AppLovin's (APP) Q2 challenges were largely related to the timing of a major "model improvement" rather than significant changes in demand or the competitive environment, RBC Capital Markets said in a note Thursday.

The company's management said a "sizable" architectural model improvement was pushed from Q2 into Q3, with the company choosing not to accelerate the rollout at the expense of longer-term benefits. The improvement expands the parameters the model can ingest and is expected to allow AppLovin to make more complete use of its existing data.

The investment firm said current Q3 guidance includes the benefit from the model improvement implemented early in the quarter but does not assume an "incremental inflection."

AppLovin's management also continues to see a long growth "runway" in gaming, though stronger growth over the next three to five years will require a larger contribution from consumer and e-commerce, according to the report.

RBC maintained its outperform rating and $575 price target on AppLovin.

Shares of AppLovin were up 3% in Thursday afternoon trading.

Price: 312.74, Change: +8.98, Percent Change: +2.96