Recently, a gardening game called "Grow A Garden" has become extremely popular. It was created by a 16-year-old named Adrian, and after its launch, it achieved a concurrent user count of 21 million, breaking industry records and becoming a phenomenon. $Roblox(RBLX.US)$ The platform behind it has become the biggest winner, with its stock price seeing the largest increase of over 100% this year, performing exceptionally well. This surge has also made significant profits for Cathie Wood, as Roblox is one of ARK's top ten Hold Positions.

So, why can the platform create such a popular game, and what investment information should we pay attention to? $Roblox(RBLX.US)$ This week, opportunities will be shared quickly.

How Roblox Emerged

On the social media platform X, many people criticize "Grow A Garden" as being boring, saying it only takes a minute to learn how to buy seeds, purchase equipment, plant, harvest, and sell fruits, then start the cycle again... In fact, this is precisely why "Grow A Garden" is so popular, as nearly 40% of users on Roblox are under 13, fitting perfectly with the product's tone.

Roblox itself is a UGC game social platform centered on teenagers as core users, often referred to as the "spiritual home" of elementary school students. Currently, it boasts approximately 97.8 million daily active users and millions of games created by developers, allowing players to fulfill various needs for entertainment, socializing, creation, trading, education, and more.

In its early days, Roblox was a developer-supported platform, with developers making up the majority of the community. They exchanged techniques and experienced each other's games. As the community grew, it began attracting more and more players, gradually evolving into a game platform for both players and developers, leading to the emergence of a Roblox economy based on the virtual currency Robux.

The current Roblox can be understood as an integrated platform for game development, distribution, operation, and monetization, consisting of three main components: Roblox Client, Roblox Studio, and Roblox Cloud. Roblox Client represents platform players, who can play games on the platform as well as create games; Roblox Studio is a free development engine for creating games and character models; and Roblox Cloud provides the infrastructure and computational support in the cloud.

The development of Roblox to this day cannot be separated from the large developer resources accumulated in the early stages. The gaming industry requires imagination and innovation, and the vast amount of developer data provides Roblox with a continuous stream of game ideas, allowing players to endlessly discover new games, ultimately forming a virtuous cycle of 'more games - more players - more revenue - more developers.' This has also spurred the rise of popular games like 'Grow A Garden,' which indirectly confirms Roblox's immense potential.

In addition, due to Roblox's dual nature of being both a game and a social platform, users can make friends and chat within the game, creating strong social stickiness. This network effect has driven rapid user growth, with the platform's daily active users (DAU) increasing from 12 million in 2018 to 97.8 million by Q1 2025, achieving a compound annual growth rate of over 20%. The UGC model combined with strong social attributes has given Roblox a solid moat.

Roblox's profit model.

The essence of Roblox's profit model is a virtual economy platform that monetizes through the sale of virtual currency Robux, advertising, and subscription services. Currently, the company's revenue primarily comes from Robux top-ups, while advertising contributions are not yet significant.

The platform's DAU growth rate is stable, and the Asia-Pacific region has potential.

Firstly, for the Roblox platform, the more users there are, the higher the potential revenue, making the number of active users on the platform crucial.

Referencing DAU data from Q1 2023 to Q1 2025, Roblox's user growth rate has remained at over 20%, which is relatively healthy. Notably, the growth rate reached 26% in Q1 2025, with a key factor being the mid-Q1 release of the hit game 'Dead Rails,' which accelerated user momentum. Furthermore, according to Deutsche Bank reports, following the launch of 'Grow A Garden' in April, Roblox's user growth experienced a positive turning point, with the growth rate accelerating to 25%-30%, and even reaching 60% by the end of May.

Combining the regional distribution of DAU, the Asia-Pacific region has a large proportion and a significant increase in growth, while Europe has a smaller share but a decline in growth, and North America is relatively stable. According to statistics from TD Cowen, since March this year, the app download volumes in emerging markets like the Philippines and Indonesia have been significantly increasing, enhancing Roblox's coverage and participation rates in the Asia-Pacific region, but it is crucial to assess the spending levels of this batch of users to see if they can contribute actual revenue to Roblox.

Revenue growth rate remains stable year-on-year, with significant regional differences.

From the overall revenue perspective, Q1 revenue in 2025 reached 1.0352 billion USD, showing a year-on-year growth of 29%; the forecasted revenue is 1.2067 billion USD, with a year-on-year growth of 31%. Overall, revenue lags behind forecasted revenue, but the year-on-year growth rates are stable.

By region, North America accounts for over 60% of revenue, serving as the main contributor; Europe accounts for about 20%, but growth is significantly improving; in contrast, the Asia-Pacific region, which has the largest user base, generates the lowest revenue, with year-on-year growth even lower than the overall figure. Looking at per DAU in each region, the revenue gap is even more pronounced, with North America realizing an average payment of 36.46 USD per person in Q1, while the Asia-Pacific region only saw 5.37 USD. As mentioned earlier, the user base in the Asia-Pacific region is growing rapidly, and if the payment rate can be effectively improved, it may become a breakthrough point for Roblox's revenue in the future.

It is noteworthy that nearly 40% of users on the platform are under 13 years old. The purchasing power of younger users is very limited, and their value in the eyes of advertisers is also low, which makes it difficult for the company to rapidly increase its overall revenue. Going forward, we should focus on whether the platform can improve its revenue situation through age-tiered operation.

Operating expenses have yet to cover revenue, but profitability is expected to improve.

As of Q1 2025, the company's operating revenue has not yet covered expenses, but the quarterly receivable growth rate exceeds the expense growth rate, indicating that profitability is likely to improve.

In Q1, the company achieved operating revenue of 1.035 billion USD, a year-on-year increase of 29.2%, which is 6.9% higher than the same period last year, maintaining a high growth rate; during the same period, operating expenses, including cost of goods sold and expenses, amounted to 1.29 billion USD, with a year-on-year growth of 16.8%, remaining consistent with last year's growth rate. In Q3 2023, the company’s revenue growth rate exceeded that of operating expenses, and thereafter the revenue growth rate has consistently remained above the expense growth rate, stabilizing around 30% for nearly four consecutive quarters, whereas the growth rate of operating expenses has shown a fluctuating downward trend since Q1 2023. If the growth rate of the company’s income and expenditure continues to remain positive, profitability is expected to continue improving.

Looking at the proportion of various expenses to revenue, the cost of goods sold in Q1 2025 accounted for 21.7%, a year-on-year decrease of 0.6%, maintaining a slow downward trend since the second quarter of 2023. The improvement in the company's costs has played a certain role in reducing losses.

Other expenses, including research and development costs, infrastructure costs, and sales and management expenses, basically continue to decline trendwise, indicating that Roblox has made improvements in expense control, positively impacting the company's profitability.

An exception is the proportion of developer settlement costs, which fluctuate relatively greatly between quarters. In Q1 2025, this cost was $0.282 billion, accounting for 27.2% of revenue, an increase of 2.0% year on year. This expenditure is the share paid by the platform to game developers. According to the previously mentioned 'more games - more players - more revenue - more developers' circular logic, the increase in developer income is a Bullish Signals, indicating that the platform is also increasing its revenue. According to Statistics, currently, there are over 10 million active developers on the platform, and about 100 top developers earn over $1 million annually, with most developers earning a few hundred to a few thousand dollars monthly.

To further incentivize developers, Roblox will launch two new systems called 'Creator Rewards' on July 24 this year. One is to encourage developers to regularly invite players into the social gaming platform, and the other allows creators to earn a commission from sales made by users who registered or returned due to their promotion, thereby enhancing overall community activity and involvement. With increasing market competition, whether Roblox's strategy can effectively attract and retain developers and players will be an important indicator to observe in the future.

Technical Analysis

Influenced by the explosive success of the game 'Grow A Garden' in April, Roblox's stock price has entered a strong upward trend, climbing from a low of $50 in April to $105, an increase of over 100%. Referring to the EMA12 and the 50-day moving average, the current stock price is maintaining a good upward trend, with strong support near the EMA50 moving average at $86.

Combining RSI for judgment, the current RSI remains above 70, in the overbought Range. However, as the stock price continues to rise, the RSI has not increased continuously, showing a certain divergence signal. Investors need to carefully monitor the possibility of a stock price pullback, where potential profit-taking points may appear when the RSI returns to the 70 overbought boundary. It should be noted that any Technical Indicator can only serve as a warning and does not necessarily mean that the price will reverse; in actual trading, it can only serve as auxiliary reference.

In summary

In summary, although Roblox has not yet achieved profitability, it has seen a series of blockbuster games this year, especially with the hit game 'Grow A Garden' gaining immense popularity, resulting in a new high in user growth. Combined with the company's continued improvement in cost of goods sold and various expenses, it is expected to break the loss situation in the future.

Currently, the stock price is running above 105 dollars, gradually approaching the 2021 peak, and caution is needed for potential pullback risks, with a focus on the key support level at 86 dollars. For more investment insights, everyone is welcome to leave comments and Share in the comments section.

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This content discusses technical analysis; other methods, including Fundamental Analysis, may provide different perspectives. The examples provided are for illustrative purposes only and do not reflect expected results.