AppLovin
APP · NASDAQAdvertising Technology · Software
Since the Report − 6.4%
Close on Report DayAug 5
$335.67▼ 19.7%Report-Day Move
- Market Cap(Today)
- ≈ $106 B
- 1Y Return(At Report)
- − 23%
- P/E($13.01 · Trailing 12M)
- 24.2
- PEG(trailing twelve months)
- 0.28
- Net Margin(Trailing 12M)
- 64.6%
AppLovin grew revenue 53% year over year to $1.92 billion at an 84% adjusted EBITDA margin, yet both revenue and EBITDA landed below the midpoint of its own guidance for the first time since the IPO. A shortfall of roughly $16 million, about 1%, was enough to knock the stock down 19.7% in a single session to a 52-week low of $335.67, because the price assumed a recommendation engine that never stumbles. From here it comes down to the gaming model improvement deployed just after quarter-end and to a margin guided lower for the first time, from 84% to 83%.
Revenue (Q2)
$1.92B
▲ 53% YoY
Adjusted EBITDA
$1.61B
84% Margin
Diluted EPS
$3.76
In Line with Expectation
Free Cash Flow
$863M
Lagging EBITDA
Q3 Revenue Guidance
$2.06–2.09B
Margin Easing to 83%
Share Buybacks
$551M
1.14 Million Shares
Quarterly Revenue ($ Billion)
1.26
1.41
1.66
1.84
1.92
$2.06–2.09B
- Q2 2025
- Q3 2025
- Q4 2025
- Q1 2026
- Q2 2026
- Q3 2026E
- Annual Revenue Growth
- 53%77% a Year Ago
- Advertising Share of Revenue
- 100%Only Segment Left
- Divested Games Business
- $0$47.7M in Q2 2025
Q3 2026 Company Guidance
- Revenue2.055 – 2.085 billion
Midpoint $2.07B · Market Expectation $2.08BSlightly Below Expectation ▼
- Adjusted EBITDA1.71 – 1.74 billion
Midpoint $1.73B · Market Expectation $1.75BBelow Expectation ▼
- Adjusted EBITDA Margin83%
Company outlook ~83% · Q2 actual 84%First Guide Lower ▼
The blue band is the company's low–high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. Axis is ±1.7% around the midpoint.
- Adjusted EBITDA Margin
- 83%84% in Q2
- Free Cash Flow (Q2)
- $863M▲ 12% Year Over Year
- Share Buyback (Q2)
- $551M1.14M Shares
“We've always managed this business with the goal of outperforming our own expectations, and this quarter, we fell short.”
- Model gains shifted into Q3
- Consumer spend 28% above Q4 peak
- Video generation is biggest bottleneck
Summary
AppLovin reported $1.92 billion of revenue for the second quarter of 2026, up 53% from a year earlier. Adjusted EBITDA reached $1.61 billion for an 84% margin — meaning the company keeps $84 of every $100 of revenue as operating profit. Diluted EPS of $3.76 came in essentially on top of the $3.75 Market Expectation. Free cash flow was $863 million, and the company repurchased 1.14 million shares for $551 million during the quarter. One line spoiled the picture: both revenue and adjusted EBITDA landed below the midpoint of the company's own guidance range. That has never happened since AppLovin went public.
The stock fell close to 20% in after-hours trading and closed the following session at $335.67, down 19.7%, hitting a 52-week low. The gap between the size of the shortfall and the size of the reaction is striking: revenue missed the Market Expectation by roughly $16 million, or about 1%. But the price attached to AppLovin was built on the assumption of a recommendation engine that never stumbles. Management said the gaming-side model improvement did not arrive at its usual cadence this quarter, and that the real step-up went live only after the quarter closed. Third-quarter guidance of $2.06–2.09 billion implies 46–48% growth but sits just under the Market Expectation; more importantly, the margin outlook points down for the first time, from 84% to 83%.
Our read is hold. In absolute terms the quarter is still remarkable: 53% growth alongside an 84% margin is a combination very few companies achieve, the SEC closed its inquiry into AXON's data-collection practices with no action recommended, and the non-gaming consumer vertical set a spending record. But three separate places show wear: growth has decelerated for four straight quarters, margin is guided lower for the first time, and free cash flow is falling well behind EBITDA. One side is strong, the other is eroding — that is where the score sits. The share price drop did not move the score; if anything this is a textbook case of a good quarter failing to clear expectations already baked into the price. Our valuation guide explains why that tension gets priced so violently.
Full Review
ClaudeA small miss, an outsized reaction.
Revenue came in at $1.924 billion against a Market Expectation of roughly $1.94 billion. The gap is about $16 million — less than 1% of revenue. The stock still fell 19.7% in a single session, taking market value from $141 billion to $112 billion. The disproportion has less to do with the number itself than with the streak it broke: AppLovin had never missed the midpoint of its own guidance since its IPO. Investors were paying a premium built on the assumption that this company beats its outlook every quarter, and that assumption cracked. Adjusted EBITDA also came in light, at $1.61 billion versus the $1.64 billion expected. In short, the problem was not $16 million — it was what $16 million implied.
The engine was late, not broken.
Management's explanation is straightforward: AppLovin's revenue depends on how much the AXON recommendation engine improves ad matching, and there was no meaningful model lift during the quarter. CEO Adam Foroughi said the quarter came down to timing, that they saw no sign of weakening advertiser demand or a competitive shift, and that publisher earnings grew double digits sequentially. The real improvement was deployed right after the quarter closed, and the company is leaning on it to deliver the 7.6% sequential revenue growth embedded in third-quarter guidance. Several analysts, including Needham and BTIG, read the shortfall as an AppLovin-specific timing issue rather than industry-wide demand softness. Even so, the explanation concedes a fragility: the revenue line depends on whether an engineering calendar happens to land inside a quarter boundary.
The non-gaming side set a record but is still too small.
AppLovin's long-term story is about moving beyond mobile game advertising into e-commerce, retail and connected TV. Advertiser spend in the consumer vertical hit a record this quarter, landing 28% above the peak set in the fourth quarter of 2025 — and it did so in a seasonally weak second quarter, which makes the comparison more meaningful, not less. The self-service AppLovin Ads Manager opened publicly in late June, ending 14 years of a referral-gated system. The strategy is not to sign up millions of small businesses one by one, but to partner with analytics firms such as Triple Whale to reach mid-market e-commerce advertisers. Foroughi flagged the real bottleneck as creative production rather than technology: automatically generating long-form video for smaller advertisers was described as the biggest hurdle in the system. By management's own account, the consumer side is not yet large enough to smooth out a quarter like this one.
The margin peak may already be behind us.
The adjusted EBITDA margin of 84% remains extraordinary. But third-quarter guidance points to 83%, the first quarter in which the company has guided margin lower. CFO Matt Stumpf attributed the sequential cost increase mostly to compute spending for model development; research and development expense rose 127% year over year to $99.9 million. There is a crack on the cash side as well: free cash flow of $863 million lagged EBITDA badly, which the company tied to the timing of international tax and interest payments. Accounts receivable now exceed a full quarter of revenue. None of these is alarming on its own, but together they keep the earnings-quality question alive. Our cash flow guide covers why the gap between accounting profit and cash matters.
The short-seller file is closed; the debate is not entirely.
In early 2025 AppLovin was the target of four consecutive short-seller reports: Fuzzy Panda Research, Culper Research, Muddy Waters Research and CapitalWatch. The shared allegation was that AXON collected user identifiers from Meta, Snap, TikTok, Reddit and Google and stitched them into unified profiles, in violation of platform terms of service and Apple's app tracking transparency rules. An SEC inquiry opened in October 2025 following a whistleblower complaint delivered another blow to the stock. On this quarter's call, CFO Matt Stumpf disclosed that the SEC had advised the company it concluded its inquiry with no recommended action. That is a concrete win for the company on the allegations themselves. The earnings-quality debate, however, has not fully closed on the investor side: building receivables and weakening cash conversion are the line items that keep the question open. The distinction worth holding onto is between a regulatory claim being dropped and the financial statements speaking for themselves.
This is now a pure advertising technology company.
AppLovin sold its portfolio of mobile game studios to Tripledot Studios, with the transaction closing on July 1, 2025. The structure was $400 million in cash plus roughly a 20% stake in Tripledot, announced at a total value of about $800 million. The result is that the revenue line you are looking at today comes entirely from advertising. That simplification lifted margins — building games costs far more than running an ad network — but it also concentrated the company's dependence on a single engine. With no second revenue stream left to act as ballast, a one-quarter slip in AXON's model calendar flows straight through to consolidated revenue. This quarter was the first live demonstration of exactly that.
Strengths
6- Revenue rose 53% year over year to $1.92 billion; the pure advertising business kept compounding at that pace after the game studios were divested.
- Adjusted EBITDA of $1.61 billion at an 84% margin — a level rarely seen even in software.
- Advertiser spend in the non-gaming consumer vertical hit a record, landing 28% above the fourth-quarter 2025 peak despite a seasonally weak second quarter.
- The SEC concluded its inquiry into AXON's data-collection practices with no recommended action, leaving the early-2025 short-seller allegations without a regulatory finding.
- The self-service AppLovin Ads Manager opened to all advertisers in late June, ending a 14-year referral-gated system.
- The company repurchased 1.14 million shares for $551 million in the quarter, with net leverage near 0.1x and about $1.8 billion left on the authorization.
Risks
6- Both revenue and adjusted EBITDA came in below the midpoint of the company's own guidance range — the first time since its IPO.
- Growth has decelerated for four straight quarters, from 77% in the second quarter of 2025 to 53%, with sequential growth of 4.5% the weakest in the disclosed series.
- Third-quarter margin guidance of 83% marks the first time the company has guided adjusted EBITDA margin lower, while research and development expense rose 127% year over year.
- Cash quality weakened: EBITDA grew 58% year over year while free cash flow grew 12.4%, and receivables now exceed a full quarter of revenue.
- The data-collection and earnings-quality debate raised by Fuzzy Panda, Culper and Muddy Waters in early 2025 has not fully closed with investors, even with the SEC file shut.
- Valuation tension is extreme: a 1% revenue shortfall took the stock down 19.7% in one session, and targets are being cut fast — Piper Sandler went from $665 to $385 and BofA from $705 to $430, so the $588 average target is a lagging figure.
What to Watch
5- Early November 2026 — third-quarter results: whether the company hits its $2.06–2.09 billion revenue guidance, and whether a second consecutive miss follows.
- Through the third quarter, the revenue contribution of the gaming model improvement deployed just after quarter-end; management tied its 46–48% year-over-year growth outlook directly to it.
- The first full quarter of the AppLovin Ads Manager, opened to everyone in June 2026: growth in non-gaming advertiser count and spend will be the first real test.
- The fourth quarter of 2026 and the year-end shopping season: e-commerce advertiser spend will show whether the consumer vertical is finally large enough to offset gaming volatility.
- How quickly the roughly $1.8 billion left on the buyback authorization is deployed at the lower share price — the clearest signal of how management views its own stock.
Upcoming Earnings
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