At first glance, Roblox looks awful. $32B market cap, $4B in losses in the past 4 years, $129M equity, $9.6B liabilities. Yet in the same 4 year time period, FCF has grown from -$58M in 2022 to $1.3B in 2025.
If you look at liabilities, it looks strange. Most of it is not long term debt as I'd typically expect. Of the $9.6B in total liabilities for 6/30/2026, $4.6B is in Current Deferred Revenue, and $2.3B is in Non-current Deferred Revenue. So $6.9B of $9.6B in liabilities is deferred revenue, what's up with that?
As it turns out, Roblox makes money by selling robux, but they don't book the revenue until the user spends the robux. Until then, it is deferred revenue.
They're not as over-leveraged as I initially thought. They have $1B in long term debt, but the $1.3B FCF (2025) can easily cover it. It's not as much as much of an easy short as their shrinking equity would suggest.
Generally, I eyeball earnings and equity when I look at stocks. Earnings up, equity up means good. This one flips it around, earnings down, equity down, but free cash flow up. I don't have intuition for this. Can FCF be used as a substitute for earnings?