What happened

Shares of Roblox (RBLX -2.28%) were down 19.5% as of 10:17 a.m. ET on Wednesday after the gaming platform reported second-quarter earnings results that were below expectations.

Revenue was up 15% year over year to $680.8 million. However, the more closely watched metric is bookings, a non-GAAP (adjusted) measure of revenue, which came in at $780.7 million, slightly missing estimates that called for $784.9 million.  

The stock had been up over 50% year to date earlier this year but most of those gains have been erased in recent weeks. 

So what

Investors shouldn't be concerned about the direction of Roblox's business. After seeing bookings fall 4% in the year-ago quarter, Roblox reported three consecutive quarters of accelerating growth on the top line. The 22% year-over-year increase in bookings last quarter is stable with the first quarter's 23% growth rate.

Moreover, it is seeing healthy player engagement trends. Total hours spent on the platform were 14 billion in the quarter, an increase of 24% year over year. This represented a slight acceleration over the previous quarter, which bodes well for continued strong growth in bookings, since higher player engagement tends to lead to higher spending on content.

Now what

The stock is expensive for a gaming platform, trading at a high price-to-sales (P/S) ratio over 10 in July, and that could be the overarching factor weighing on the stock after the earnings news. But with bookings and hours on the platform still growing strong, the stock's P/S ratio of 7.7 is more in line with leading gaming companies.

Bookings per daily active user were down 3% year over year, but this metric has been holding steady since the first quarter of 2022. At $11.92, bookings per user is still down 31% from the high in the fourth quarter of 2020. 

As hours spent on the platform grow, brands are also showing more interest in Roblox. The company reported over 200 brand activations in the quarter. This is another reason why long-term investors should stay the course with Roblox.