Roblox (RBLX -0.41%) delivered a terrific first-quarter earnings report on Monday, with revenue surging 140% year over year -- well above management's previous growth forecast. The stock bounced sharply on the news. 

And as impressive as the gaming platform company's growth has been, CEO David Baszucki made it clear that he thinks it's just getting started. "The opportunity of what we're building at Roblox is massive," he said. Management provided plenty of insights during its first-quarter earnings call to explain why it is confident in its growth trajectory.

Roblox corporate logo

Image source: Roblox. 

Roblox is spending big on the right things

Roblox went public in March at a high valuation and a market cap of nearly $40 billion. After a couple of months of ups and downs, that's about what it's valued at now. Investors bought the stock expecting big returns from this high-growth business. The key to that hoped-for growth will be getting more content on the platform. As Baszucki said during the earnings call, "[T]he better the content, the more people come to the platform." 

The company doesn't make the content for its platform itself. Instead, it relies on a large and growing community of 8 million content creators and developers. Given that, it's noteworthy that Roblox is on track to award nearly $500 million in engagement-based payouts to its developer community this year. Developer exchange fees were its largest expense item, soaking up 30% of revenue in the first quarter. 

That's a large amount of money to Roblox, and a big reason why it delivered an operating loss of $135 million last quarter. But at the same time, the fact that it is prioritizing rewarding its developers at the expense of turning a profit in the near term is helping Roblox significantly grow the long-term value of its business.

Daily active users grew by 37% year over year in April to 43 million. That growing user base spent 3.2 billion hours on the platform in that month alone. 

It's clear that the more money Roblox spends on developer exchange fees, the more revenue it will get back. In Q1, it reported a 46% increase in average bookings per user. This is a clear indication that users are finding quality content on the platform to spend time with.

A powerful developer incentive is fueling growth

What Roblox is building is a platform that incentivizes millions of developers to come and create content that can, in turn, attract potentially billions of users, which is Buszucki's long-term vision for the company. 

In 2018, Roblox paid out only $72 million in developer fees. It's on pace to grow that by nearly seven times in just three years. Roblox has made its platform a place where developers can transition from hobbyists into large professional studios. As a result, developers are rising through its ranks and earning more money, which creates additional incentives to produce more for the platform. 

Moreover, the motivation for developers to join Roblox and get rewarded is helping propel its international expansion efforts. For example, in Q1, its user base in Europe grew by 79% -- a faster rate than in the U.S./Canada region. 

Baszucki highlighted other countries, including the Philippines, Brazil, and Russia, where developers are producing "amazing content" and "the players [are] becoming more embedded" in the platform. 

It's this international momentum that explains why Buszucki said, "We continue to move as much money as we think is financially prudent back to the developer community."

What to expect in the near term

Roblox will come up against tough year-over-year growth comparisons in the near term. User engagement spiked during the pandemic, and due to the uncertainty about how that will trend as more of the entertainment options that COVID-19 took off the table become available again, management is not giving further earnings guidance for 2021.

In the near term, I wouldn't focus too much on the company's revenue growth. Instead, I'd watch average bookings per daily active user. This metric serves as a good indicator of how much users value the content they find on the platform, and whether management is getting a good return on its investment in developer exchange fees.

The stock trades at a high valuation, which may limit investors' near-term returns. But Roblox is definitely a growth stock you'll want to keep an eye on.