Mobile app advertising platform AppLovin (NASDAQ: APP) fell short of the market’s revenue expectations in Q2 CY2025, but sales rose 16.5% year on year to $1.26 billion. On the other hand, next quarter’s outlook exceeded expectations with revenue guided to $1.33 billion at the midpoint, or 1.3% above analysts’ estimates. Its non-GAAP profit of $2.49 per share was 7.8% above analysts’ consensus estimates.
Is now the time to buy APP? Find out in our full research report (it’s free).
AppLovin (APP) Q2 CY2025 Highlights:
- Revenue: $1.26 billion vs analyst estimates of $1.27 billion (16.5% year-on-year growth, 1.2% miss)
- Adjusted EPS: $2.49 vs analyst estimates of $2.32 (7.8% beat)
- Adjusted Operating Income: $957.7 million vs analyst estimates of $841.7 million (76.1% margin, 13.8% beat)
- Revenue Guidance for Q3 CY2025 is $1.33 billion at the midpoint, above analyst estimates of $1.31 billion
- EBITDA guidance for Q3 CY2025 is $1.08 billion at the midpoint, above analyst estimates of $1.06 billion
- Operating Margin: 76.1%, up from 36.2% in the same quarter last year
- Market Capitalization: $157.5 billion
StockStory’s Take
AppLovin’s second quarter was marked by a positive market response, despite revenue slightly missing Wall Street expectations. Management credited robust growth in its gaming advertising segment and ongoing improvements in advertising technology as key drivers. CEO Adam Foroughi emphasized the importance of the company’s MAX marketplace, noting that “our growth comes from improved technology, increased demand as well as from supply side expansion.” The majority of the quarter’s revenue growth came from gaming, and the company maintained a disciplined approach to operational efficiency, which supported strong profitability.
Looking ahead, AppLovin’s guidance is shaped by the anticipated broader rollout of its AXON self-service ads manager and expanded international reach. Management expects the referral-based launch on October 1 to accelerate advertiser onboarding, especially outside the gaming vertical. Foroughi highlighted, “We will be launching the platform under its own brand, AXON,” and noted the company’s plan to begin paid marketing in 2026 to attract new advertisers globally. The company’s focus remains on automating workflows and integrating AI-driven tools to enable scalable, profitable customer acquisition across industries.
Key Insights from Management’s Remarks
Management attributed Q2 performance to sustained gaming advertising strength, technology enhancements, and a strategic pause in e-commerce onboarding to focus on product readiness for self-service expansion.
-
Gaming advertising momentum: The core gaming segment remained the primary driver of growth, benefiting from continued upgrades to the MAX mediation platform. Foroughi stated that the MAX marketplace “creates the supply that drives our growth,” and noted double-digit growth in this area, well ahead of broader in-app purchasing market trends.
-
Self-service platform groundwork: The team deliberately limited onboarding of new e-commerce advertisers in Q2, prioritizing the development and refinement of the AXON ads manager ahead of its referral-based launch. This included building features like dynamic product ads, attribution integrations, and a Shopify app for seamless onboarding.
-
Apps business divestiture: AppLovin completed the sale of its Apps business to Tripledot Studios, shifting focus fully to advertising operations. CFO Matt Stumpf noted this change would result in clearer financial reporting and allow management to concentrate resources on the advertising platform.
-
E-commerce as a growth lever: While e-commerce accounted for roughly 10% of the business, management expects its contribution to rise as onboarding constraints are lifted and international markets open. Foroughi explained, “We expect that e-commerce will see a pretty substantial ramp-up through that…soft launch period.”
-
Operational efficiency focus: Strong adjusted EBITDA margin performance reflected disciplined cost control, with Stumpf highlighting an 81% flow-through from revenue to adjusted EBITDA. Free cash flow remained robust, supporting continued share repurchases and organic investment.
Drivers of Future Performance
AppLovin’s outlook is driven by the phased rollout of AXON, international market expansion, and further automation of advertising workflows.
-
Global AXON rollout: Management believes that opening the AXON platform to international advertisers and moving toward a public launch in 2026 will significantly expand the customer base. Foroughi described the upcoming referral-based onboarding as a key step, with the eventual goal of serving “any business of any size anywhere in the world.”
-
AI-driven automation: The company is investing heavily in automation and generative AI tools to streamline advertiser onboarding and campaign management. Plans include providing small businesses with creative automation capabilities to level the playing field, which management expects will support scalable growth and high incremental margins.
-
E-commerce and new verticals: As self-service features mature, AppLovin anticipates a greater share of revenue from e-commerce and other categories beyond gaming. Management acknowledged that the pace of adoption in new markets may vary, but expects “a substantial ramp-up” as product readiness and global access improve.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will closely follow (1) the initial impact of the AXON ads manager’s referral-based launch and subsequent international expansion, (2) adoption rates and user feedback on new AI-powered automation tools for advertisers, and (3) the pace at which e-commerce and non-gaming verticals contribute to overall revenue growth. Continued progress in operating efficiency and product enhancements will also be central to assessing execution.
AppLovin currently trades at $464.40, up from $391.10 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
Stocks That Trumped Tariffs
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.