Roblox (RBLX  ) shares were nearly 20% lower following the company's worse-than-expected Q2 results. The company missed analysts' estimates on the top and bottom line in addition to having a million fewer accounts than forecast as well.

One of the leading indicators of the stock market rally has been the performance of growth stocks. This group bottomed in mid-May about a month before the broader market. However, now we are starting to see members of the group peak out well in advance of the market rally. For example, the Ark Innovation ETF (ARKK  ) is down about 18% over the last 4 days, giving back nearly all of its gains since late July.

Inside the Numbers

In Q2, Roblox reported a loss of $0.30 per share which was wider than analysts' expectations of a $0.21 per share loss. Revenue also fell short at $639.9 million vs $644.4 million.

This was down 4% from last year as revenues are generated from sales of its virtual currencies. In total, the company had 52.2 million average daily active users which was a million shy of estimates but up 21% from last year. In total, users spent 11 billion hours on the platform. Average bookings per daily active users were down 21% to $12.25.

In terms of its forecast for the next quarter, the company sees daily active users of 58.5 million and revenue growth between 8% and 10%. The company said it's being affected by the slowdown in digital spending as well as people spending less time playing video games as the economy continues to normalize following the pandemic.

Unlike many other growth stocks which are pivoting to a focus on profits and maximizing cash flow, Roblox said it's still in 'investment mode'. It continues to spend on employees, server capacity, and global data centers which it believes will pay off on a longer timeframe.

Overall, Roblox shares are down 60% from their peak in November 2021 when it attained a peak valuation of $80 billion. Shares are up more than 100% from their low in mid-May. Given Roblox's underwhelming earnings report, investors should be patient and wait for lower prices before taking a position.