on two aspects: first, the growth rate of users aged 18 and above exceeds 50%; second, the technological advantages used to expand users under 18 are the same as those used for users above 18from cloud services to applications, content discovery, social graphs, and other vertical integrations, we believe these technological advantages are equally applicable. More importantly, technology continues to support an increasingly real user experience. Therefore, I am still confident in the prospects for the development of users aged 18 and above. Q7: The penetration rate of age verification promotion seems to be progressing smoothly. But have you noticed any changes in behavior or engagement levels for users who have completed age verification and those who have not? Could the derived effects of age verification possibly make older users see this as an update to their quality of life, contributing to engagement levels? A: Let me give an example of why we are excited about this. As age verification is deeply integrated with social interaction, we can more accurately match users of different age groups with suitable partners. What makes me most optimistic is that this age-tiered matching mechanism can not only accurately connect older users with younger ones, but also efficiently match users of different age groups. We believe this will be a potential point for long-term growth. It is why we consider it a benchmark for the industry. In fact, after implementing this program, another large game company announced that they would adopt this and a social platform also announced that they would implement it simultaneously. We believe this will eventually become an industry mainstream model. As one of the first major platforms to adopt this program, we are proud of it. Q8: The Q1 booking revenue guidance shows a sequential decline of more than 20%, which seems to be one of the larger quarterly slowdowns. Is there a specific reason for this? Or is it just caution? A: My view is quite different. This is a quarter where we did not have any big virus-like blockbusters. Achieving 40% to 44% top-line growth in a quarter without such a situation, I think we should all be very excited about what this indicates about the health of the platform. We said last quarter that as we start to move away from a period of huge virus-like blockbusters, growth will slow down. So I think we should not be surprised by this quarterly trend. If anything, I think we should be very excited about the situation at the beginning of the year.