AppLovin (APP) Stock Jumps as Mobile Ad Platform Crushes Q3 Estimates

TLDR

• AppLovin reported Q3 revenue of $1.41 billion, beating analyst estimates of $1.34 billion with 68% year-over-year growth driven by its Axon Advertising platform.
• Earnings per share jumped 96% to $2.45, exceeding the consensus estimate of $2.38.
• The company guided Q4 revenue between $1.57 billion and $1.60 billion, above the $1.55 billion analyst forecast.
• AppLovin increased its share repurchase authorization by $3.2 billion, bringing total remaining authorization to $3.3 billion.
• The stock surged 6.4% in after-hours trading despite being under SEC investigation for data-collection practices.

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AppLovin shares climbed 6.4% in after-hours trading Wednesday following the release of third-quarter results that topped Wall Street expectations. The AI-powered mobile advertising company posted revenue of $1.41 billion, exceeding analyst estimates of $1.34 billion.

AppLovin Corporation, APP

Revenue grew 68% compared to the same quarter last year. The company credited its Axon Advertising platform for driving the strong performance.

Earnings per share reached $2.45, up 96% year-over-year. Analysts had expected $2.38 per share.

The results come as AppLovin faces scrutiny from the SEC over its data-collection practices. The stock has dropped about 10% over the past month following news of the investigation. A whistleblower complaint and multiple short-seller reports triggered the SEC probe, according to Bloomberg.

Despite the regulatory pressure, AppLovin has rallied 91% year-to-date as of Wednesday’s close. The company now carries a market capitalization of $205.9 billion.

Fourth Quarter Outlook Tops Forecasts

AppLovin guided fourth-quarter revenue between $1.57 billion and $1.60 billion. Wall Street had been expecting $1.55 billion for the period.

The company also projected adjusted EBITDA of $1.29 billion to $1.32 billion for Q4. Management’s confidence in the outlook reflects continued momentum in the business.

AppLovin operates at the intersection of mobile advertising and app development. The company maintains a portfolio of over 200 free-to-play games while providing software tools that help developers market and monetize their apps.

The Axon platform uses AI to optimize ad placement and targeting. This technology has become increasingly effective at matching advertisers with relevant audiences.

Operational Efficiency Improves

Operating margin expanded to 76.8% in the third quarter, up from 44.6% in the year-ago period. Free cash flow margin reached 74.7%, compared to 61.3% in the previous quarter.

AppLovin’s customer acquisition cost payback period stood at 2.8 months this quarter. This rapid recovery time indicates strong product-market fit and efficient go-to-market execution.

The company has grown revenue at a 35.2% compound annual rate over the past five years. This performance exceeds the average for software companies in its peer group.

Over the last two years, revenue growth has maintained a similar pace at 34.9% annually. Analysts project 26.9% growth over the next 12 months.

Share Buyback Program Expanded

AppLovin increased its share repurchase authorization by $3.2 billion. Total remaining authorization now stands at $3.3 billion as of the end of October.

The company bought back 1.3 million shares during the third quarter for $571 million. The expanded program signals management’s confidence in the business and commitment to returning capital to shareholders.

Wall Street maintains a Strong Buy consensus rating on the stock based on 18 Buy ratings and two Hold ratings. The average price target of $682.56 suggests 10.6% upside from current levels, though these targets may be adjusted following the Q3 report.

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