AppLovin Corporation (APP) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary highlights strong financial performance, with a 40% revenue increase and high adjusted EBITDA margins. The Q&A section reveals positive sentiment towards international expansion, e-commerce growth, and strategic focus on advertising. Despite some vague responses, the company's optimistic guidance and strategic initiatives indicate a positive outlook. However, the lack of specific market cap data limits the prediction's precision.
Key Financial Performance
Revenue Revenue increased by 77% year-over-year to approximately $1.260 billion. The majority of this growth was driven by the core gaming business.
Adjusted EBITDA Adjusted EBITDA nearly doubled year-over-year to $1.020 billion, achieving an 81% adjusted EBITDA margin. This reflects strong operational efficiency and dedication to operating lean.
Free Cash Flow Free cash flow increased by 72% year-over-year to $768 million. The increase was slightly lower than last quarter due to the timing of payments for interest on bonds and certain taxes associated with the prior year.
Cash and Cash Equivalents At the end of the second quarter, cash and cash equivalents stood at $1.2 billion, which includes $425 million in net cash received from the sale of the Apps business.
Share Repurchase Approximately 900,000 shares were repurchased and withheld at a total cost of $341 million, funded through free cash flow. This reduced the weighted average diluted common shares outstanding from 346 million in Q4 to 342 million this quarter.
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Operating Highlights
AXON Ads Manager Launch: AppLovin launched the AXON ads manager, a self-service portal designed to simplify advertising workflows, enable credit card billing, and provide automated ad generation. The platform is set for a referral-based launch on October 1, 2025, with a global public launch planned for the first half of 2026.
International Market Expansion: The AXON platform, initially limited to the U.S., will expand to most major international markets starting October 1, 2025.
Revenue Growth: Revenue increased by 77% year-over-year to $1.260 billion, driven primarily by the core gaming business.
Adjusted EBITDA: Adjusted EBITDA nearly doubled to $1.020 billion, achieving an 81% margin.
Free Cash Flow: Generated $768 million in free cash flow, up 72% year-over-year.
Sale of Apps Business: AppLovin completed the sale of its Apps business to Tripledot Studios, focusing solely on its advertising business.
Share Repurchase: Repurchased approximately 900,000 shares for $341 million, reducing diluted common shares outstanding from 346 million to 342 million.
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Risk or Challenges
Regulatory Risks: The company acknowledges the presence of risk factors in its SEC filings, which could include regulatory hurdles that may impact operations or financial performance.
Strategic Execution Risks: The company is launching a new platform, AXON ads manager, which involves significant strategic execution. Any delays or issues in the rollout, including the global public launch planned for 2026, could adversely impact growth projections.
Market Expansion Risks: The company plans to expand its platform to international markets starting October 2025. Challenges in adapting to new markets or unforeseen market-specific issues could hinder growth.
Operational Risks: The company is focusing on lean operations and high EBITDA margins. However, any disruptions in operational efficiency could impact financial performance.
Economic Uncertainties: The company’s growth is tied to global economic conditions, which could affect advertising demand and overall revenue.
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Guidance & Outlook
Expected growth in gaming advertising: The company expects to sustain 20% to 30% year-over-year growth driven by gaming.
AXON ads manager launch: The AXON ads manager, a self-service portal, is planned to open on October 1, 2025, on a referral basis, with a global public launch in the first half of 2026. The platform will expand to most major international markets starting October 1, 2025.
Future branding and marketing plans for AXON: The platform will be launched under its own brand, AXON, and paid marketing to recruit new advertisers will begin once the platform is fully open next year, driving predictable compounding growth.
Financial guidance for Q3 2025: The company anticipates delivering between $1.320 billion and $1.340 billion in revenue, with adjusted EBITDA between $1.070 billion and $1.090 billion, targeting an adjusted EBITDA margin of 81%.
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Shareholder Return Plan
Share Repurchase: In the second quarter, the company repurchased and withheld approximately 900,000 shares for a total cost of $341 million funded through free cash flow. This activity reduced the weighted average diluted common shares outstanding from 346 million in the fourth quarter to 342 million this quarter.
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Key Q&A
Q:Why is now the right time to start paid marketing to acquire advertisers?
A:The company has big aspirations for its platform and sees strong performance in its advertising solutions. They believe that with their lucrative financial model and ability to automate processes, they can profitably acquire customers without needing a large sales force. They plan to use channels like Facebook, LinkedIn, and TikTok for marketing.
Q:Where is the supply growth coming from for MAX mediation?
A:The supply growth is driven by improvements in technology, demand, and expansion of supply. The MAX mediation platform has high penetration, and growth is coming from the audience inside MAX, which is growing at double-digit rates, much higher than the gaming market growth rates of 3%-5%. Growth is also driven by increased inventory and transactions within the ecosystem.
Q:What is the potential impact of the self-serve platform launch?
A:The self-serve platform is expected to significantly increase advertiser count and provide incremental growth. The company has built tools like ads manager, dynamic product ads, and integrations with attribution companies to support this launch. They plan to open the platform globally in the first half of next year, which could lead to substantial growth, especially in non-gaming categories.
Q:What is the current contribution of e-commerce to the business, and how has it been impacted by constrained onboarding?
A:E-commerce currently contributes around 10% to the business. Constrained onboarding has limited growth, but the company expects a substantial ramp-up in Q4 due to the holiday shopping season and new onboarding. They also plan to release international markets, which could further boost e-commerce growth.
Q:What is the company's perspective on using game engine data for ad targeting?
A:The company does not have access to game engine data and is unsure of its significance. They rely on behavioral data from their integrations and have cutting-edge models like AXON 2. They believe their large market penetration in gaming provides sufficient visibility into consumer behavior.
Q:How will the referral program for the self-serve platform work?
A:The referral program will allow existing clients to invite their peers to the platform. The company does not plan to offer referral bonuses, as they believe the exclusivity and benefits of the platform are sufficient incentives. The program will initially be curated and iterative.
Q:What is the timeline for achieving parity between gaming and e-commerce AXON models?
A:The timeline is uncertain as it depends on data acquisition and model development. The two models are architecturally different due to the nature of gaming and e-commerce. The company is optimistic about the potential for cross-category data to improve both models.
Q:What are the challenges and opportunities in improving performance for web-based advertisers?
A:The company faces challenges in meeting advertiser expectations for features like customer exclusion, which are easier for platforms like Meta. However, their ads drive quick conversions, and they focus on automation to optimize performance. They believe their platform's differences will ultimately benefit advertisers.
Q:What is the company's approach to international expansion?
A:The company plans to open up international markets, which could significantly increase revenue. They aim to onboard local businesses in various countries and market to them if necessary. The current revenue split is roughly 50-50 between the U.S. and international markets.
Q:What is the expected impact of Meta's advanced mobile measurement on the company's business?
A:The company does not see any direct overlap or impact from Meta's advanced mobile measurement. They operate independently and focus on their own integrations and attribution models.
Q:What is the company's capital allocation strategy?
A:The company prioritizes organic growth initiatives, hiring high-quality talent, and returning capital to shareholders through share buybacks. They aim to maintain a responsible approach to spending.
Q:What is the company's perspective on incremental margins as e-commerce expands?
A:The company expects incremental margins to remain high, even with new costs like performance marketing. They will only spend on marketing if it generates a significant return on investment.
Q:What is the company's outlook on the impact of the Apple vs. Epic lawsuit on user acquisition spend?
A:The company has not yet seen an impact but expects it to materialize in 2-4 quarters, with more significant effects in 4-8 quarters as large gaming companies adopt changes.
Q:What is the company's approach to improving tools for web-based advertisers?
A:The company has focused on integrating with major attribution companies and creating seamless onboarding processes. They aim to provide tools that automate and optimize the advertising process for web-based advertisers.
Q:What is the company's strategy for expanding MAX beyond gaming?
A:The company plans to explore new supply sources like social networks, music apps, and websites. They aim to access users across various platforms to maximize ad reach and revenue.
Q:What is the company's perspective on the potential size of the e-commerce business?
A:The company sees e-commerce as a much larger opportunity than gaming, with potential for significant growth in advertiser count and total addressable market. They expect both gaming and e-commerce to grow substantially.
Q:Review of Unclear Management Responses
A:Management avoided directly answering questions about the timeline for achieving parity between gaming and e-commerce AXON models, as well as the specific size of the queue of advertisers waiting to join the self-serve platform. They also provided vague responses about the potential impact of Meta's advanced mobile measurement and the exact financial impact of the referral program.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AXON manager
AXON marketing
Alec Reid
Arash Foroughi
Arsenije Edward
Co Founder
Division Jason
Foroughi Co
Founder CEO
Head Investor
Inc Research
Investor Relations
LLC Research
MAX marketplace
Research Division
Securities
app
class
core market
date
decade
launch
measure
opening
rate
release
self service
statement
supply
update
APP Transcript
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The earnings call summary and Q&A indicate strong financial performance with expected growth in gaming advertising and the launch of AXON ads manager. Despite some unclear management responses, the company's strategic initiatives, such as expanding international markets and optimizing ad tools, are promising. The focus on high-quality advertisers and a unified auction platform supports positive sentiment. However, the lack of immediate impact from direct payments and unclear expansion timelines slightly temper the outlook. Overall, the positive aspects outweigh the negatives, suggesting a likely stock price increase.
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Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
