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Roblox Shares Fall as Cost Increases Hit Video Game Platform

Roblox Shares Fall as Cost Increases Hit Video Game Platform

Shares of Roblox dropped more‍ than 11% in late Thursday trading​ after the company⁢ reported ‌a larger-than-expected climb in operating expenses, raising ​questions over the sustainability of its business model.

The⁣ gaming platform said total operating expenses surged 68% to $485.6 million in the just-ended quarter, driven by ​an​ increase⁢ in personnel-related costs, external services and⁢ tech costs.

Roblox⁢ was further hit ⁤by​ rising costs due to the pressure of ⁤competition in the industry,⁣ resulting in higher marketing and product development costs. As a result, the company reported a loss of $92.8 million in the ‍period, up from a loss of $68 million a year​ ago but narrower‍ than the $107 million loss in the previous quarter.

Revenue attributable to the company ⁢rose ⁣94% to ‍$387.2⁣ million in the fourth quarter, driven by a surge in⁤ active users and increase in average ⁤revenue per user (ARPU).⁤ However, Roblox’s soaring ‍costs continued to ⁢outpace the revenue growth.

Roblox is looking to find solutions to‍ help control the rising‌ costs and has⁣ already announced⁣ plans to⁢ reduce the number of acquisitions it makes in the near future in ​order to focus on developing its‍ own in-house ⁣technology and⁢ widening its global presence.

However, investors remain wary about future prospects‌ as competition in the sector intensifies and the‌ costs to acquire ⁤and ‌retain⁤ users climb.

Roblox is not the only gaming platform struggling to manage its costs. Competitors, such as Epic Games and Zynga experienced similar⁣ pressures ‌in recent quarters, which has prompted a shift ‍from an acquisition-led strategy to focusing ‍on in-house product development and marketing.

Roblox’s stock has been ​volatile in 2021, though the⁢ company⁣ and its business remain‌ intertwined with Wall Street’s broader technology sector performance. The stock is up 63%​ year to date, ​despite its latest trading slump.


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