AppLovin Q2 Earnings Call Highlights

Key Points

• Second-quarter results fell below guidance: Revenue rose 53% year over year to $1.92 billion and adjusted EBITDA increased 58% to $1.61 billion, but a slower pace of advertising-model improvements weighed on performance rather than weaker advertiser demand.
• Management expects a stronger third quarter following the launch of its latest model improvement. AppLovin forecasts revenue of $2.055 billion to $2.085 billion and adjusted EBITDA of $1.71 billion to $1.74 billion, with margins near 83% despite higher compute costs.
• Growth initiatives and capital returns remain active: Consumer advertising spend reached a record 28% above fourth-quarter 2025 levels, while AppLovin continued expanding its Ads Manager platform. The company generated $863 million in free cash flow, repurchased $551 million of stock and ended the quarter with approximately 0.1 times net leverage.

AppLovin NASDAQ: APP reported second-quarter revenue of $1.92 billion, up 53% from a year earlier and 4% sequentially, while adjusted EBITDA rose 58% year-over-year to $1.61 billion. The company said both figures came in below its own guidance expectations, attributing the shortfall primarily to a lighter-than-normal pace of advertising-model improvements during the quarter.

Co-founder and CEO Adam Foroughi said the company’s gaming business, which remains the majority of revenue, depends heavily on the performance of its models. Improved models enable advertisers to profitably increase spending while meeting return-on-ad-spend targets, he said. During the second quarter, however, the company did not receive the level of model uplift it had experienced in prior periods.

“This quarter came down to timing,” Foroughi said. “Our pace of meaningful model improvement was lighter than normal during the quarter, and the next step up in model performance landed just after quarter end.”

Third-Quarter Outlook Reflects New Model Release

Management said the next model improvement is now live, has contributed to a strong start to the third quarter, and is reflected in the company’s outlook. AppLovin expects third-quarter revenue of $2.055 billion to $2.085 billion, representing year-over-year growth of 46% to 48% and sequential growth of 7% to 8%.

The company forecast adjusted EBITDA of $1.71 billion to $1.74 billion for the third quarter, implying year-over-year growth of 48% to 50% and an adjusted EBITDA margin of about 83%. The outlook includes higher training and compute costs associated with the model improvements already deployed, but does not assume further model releases that have not yet gone live.

Foroughi said there was no indication during the quarter of weaker advertiser demand or a change in the competitive environment. He noted that MAX publisher earnings grew by double digits sequentially and that AppLovin’s share of publisher waterfalls remained consistent.

Chief Financial Officer Matt Stumpf said higher compute spending was the main driver of sequential cost increases. He said AppLovin manages its business toward EBITDA dollars and free cash flow rather than a fixed margin percentage, and will continue to spend on compute when it can generate incremental revenue.

Stumpf said the company expects to remain in the low-80% adjusted EBITDA margin range over the longer term, though margins could fluctuate in the near term as AppLovin invests in model development and infrastructure.

Consumer Advertising Spend Reaches New Record

AppLovin also highlighted continued expansion in its consumer advertising vertical. Foroughi said advertiser spending in the category set another record and finished 28% above fourth-quarter 2025 levels, despite the second quarter being seasonally slower for e-commerce advertisers than the fourth quarter.

The company said consumer advertising is still not large enough to fully offset variability in the gaming business, but management expects its growing contribution to become increasingly meaningful over time. Foroughi said the company believes its combination of continued gaming-model improvements and consumer expansion could support roughly 30% annual compounding over the longer term.

AppLovin opened its platform to the public during the quarter under the AppLovin Ads Manager name. Management said the launch was progressing as expected but was not intended to transform the business immediately. The company is initially targeting mid-market advertisers, rather than the largest brands or smaller long-tail businesses.

Foroughi said mid-market advertisers are more likely to have the budgets and willingness to absorb the learning costs associated with a newer advertising platform. He said the company expects its addressable base to broaden as it brings more advertisers onto the platform, collects more transaction data and further improves its models.

• AppLovin is using partnerships with third-party analytics providers to target prospective mid-market advertisers.
• Management said consumer advertisers currently tend to be fewer in number but larger in spending, rather than a broad base of small advertisers.
• The company identified creative production as a key hurdle for smaller advertisers, particularly the need for 30- to 60-second video advertisements paired with interactive end cards.

Foroughi said AppLovin can already generate interactive end cards with relatively high efficiency, but is still working to reliably produce high-quality long-form video creative automatically. Resolving that issue, or offering alternative ad templates that do not require video, could make campaign creation easier for smaller advertisers, he said.

Cash Flow, Debt and Buybacks

Free cash flow totaled $863 million in the second quarter. Stumpf said cash conversion was below the company’s typical level because of the timing of international cash-tax and interest payments, rather than a change in the company’s earnings power. AppLovin expects free-cash-flow conversion to improve in the third quarter and to normalize to roughly 75% of adjusted EBITDA for the full year.

The company ended the quarter with $3.05 billion in cash and $3.7 billion in total debt, for net leverage of approximately 0.1 times trailing 12-month adjusted EBITDA. Stumpf said this was well within the roughly one-times leverage level AppLovin expects to maintain over the long term.

During the quarter, AppLovin repurchased and withheld approximately 1.14 million shares for $551 million. It ended the period with 335 million shares outstanding and about $1.8 billion remaining under its repurchase authorization. Stumpf said the reduced pace of buybacks from the roughly $1 billion deployed in the first quarter reflected lower second-quarter free cash flow and did not signal a change in the company’s view of share repurchases.

Stumpf also said the Securities and Exchange Commission had concluded a previously reported voluntary inquiry with no recommended action. The company had not considered the request material, he said.

Looking ahead, management said its immediate priorities include improving core models, advancing architecture that can benefit more from scaled compute, enhancing creative tools and ad formats, and adding higher-quality advertisers through partnerships.

About AppLovin (NASDAQ:APP)

AppLovin Corporation is a Palo Alto–based mobile technology company that provides software and services to help app developers grow and monetize their businesses. The company operates a data-driven advertising and marketing platform that connects app publishers and advertisers, delivering tools for user acquisition, monetization, analytics and creative optimization. AppLovin's technology is integrated into a broad set of mobile applications through software development kits (SDKs) and ad products designed to maximize revenue and engagement for developers.

Key components of AppLovin's offering include an ad mediation and exchange platform that enables publishers to manage and monetize inventory across multiple demand sources, and a user-acquisition platform that helps advertisers target and scale campaigns.

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