Overview
Since the Report − 22.2%
Revenue grew 53.0% year over year, EPS beat the estimate by 0.3%; the stock fell 19.7% in its first reaction.
- RevenueQ2
- $1.92B
- ▲ 53% YoY
- EBITDAAdjusted
- $1.61B
- 84% Margin
Verdict
HOLDAppLovin grew revenue 53% to $1.92 billion at an 84% adjusted EBITDA margin, yet both landed below the midpoint of its own guidance for the first time since the IPO. A shortfall of roughly $16 million, about 1%, knocked the stock down 19.7% in one session to a 52-week low of $335.67. From here it comes down to the gaming model improvement deployed after quarter-end and to a margin guided lower for the first time, from 84% to 83%.
Close on Report DayAug 5
$335.67▼ 19.7%Report-Day Move
- Market Cap(Today)
- ≈ $87.4 B
- 1Y Return(At Report)
- − 23%
- P/E(At Today's Price · $13.01 · Trailing 12M)
- 20.1
- PEG(Trailing Twelve Months)
- 0.24
- Net Margin(Trailing 12M)
- 64.6%
Earnings Summary
In 30 Seconds- AppLovin's revenue rose 53% year over year to $1.92 billion, with adjusted EBITDA of $1.61 billion at an 84% margin.
- Third-quarter revenue guidance is $2.06–2.09 billion, and the company is guiding its EBITDA margin down from 84% to 83% for the first time.
- Shares fell 19.7% in a single session after revenue and EBITDA landed below the guidance midpoint for the first time since the IPO.
The Numbers
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
Q2 2025 · $1.26 B
1.41
Q3 2025 · $1.41 B · QoQ + 11.6%
1.66
Q4 2025 · $1.66 B · QoQ + 18.1%
1.84
Q1 2026 · $1.84 B · QoQ + 11.0%
1.92
Q2 2026 · $1.92 B · QoQ + 4.5% · YoY + 52.8%
$2.06–2.09B
Q3 2026E · $2.06–2.09B · QoQ + 7.6% · YoY + 47.3%
- Q2 2025
- Q3 2025
- Q4 2025
- Q1 2026
- Q2 2026
- Q3 2026E
Q3 2026 Company Guidance
- Revenue2.055 – 2.085 billion2.055 billion2.085 billion
Midpoint $2.07B · Market Expectation $2.08BMidpoint 0.5% Below Estimate ▼
- Adjusted EBITDA1.71 – 1.74 billion1.71 billion1.74 billion
Midpoint $1.73B · Market Expectation $1.75BMidpoint 1.4% Below Estimate ▼
- Adjusted EBITDA Margin83%
Company Outlook ~83% · Q2 Actual 84%First Guide Lower ▼
How to Read the Chart
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. When the company gave a single number rather than a range and no market expectation is known, that row gets no band at all: there is no length to measure and no position to compare. Axis is ±1.7% around the midpoint.
Company-Specific Metrics
Operating Cash Flow
$869 M
▲ 12.5% YoYPress Release
Net Income From Continuing Operations
$1.27 B
▲ 64.1% YoYPress Release
Net Margin
66.0%
Press Release
Cash and Cash Equivalents
$3.05 B
Press Release
Research and Development Expense
$99.9 M
▲ 126.9% YoYPress Release
Shares Outstanding
335 M shares
Press Release
Metrics come only from the company's own filings; each one names the document it was taken from.
“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 and Review
Summary
AppLovin reported $1.92 billion of second-quarter revenue, up 53% from a year earlier. Adjusted EBITDA reached $1.61 billion, an 84% margin: $84 of every $100 of revenue kept as operating profit. Diluted EPS of $3.76 matched the $3.75 Market Expectation. Free cash flow was $863 million, and 1.14 million shares were repurchased for $551 million. One line spoiled the picture: both revenue and adjusted EBITDA landed below the midpoint of the company's own guidance range. A first since the IPO.
The stock closed the next session at $335.67, down 19.7%, a 52-week low. The disproportion is striking: revenue missed the Market Expectation by roughly $16 million, or 1%. But the price assumed an engine that never stumbles. Management said the gaming model improvement missed its usual cadence; the real step-up went live after quarter-end. Third-quarter guidance of $2.06–2.09 billion implies 46–48% growth, just under the Market Expectation. Margin is guided down for the first time, from 84% to 83%.
Our read is hold. The quarter is still remarkable: 53% growth alongside an 84% margin is rare. The SEC closed its AXON inquiry with no action; the non-gaming vertical set a spending record. But three places show wear: growth slowed four straight quarters, margin guided lower, free cash flow lagging EBITDA. The price drop did not move the score; a good quarter failed to clear expectations already priced in. Our valuation guide explains why that prices so violently.
Full Review
A 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; and it is the only engine.
AppLovin's revenue depends on how much the AXON engine improves ad matching; there was no meaningful lift this quarter. CEO Adam Foroughi called it timing: no weakening in advertiser demand or competition, and publisher earnings up double digits sequentially. The real improvement went live right after quarter-end; the 7.6% sequential growth in third-quarter guidance rests on it. Analysts including Needham and BTIG read it as an AppLovin-specific timing issue, not industry demand softness. The explanation concedes a fragility: revenue depends on whether an engineering calendar lands inside a quarter. It is magnified because AppLovin is now a pure ad-tech company. It sold its game studios to Tripledot Studios on July 1, 2025 for $400 million cash plus a roughly 20% stake, about $800 million total. With no second revenue stream as ballast, a one-quarter slip in AXON's calendar hits consolidated revenue directly. This quarter was the first demonstration.
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. It did so in a seasonally weak second quarter, which makes the comparison more meaningful. 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 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. That would violate platform terms of service and Apple's app tracking transparency rules. An SEC inquiry opened in October 2025 after a whistleblower complaint dealt another blow to the stock. On this quarter's call, CFO Matt Stumpf said the SEC had 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 with investors: building receivables and weakening cash conversion keep the question open. The distinction worth holding onto is between a regulatory claim being dropped and the financial statements speaking for themselves.
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. Next quarter's line to watch: does margin hold above the 83% guide, and does free cash flow close the gap to EBITDA. Our cash flow guide covers why the gap between accounting profit and cash matters.
Looking Ahead
Strengths and Risks
6 Strengths · 6 RisksStrengths
6- Revenue rose 53% year over year to $1.92 billionThe 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 slowed for four straight quarters, from 77% in the second quarter of 2025 to 53%Sequential growth of 4.5% is the weakest disclosed.
- Third-quarter margin guidance of 83% is the first time adjusted EBITDA margin has been guided lower, while R&D expense rose 127% year over year.
- Cash quality weakenedEBITDA 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 closed, even with the SEC file shut.
- Valuation is stretched: a 1% revenue shortfall cut the stock 19.7% in one sessionPiper Sandler went from $665 to $385, BofA $705 to $430.
What to Watch
5- Early November 2026Third-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 after quarter-end; management tied its 46–48% growth outlook directly to it.
- The first full quarter of the AppLovin Ads Manager, opened to everyone in June 2026: non-gaming advertiser count and spend will be the first test.
- Fourth quarter of 2026 and the year-end shopping season: e-commerce advertiser spend will show whether the consumer vertical can offset gaming volatility.
- How quickly the $1.8 billion left on the buyback authorization is deployed at the lower price — a clear signal of management's view.
Upcoming Earnings
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