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Table of Contents
AppLovin is an advertising technology company. It operates a two-sided marketplace by matching demand with the optimal placement for everyone involved. Inventory includes gaming and now consumer verticals like e-commerce. Axon is the name of its AI-powered ad engine that powers its demand-side platform (DSP) called AppLovin Ads. This platform is meant to granularly quantify ad impression value for each specific advertiser, helping them find the perfect placement.
MAX is used on the supply-side for publishers to auction their opportunities to an aggregated base of demand. The company used to operate gaming studios where they developed and provided games to customers, but they sold that business last year to exclusively focus on advertising.
Other products to know:
- Adjust is their measurement and attribution tool that allows stakeholders to understand how placements performed.
- Wurl is their connected TV (CTV) subsidiary, which extends their ad platform into streaming television.
a. Demand
AppLovin missed revenue estimate by 1% & missed guidance by 0.5%. It blamed a worse-than-expected pace of model improvements for the miss. More on this later.
b. Profits
- Missed EBITDA estimate by 1.2% & missed guidance by 1.2%.
- Missed FCF estimate by 29%.
- About 68% FCF conversion was hit by tax and interest timing. They expect it to normalize to 75% of adjusted EBITDA for 2026.
c. Balance Sheet
- $3.05B cash & equivalents.
- $3.7B long-term debt.
- -1.5% Y/Y dilution.
- The slower pace of buybacks this quarter was due to the aforementioned lower FCF conversion. They bought back about $550M vs. closer to $1B during recent quarters.