AppLovin outlines 20–30% annual growth target and expands AXON platform globally as e-commerce ramps
Aug. 06, 2025 9:13 PM ET
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Earnings Call Insights: AppLovin Corporation (APP) Q2 2025
Management View- Adam Arash Foroughi, CEO, highlighted "continued strength in gaming advertising" as the key driver behind another strong quarter, citing improved technology, increased demand, and supply side expansion. He stated, "we are confident we can sustain 20% to 30% year-over-year growth driven by just gaming" and emphasized the company's excitement about expanding outside its core market with the new AXON ads manager self-service portal.
- Foroughi described the AXON ads manager as the "foundation for our next decade of growth," noting benefits such as direct day-to-day controls for advertisers, credit card billing, and automation architecture. He announced, "On October 1, 2025, we plan to open the AXON ads manager on a referral basis, perfectly timed for the holiday season," with a global public launch targeted for the first half of 2026.
- The CEO revealed that, "web advertising campaigns have been limited to the United States. On October 1, we plan to open our platform to most major international markets."
- Matthew A. Stumpf, CFO, stated, "Q2 was another exceptional quarter for AppLovin. At the end of the quarter, we closed the sale of our Apps business to Tripledot Studios." He added, "During the quarter, revenue increased by a very healthy 77% from last year to approximately $1.260 billion, while adjusted EBITDA nearly doubled to an impressive $1.020 billion, achieving an 81% adjusted EBITDA margin."
Outlook- Stumpf guided for Q3 2025 advertising business revenue between $1.320 billion and $1.340 billion, with adjusted EBITDA between $1.070 billion and $1.090 billion, targeting an adjusted EBITDA margin of 81%. He said, "We're confident these targets position us to continue driving strong growth and value for our partners and shareholders."
- Foroughi reiterated growth prospects, stating, "we are confident we can sustain 20% to 30% year-over-year growth driven by just gaming."
- The self-serve AXON platform will open for referrals in Q4 and launch globally in the first half of 2026, which management expects to drive "predictable compounding growth."
Financial Results- Stumpf reported "revenue increased by a very healthy 77% from last year to approximately $1.260 billion, while adjusted EBITDA nearly doubled to an impressive $1.020 billion, achieving an 81% adjusted EBITDA margin."
- Free cash flow in Q2 was $768 million, described as "up a staggering 72% year-over-year," but "slightly lower than last quarter due to the timing of payments for interest on our bonds, which are semiannual and certain taxes associated with the prior year."
- The company repurchased and withheld approximately 900,000 shares for $341 million, reducing weighted average diluted shares outstanding from 346 million in Q4 to 342 million in Q2.
- Cash and cash equivalents at the end of Q2 stood at $1.2 billion, including $425 million net cash from the Apps business sale.
Q&A- Matthew Cost, Morgan Stanley: Asked about the decision to start paid marketing to acquire advertisers and channels for outreach. Foroughi responded, "It's plausible that we will be using our own models to recruit advertisers off of our own inventory," and described plans to use channels like Facebook, LinkedIn, and TikTok.
- Cost also inquired about supply growth. Foroughi explained, "The MAX mediation platform is really high penetration into the market... the base platform, just the audience inside MAX, is growing swiftly, double-digit growth, so multiples greater than... gaming market growth rates of 3% to 5%."
- Ralph Schackart, William Blair: Asked about the impact of the self-serve platform. Foroughi said, "We expect that will increase the advertiser count quite quickly and also allow us to go through live examples of advertisers coming in self-service all the way to scale on our product."
- Omar Dessouky, BofA: Asked about game engine data. Foroughi replied, "We can't speak to other people's data... our market penetration inside gaming is really large at this point. It's materially higher than 70%."
- Christopher Kuntarich, UBS: Asked about the referral program and Q3 guidance. Stumpf noted, "we have a slight pickup in revenue" from the divestiture of the Apps business incorporated into the Q3 guide.
- Other analysts probed on expansion, onboarding, e-commerce contribution, model parity, and marketing margins, with management indicating ongoing improvements and expansion plans, but maintaining disciplined cost control.
Sentiment Analysis- Analysts raised questions focused on the scalability of self-service, expansion into international markets, e-commerce growth, and supply-side improvements. Their tone was generally positive but probing, especially regarding onboarding pace and new product performance.
- Management maintained a confident and optimistic tone, emphasizing "patient, disciplined execution" and expressing excitement for the upcoming AXON launch and the global rollout. Foroughi frequently reiterated confidence in growth drivers and technology.
- Compared to the previous quarter, management's tone remained confident but with increased emphasis on expansion outside gaming and on the AXON launch. Analysts' sentiment remained constructive, with questions shifting from model development to execution and scaling.
Quarter-over-Quarter Comparison- Guidance for Q3 2025 advertising revenue increased to a range of $1.320–$1.340 billion from Q2's $1.195–$1.215 billion, and adjusted EBITDA to $1.070–$1.090 billion from $970–$990 million.
- The Apps business sale to Tripledot Studios was completed, with financial results now focused on advertising.
- Self-service platform development progressed from select customer testing to a planned referral-based rollout in Q4, with global expansion targeted for H1 2026.
- E-commerce onboarding was limited in Q2 to focus on product readiness, in contrast to Q1's accelerated ramp-up.
- Management tone remained highly confident, shifting from a primary focus on model improvement to a broader emphasis on platform scalability and international expansion.
- Analysts' focus shifted from product readiness and integration to onboarding velocity, international exposure, and the magnitude of latent demand for the platform.
Risks and Concerns- Foroughi acknowledged that limiting e-commerce advertiser onboarding in Q2 "constrained growth" and that future onboarding will be closely monitored through the referral program before global expansion.
- Management highlighted the uncertainty in international ramp-up, with Foroughi stating, "I can't say I know" about the pacing of international advertiser onboarding.
- Analysts inquired about the pace and performance of self-serve rollout, potential margin impact from wider onboarding, and the competitive landscape, particularly regarding model parity and data access.
- Stumpf noted that planned marketing spend will be "a cost line item that wouldn't have existed before" but will be performance-driven and "will imply we're going to make a huge spread on the LTV to cost of user acquisition."
Final Takeaway
AppLovin's Q2 2025 results reflect robust growth in gaming advertising, disciplined operational execution, and a major strategic shift toward global expansion with the AXON platform. Management is focused on ramping up self-service onboarding, expanding internationally, and driving sustainable 20% to 30% annual growth. The company enters Q4 with a strong cash position, continued cost discipline, and a clear strategy for broadening its advertiser base beyond gaming, setting the stage for accelerated growth in the coming quarters.
Read the full Earnings Call Transcript |
