AppLovin Corporation

(NASDAQ Global Select)
Back to all articles
Somewhat Bullish +30

AppLovin Slides 64% From Its High as Model Gains Slow Before Q3

Class action Earnings report Regulatory investigation AI-generated analysis

πŸ“‰ AppLovin stock trades at $263, down 64% from its 52-week high of $738, reflecting market concerns despite strong underlying revenue growth.

πŸ’° Second-quarter revenue surged 53% to $1.92 billion with diluted EPS of $3.76 matching analyst estimates exactly.

πŸ“‰ The company missed consensus guidance for Q3 revenue, projecting a midpoint of $2.07 billion versus an estimated $2.08 billion.

🐒 Sequential growth slowed to 4% in the second quarter due to lighter-than-normal model improvements affecting the ad engine.

πŸš€ The implied 7.8% sequential growth for Q3 suggests a potential doubling of the previous quarter's pace if model cadence returns.

πŸ’Έ AppLovin generated $863 million in free cash flow while repurchasing shares worth $551 million in the second quarter.

βš–οΈ The stock currently prices in an active SEC probe regarding data collection and a securities class action lawsuit.

πŸ“Š Analysts model 38.9% annual EPS growth over the next two years, valuing the company at 14.2x forward earnings.

πŸ” Management indicated that the next major model step-up occurred just after the second quarter ended, leaving room for upside.

Bullish Signals
  • AppLovin achieved a robust 53% year-over-year revenue increase to $1.92 billion in the second quarter.
  • The company maintained an impressive 84% adjusted EBITDA margin despite higher compute costs.
  • Strong free cash flow generation of $863 million supported significant share repurchases totaling $551 million.
  • Q3 guidance implies a 7.8% sequential growth rate, which is roughly double the 4% pace seen in the prior quarter.
  • Analysts maintain high growth expectations with a modeled 38.9% annual EPS growth over the next two years.
Risk Factors
  • The stock missed consensus revenue estimates and provided Q3 guidance that landed below Street expectations.
  • Sequential growth slowed to 4% in the second quarter due to lighter-than-normal model improvements.
  • The market is pricing in a permanent stall of model gains, causing shares to trade near their 52-week low.
  • An active SEC probe into data-collection practices and an ongoing securities class action create regulatory overhang.
Full Analysis
AppLovin (APP) shares have declined significantly, trading at $263 which is 64% below its 52-week high of $738. Despite reporting a robust 53% year-over-year revenue increase to $1.92 billion in the second quarter with an adjusted EBITDA margin of 84%, the stock has underperformed due to missed analyst consensus and guidance that landed below Street estimates. The primary driver of the recent market skepticism is a slowdown in model improvement, which caused sequential growth to decelerate to approximately 4% in the second quarter. Management noted that meaningful model enhancements were lighter than normal during this period, directly impacting the ad engine's ability to drive accelerated advertiser spending and revenue steps. Looking ahead to the November 4 third-quarter report, analysts are closely watching whether AppLovin can restore its growth trajectory. The company's Q3 guidance midpoint implies a 7.8% sequential growth rate, roughly double the previous quarter's pace, suggesting that the current slowdown may be temporary and that upcoming model releases could drive significant upside.