Roblox’s lowered forecast adds to gloom in the video game sector, causing its shares to plummet by the largest margin in two years.

Roblox revised down its annual bookings forecast on Thursday, amplifying concerns over a downturn in the video game sector and leading to a 23% drop in its shares, marking the steepest decline in over two years.

The adjustment reflects a pullback in spending within Roblox’s gaming platform amidst economic uncertainties and heightened inflation. This move follows a similarly weak revenue outlook from video game publisher Electronic Arts earlier this week.

Roblox now anticipates full-year bookings, a key indicator of future revenue, to range between $4 billion and $4.10 billion, down from its previous guidance of $4.14 billion to $4.28 billion.

The company’s second-quarter bookings forecast also fell short of LSEG estimates.

In an interview with Reuters, Finance Chief Michael Guthrie attributed the conservative quarterly outlook partly to the timing of the Easter holiday, which boosted engagement in the first quarter this year compared to the second quarter in 2023.

Despite the Easter boost, Roblox reported a 19% increase in bookings in the first quarter, marking its slowest growth rate in over a year. Average daily active users grew by 17% to 77.7 million, the lowest rate since its IPO in 2021. Meanwhile, the number of hours spent by gamers aged 13 and above on the platform rose by 19%, the slowest growth rate in about two years.

Guthrie noted that the slowdown in growth aligns with broader trends in the video game industry, where companies like Sony Group and Microsoft have responded by implementing layoffs and studio closures this year.

To diversify revenue streams, Roblox has turned to digital advertising. This month, it began displaying virtual billboards featuring content from brands like Walmart and Warner Bros Discovery to users on its platform.

During a post-earnings conference call, Roblox executives announced plans to start providing forecasts for ad revenue in 2025, expecting it to contribute significantly to growth in 2026 and 2027.

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