AppLovin’s Q2 Miss Spooks Market, But Wall Street Doubles Down

Key Points

• AppLovin's latest earnings sent shares plunging after-hours, but the market reaction quickly changed in the subsequent regular trading session.
• AppLovin's advertising business continued to chug, posting revenue growth of 77% and huge margins.
• Management commentary indicates AppLovin will ramp up its e-commerce push in the coming quarters. It's a massive emerging opportunity that adds upside to the stock.

Over the past 52 weeks, AppLovin NASDAQ: APP has been one of the biggest stock market standouts. As of the Aug. 6 close, shares have surged by a whopping 446%. The company has an incredibly strong record of delivering impressive earnings. Shares have gained by 12% or more the day following its last six earnings releases. But, investors seemed to hit the panic button after seeing AppLovin’s Q2 2025 results, released on Aug. 6.

Within minutes of the release, shares plunged around 13% in after-hours trading. However, as investors further digested the results and management commentary, worries subsided considerably. By 10 PM EST, shares were down 5.5% in extended trading. Then, in a massive shift, shares gained by more than 10% midday on Aug. 7 as the rest of the market provided its take on the results.

So, what are the key details from AppLovin’s earnings, and what is the outlook for this gangbusters stock going forward? Let’s dive in to get to the bottom of these questions. Note that the company’s Q2 results only consider its advertising segment. On June 30, AppLovin sold its Apps business and excludes its results from the Q2 report.

APP: Explosive Revenue Growth Plus Leading Free Cash Flow Margins

In Q2, AppLovin reported revenues of approximately $1.26 billion, an increase of 77% versus Q2 2024. According to MarketBeat estimates, this figure fell short of the $1.37 billion Wall Street was looking for. Notably, that 77% rate was the highest growth figure the company’s advertising business posted over the past five quarters.

The company’s bottom-line results were a different story. Diluted earnings per share (EPS) came in at $2.26, substantially higher than the $2.05 estimate. The figure marked a massive 163% spike versus the prior year's quarter. The company’s guidance for Q3 also came in moderately better than expected.

AppLovin’s sale of its Apps segment drove one of its key intended results: massively lifting the margins of the overall business. AppLovin achieved an EBITDA margin of 81%, compared to 67.7% in Q1 2025 when the company included the Apps business in the results.

AppLovin also posted an incredible free cash flow margin of just under 61%. Excluding the Apps business, this gives the firm a last-12-months free cash flow margin of 66%. That’s the highest figure of any large-cap U.S. stock in the software industry over that period. It’s also higher than any stock in the Magnificent Seven.

E-Commerce Developments: AppLovin’s Next Frontier

AppLovin dominates advertising in mobile gaming, but it sees huge potential in the much larger e-commerce market. Last quarter, the firm provided the first key data around its e-commerce push, stating that it had achieved an annual run rate of $1 billion with around 600 customers.

In Q2, AppLovin didn’t provide any new numbers around the e-commerce push, which likely disappointed investors initially. However, it did provide key details on why that was the case and clarified the timeline going forward. AppLovin said it intentionally constrained the advertiser onboarding process in e-commerce to make its product better.

The stock’s price action on Aug. 7 shows that although this wasn’t the best news, it certainly wasn’t a reason for investors to panic. AppLovin is entering a massive new market. To achieve sustained success, making sure its product is high-quality is much more important than moving quickly.

The company said it plans to begin onboarding again on Oct. 1. However, new customers will require a referral from an existing customer to join, meaning the rollout will still be somewhat measured. A full rollout will begin in the first half of 2026.

Based on this information, investors might not get a huge amount of new data on AppLovin’s e-commerce push until its Q1 2026 earnings release. The company says it is less than 1% penetrated in e-commerce in terms of the number of advertisers it works with. This highlights the huge opportunity it has going forward.

APP: E-Commerce Could Bring Big 2026 Gains, Analysts Lift Targets

Overall, AppLovin didn’t announce anything groundbreaking in Q2. Thus, for a stock that has risen so much, it wasn’t surprising to see shares fall after-hours. However, its enormous e-commerce opportunity still remains, and analysts are bullish on the stock.

Morgan Stanley and Piper Sandler raised their price targets to $480 and $500, respectively, on Aug. 7. These numbers imply significant upside potential in shares going forward. They highlight how AppLovin could experience strong gains in 2026 if its e-commerce business really takes off.