Does Roblox Have Good Margins?

By Tamara Parker • Monday, April 17 12:03 • Permanent Link

Large-cap Data Processing Services company Roblox is down -11.4% during this afternoon's trading session, while the S&P 500 moved -0.0%. With last year's reported gross margins at 75.4%, you might be wondering if today's drop is an opportunity to pick up shares of a profitable company at a discount.

Gross margins give insight into the basic economics of the company' product line and its pricing power in the target market, yet it's essential to balance this with a review of Roblox's operating margins. Operating margins take into account the company's fixed overhead costs, in addition to the cost of revenue used to calculate gross margins.

Is Roblox plagued with bloated overhead expenses that are eating away at an otherwise profitable business? Or is the company currently unprofitable because it is in a growth phase? A combined analysis of both gross and operating margins can help answer these questions, so that you understand what kind of business you are investing in.

Date Reported	Revenue ($ k)	Cost of Revenue ($ k)	Gross Margins (%)	YoY Growth (%)
2022-12-31	2,225,052	547,658	75.39	1.73
2021-12-31	1,919,181	496,870	74.11	0.11
2020-12-31	923,885	239,898	74.03	-2.5
2019-12-31	508,393	122,381	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 45.4% compared to 44.6% for its revenues, its gross margins have been shrinking -0.2% on average each year.

Date Reported	TotalRevenue ($ k)	Operating Expenses ($ k)	Operating Margins (%)	YoY Growth (%)
2022-12-31	2,225,052	2,601,178	-41.52	-60.93
2021-12-31	1,919,181	1,917,409	-25.8	10.45
2020-12-31	923,885	950,124	-28.81	-91.56
2019-12-31	508,393	462,452	-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 rate of -28.9%

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.