AppLovin sinks as tepid top-line beat fails to impress

AppLovin, the company that reminds everyone of a character from “Superbad,” reported results that investors seemed to think were super bad at first blush. Shares initially tumbled in after-hours trading as the company’s top-line results only modestly exceeded expectations, as did management’s outlook for Q3, before reversing much of those losses.

Here are the numbers:

• Revenues of $1.26 billion (compared to the consensus estimate of $1.25 billion and guidance for $1.195 billion to $1.215 billion).

• Adjusted EBITDA of $1.02 billion (estimated $997.6 million, guidance for $970 million to $990 million).

• Adjusted earnings per share of $2.39 (estimated $2.02).

For Q3, management called for revenues of $1.33 billion (plus or minus $10 million), with the Street looking for $1.3 billion. Adjusted EBITDA guidance for $1.08 billion (with the same range around it) was also above the consensus estimate of $1.05 billion.

Sometimes small beats can look disappointing in the eyes of investors in a world where everything related to AI seems to be crushing expectations. But no doubt about it: this puts a dent in what’s been a strong year so far for AppLovin. The company shook off short sellers’ reports that helped sink the stock with great earnings in Q1, and shares were up about 20% year to date heading into this release.

Bulls have praised the company’s heavy integration of AI, with UBS saying it uses LLMs to deploy code more than Meta or Alphabet. Earlier this year, Wedbush Securities also highlighted AppLovin as a key beneficiary of a court order banning Apple from collecting commissions on off-app purchases made in mobile games, saying that this will prompt more spending on ads to promote those very games.