Is RBLX Able to Sustain its Profitability?

Large-cap Electronic Gaming & Multimedia company Roblox was down -3.7% during Friday's trading session, while the S&P 500 moved 2.3%. With last year's reported gross margins at 74.1%, you might be wondering if Friday's drop is an opportunity to pick up shares of a profitable company at a discount on Monday.

Date Reported Revenue ($ MM) Cost of Revenue ($ MM) Gross Margins (%) YoY Growth (%)
2021-12-31 1,919 497 74.11 0.11
2020-12-31 924 240 74.03 -2.5
2019-12-31 508 122 75.93 n/a

Roblox's gross margins are currently in the green, but this might not be the case for long. Since its cost of revenue is growing at a rate of 101.6% compared to 94.7% for its revenues, its gross margins have been shrinking -1.2% on average each year.

Date Reported Total Revenue ($ MM) Operating Expenses ($ MM) Operating Margins (%) YoY Growth (%)
2021-12-31 1,919 1,917 -25.8 10.45
2020-12-31 924 950 -28.81 -91.56
2019-12-31 508 462 -15.04 n/a

The table above tells us that, on average, Roblox has not been profitable over the last four years, which should be a warning sign to prospective investors. Indeed, the company's operating margins are sinking at an average rate of -40.6%

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.