AppLovin Shares Sink as Q3 Guidance Overshadows Another Strong Quarter

AppLovin’s latest earnings release showed a business still growing quickly, but investors were far more focused on what came next. The mobile adtech group reported a sharp rise in second-quarter revenue and EBITDA, yet its third-quarter outlook fell a touch short of the market’s expectations, sending the stock lower in both the European quote and U.S.-style premarket reaction cited by the sources. In Frankfurt, the shares were last seen at EUR 291.75, down 19.61%, and just 1.18% above the 52-week low. Another report put the stock at EUR 301.80, a decline of 16.84%, leaving it 0.92% above that same low.

For the quarter ended June, revenue climbed 53% from a year earlier to about US$1.92 billion, with Reuters citing US$1.924 billion. That was still below the US$1.94 billion consensus. Adjusted EBITDA increased 58% to roughly US$1.61 billion, including Reuters’ figure of US$1.614 billion, while the operating margin stayed at 84%. Adjusted earnings per share came in at US$3.76, effectively matching expectations.

The problem for the market was guidance. AppLovin said third-quarter revenue should come in between US$2.055 billion and US$2.085 billion, with adjusted EBITDA projected at US$1.71 billion to US$1.74 billion. The midpoint of the revenue range, US$2.07 billion, sits below the US$2.08 billion average estimate cited in one of the reports, while the other described the outlook as slightly under the market view. Management also flagged higher compute costs tied to its AI infrastructure, which are weighing on short-term profitability.

CEO Adam Foroughi said the miss was mainly a timing issue. He attributed the softer revenue outcome to the late rollout of new machine-learning models, arguing that the improvements to AppLovin’s AI engine only became effective near the end of the quarter. In his view, demand has not weakened; the revenue benefit simply arrived too late to fully show up in the reporting period.

Should investors sell immediately? Or is it worth buying Applovin?

There was also some regulatory relief in the release. AppLovin confirmed that the U.S. Securities and Exchange Commission has ended its voluntary investigation and made no recommendation for enforcement action, closing the matter without further steps. Separately, the company said it bought back 1.1 million Class A shares in the second quarter for a total of US$551.3 million.

The balance sheet and cash generation remain part of the bullish case. One market comment cited free cash flow of US$863.3 million, while another noted that some observers believe the selloff was exaggerated. Still, the stock’s latest move came after a run of caution from analysts. Wells Fargo cut its rating to “Equal Weight” from “Overweight” and reduced its target to US$357 from US$575, citing signs that mobile gaming growth could be leveling off. Piper Sandler also moved to “Neutral” from “Overweight” and lowered its target to US$385 from US$665.

Even so, not every firm turned more guarded. Evercore ISI reaffirmed a buy recommendation after the results, Citigroup’s Jason Bazinet maintained a “Buy” rating with a US$710.00 target on Tuesday, and UBS lifted its target from US$750.00 to US$798.00 on Monday. The company also disclosed a management change: Corina Cacovean took over as chief legal officer at the start of August, succeeding Victoria Valenzuela, who has retired.

One additional overhang for sentiment has been insider selling. Over the past 90 days, insiders sold shares worth around US$197 million, adding another layer of caution around a report that was otherwise solid on growth but not strong enough to satisfy a market that had been expecting more.