Roblox (RBLX  ) shares were more than 42% higher following the company topping consensus expectations for Q3. Some highlights from the report were revenue in Q3, more than doubling compared to last year. The number of daily active users also increased by 31% and showed no attrition from the pandemic ending, unlike many companies which saw a surge in revenue last year. The gain in the stock price, led to new all-time highs for the stock, exceeding previous highs made in June.

Inside the Numbers

In Q3, Roblox reported a loss of $0.13 per share, beating expectations of a loss of $0.14 per share. This is a slight improvement from its loss of $0.25 per share in Q2. Revenue came in at $637.8 million, beating expectations of $636.5 million and a 102% improvement from last year's Q3. It was a slight deceleration from Q2's growth of 127%.

It had over 47.3 million average daily active users in Q3, a 31% increase from last year and a 4.1 million gain from Q2's 43.2 million. The company did face an outage during the early parts of Q4 which could have a negative impact on lost bookings by about $25 million and dent user growth.

The biggest silver lining from the report and likely cause of the more than 40% gain in the stock is that the company's momentum didn't slow despite students going back to school and the economy returning to normal. Compare this to many of the pandemic winners like Zoom (ZM  ) or Peloton (PTON  ) which are struggling to meet last year's levels.

Stock Price Outlook

In some ways, the big gain in Roblox isn't surprising considering the hype around the 'metaverse'. Roblox has created an environment that is similar to a metaverse where users also have tools to create their own games and world.

Roblox is certainly expensive with a market cap of $60 billion and sales of $1.4 billion. Buying the stock is a bet that user growth, engagement, and revenue per user will continue to trend in the right direction. And, it's quite possible given that video game monetization is at low rates compared to other mediums. But, a bigger threat for Roblox may be newer games or platforms that emerge just like Roblox emerged to take market share away from established legacy companies.