AppLovin Q2 FY2025 Earnings Review

TradingKey - AppLovin (NASDAQ: APP) reported strong Q2 FY2025 earnings on August 6, 2025, driven by its AI-powered advertising platform, Axon 2.0, and the completion of its apps business divestiture. The company exceeded market expectations, although cautious guidance, concerns over long-term impact of shifting exclusively to an ad-tech model focused on AI-powered advertising and e-commerce, and limited e-commerce onboarding led to a roughly 5% decline in the stock after hours.

Source: TradingKey

Key Financial Results

Source: AppLovin, TradingKey

Note: Q2 FY2024 figures reflect the originally reported results for comparability, prior to any restatement for discontinued operations following the sale of the Apps business. This approach is used to ensure a consistent year-over-year comparison of the company’s core operating results.

Guidance & Conference Call

Q3 FY2025 Guidance: AppLovin expects revenue of $1.32B–$1.34B, up 58–60% YoY and 5–6% sequentially, with adjusted EBITDA of $1.07B–$1.09B at an 81% margin. This outlook includes incremental revenue from the apps business divestiture and strong gaming performance but assumes limited e-commerce growth as Axon Ads Manager’s referral launch starts October 1, 2025, delaying significant new e-commerce revenue.

Advertising Segment: Revenue soared 77% YoY to $1.26B, driven by a 70% increase in net revenue per installation and 8% growth in installations. Adjusted EBITDA margin rose to 81%, reflecting operational efficiency and AXON 2.0’s precise ad targeting. CEO emphasized sustained double-digit growth in the MAX mediation platform, outpacing the 3–5% mobile gaming market growth, driven by technology improvements and supply expansion. E-commerce, contributing around 10% of revenue, showed strong performance but was constrained by limited advertiser onboarding to prioritize self-service tools. 

Apps Business Divestiture: AppLovin completed the $400 million cash sale of its apps business to Tripledot Studios on June 30, 2025, which also included a 20% equity stake in Tripledot. This divestiture sharpened AppLovin’s focus on its high-margin advertising segment. Operating expenses were reduced, with R&D falling 56% YoY to $44 million. The transaction contributed approximately $425 million in net cash proceeds, boosting cash reserves to $1.19 billion. Management emphasized that the deal enhances long-term profitability, with discontinued operations reporting $47.7 million in income in Q2.

Web Advertising Expansion: The soft launch of Axon Ads Manager, AppLovin’s self-service portal, marks a key step to scale e-commerce and web advertising. Starting October 1, 2025, it will open in the U.S. and major international markets via a referral program, with a global public launch planned for H1 2026. Features like credit card billing, Shopify integration, and dynamic product ads streamline onboarding and enhance performance. CEO emphasized that AppLovin’s e-commerce segment is a small fraction of Meta’s 10 million+ advertisers, showing huge growth potential, with international expansion set to accelerate adoption.

AI and Strategic Investments: AXON 2.0 remains the core driver of improved ad effectiveness, with continuous AI model enhancements boosting performance, particularly in gaming. The platform’s advanced AI capabilities, including automated ad creation and attribution integration, reduce friction and improve advertiser outcomes. Paid marketing initiatives to accelerate advertiser acquisition are planned following the public launch in H1 2026, positioning AppLovin to effectively compete with major ad tech players like Meta and The Trade Desk.

Financial Position: AppLovin posted an 81% adjusted EBITDA margin and strong free cash flow growth of 72% YoY to $768 million. Operating cash flow of $772 million increased cash reserves to $1.19 billion, while long-term debt remained steady at $3.51 billion. The company repurchased 0.9 million shares for $341 million, reducing diluted shares to 342 million, reflecting disciplined capital allocation. CFO Matthew Stumpf highlighted the focus on maintaining high margins and funding growth and shareholder returns through robust cash flow.

Conclusion

AppLovin’s Q2 FY2025 results reflect strong AI-driven growth and improved margins, particularly in gaming. The apps divestiture sharpens focus on high-margin advertising, while Axon Ads Manager’s phased rollout sets the stage for accelerated e-commerce expansion. Near-term growth is cautious due to controlled onboarding and macro risks, likely fueling the modest post-earnings stock dip. The October referral launch and 2026 global rollout are key catalysts. Sustained advertiser growth and expanding e-commerce revenue could cement AppLovin’s AdTech leadership. Execution in the coming quarters will be crucial for translating this potential into lasting market outperformance.

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AppLovin Q2 FY2025 Earnings Preview

TradingKey - AppLovin (NASDAQ: APP) is set to report its Q2 FY2025 earnings on Wednesday, August 6, 2025, after the U.S. market closes. The earnings call will begin at 5:00 p.m. Eastern Time, hosted by CEO Adam Foroughi and CFO Matthew Stumpf.

Market Forecast

Source: AppLovin, Nasdaq, SeekingAlpha, TradingKey

Where Investors Should Watch

AI-Driven Advertising Performance: AppLovin’s AXON 2.0 AI engine remains central to its advertising revenue growth by enabling real-time, precise ad targeting and maximizing revenue per install. Key focus points include its expansion into e-commerce and web advertising channels and the integration of generative AI for creating ad creatives. Updates on advertiser usage and the effectiveness of self-service onboarding tools are especially important, because the company currently faces resource limitations in supporting new web advertisers, which has slowed down the onboarding process for new advertisers.

Impact of Games Business Divestiture: The $400 million divestiture of AppLovin’s games business to Tripledot Studios, accompanied by a 20% stake in the combined entity, signals a strategic shift towards becoming a pure-play advertising platform. Details on how this transaction sharpens focus on the high-margin advertising segment and the prospective use of proceeds, whether for further AI investments or share repurchases, will clarify financial and operational trajectories. The timing of the deal’s closure in Q2 and its influence on the company’s cost structure also remain important.

Web Advertising Expansion: Despite strong growth in advertising, AppLovin’s presence in web advertising remains nascent, highlighting significant room for expansion. Managerial guidance on scaling sales and integration teams to broaden web advertising reach, as well as enhancements to self-service dashboards, will influence growth outlooks. Additionally, any commentary on macroeconomic risks such as tariffs or global economic pressures related to web advertising will be pertinent.

Operational Efficiency and Margins: AppLovin continues to benefit from a highly efficient operating model, generating approximately $4 million in adjusted EBITDA per employee and maintaining an industry-leading 74% gross margin forecast. Monitoring how the company balances sustaining this efficiency while investing aggressively in machine learning capabilities and automated ad tools will be critical. Signs of margin compression due to increased headcount or heavier R&D investment could affect near-term profitability metrics.

Long-Term Growth Outlook: The company projects 20–30% long-term growth driven by advancements in AI and expansion from mobile gaming advertising into adjacent sectors such as e-commerce and connected TV. The earnings guidance range for advertising revenue and adjusted EBITDA will provide evidence of the sustainability of this momentum. Competitive positioning updates, especially against industry giants like The Trade Desk and Meta, will further contextualize market dynamics.

Conclusion

AppLovin’s Q2 FY2025 earnings will largely depend on the continued strong performance of its AI-powered advertising platform, AXON 2.0, and the strategic benefits stemming from the recent divestiture of its games business. Sustained advertising revenue growth, notably fueled by AXON 2.0’s superior ad targeting capabilities, alongside early progress in expanding the web advertising segment, could reinforce market confidence. However, challenges such as slower web advertiser onboarding due to resource constraints and potential macroeconomic risks pose risks to growth and margins. The company’s upcoming guidance will be closely watched for indications of how these factors are being managed. Positive developments in AI-driven ad performance or announcements of new high-profile partnerships, such as a potential collaboration with TikTok, may further bolster AppLovin’s leadership positioning in the competitive AdTech landscape.

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