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AppLovin Corp (APP)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered strong growth with total revenue $1.484B (+40% YoY), Adjusted EBITDA $1.005B (+83% YoY), and diluted EPS $1.67; Advertising revenue rose to $1.159B (+71% YoY) while Apps fell 14% YoY to $325M .
  • Versus S&P Global consensus, APP posted a significant beat: revenue actual $1.484B vs consensus $1.382B*, EPS actual $1.67 vs primary EPS consensus mean $1.44*; Adjusted EBITDA also exceeded consensus ($1.005B vs $0.873B*) .
  • Management announced a definitive agreement to sell the entire mobile gaming Apps business to Tripledot: $400M cash plus ~20% equity stake; closing targeted for Q2 2025 and a secured note at 11% interest (18-month maturity) .
  • Q2 2025 guidance: Advertising revenue $1.195–$1.215B and Advertising Adjusted EBITDA $970–$990M (81% margin), reflecting continued AXON ML improvements and web/e-commerce expansion; Apps guidance withdrawn due to pending sale .

What Went Well and What Went Wrong

  • What Went Well

    • Advertising segment strength: $1.159B revenue (+71% YoY) and $943M Segment Adjusted EBITDA with 81% margin; total Adjusted EBITDA hit $1.005B (68% margin) .
    • Web/e-commerce traction and diversification: full-quarter contribution aided growth while gaming ML refinements drove substantial efficiency; “We further refined our machine learning models... Less significant, but impactful was the full quarter contribution from web advertisers” (CEO) .
    • Strategic focus sharpened: definitive agreement to divest Apps business to Tripledot to become a pure ad platform; transaction terms and expected Q2 closing bolster capital flexibility .

  • What Went Wrong

    • Goodwill impairment: Q1 recorded a $188.9M goodwill impairment within GAAP results, diluting GAAP margins despite strong operating performance .
    • Apps segment decline: Apps revenue fell 14% YoY to $325M; segment EBITDA margin remained 19% (61.8M EBITDA), underscoring strategic need for divestiture .
    • Seasonality and onboarding constraints: management highlighted limited resources (e-commerce team ~20 people) and seasonality volatility for new web advertisers pending rollout of self-serve tools .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenue ($USD Billions)$1.198 $1.373 $1.484
Diluted EPS ($)$1.25 $1.73 $1.67
Net Income ($USD Millions)$434.4 $599.2 $576.4
Adjusted EBITDA ($USD Millions)$721.6 $848.0 $1,005.0
Adjusted EBITDA Margin (%)60% 62% 68%

Segment Breakdown

MetricQ3 2024Q4 2024Q1 2025
Advertising Revenue ($USD Millions)$835.2 $999.5 $1,158.97
Advertising Segment Adj. EBITDA ($USD Millions)$653.4 (78%) $776.7 (78%) $943.2 (81%)
Apps Revenue ($USD Millions)$363.0 $373.3 $325.05
Apps Segment Adj. EBITDA ($USD Millions)$68.2 (19%) $71.3 (19%) $61.8 (19%)

KPIs and Cash Flow

MetricQ3 2024Q4 2024Q1 2025
Net Cash from Operating Activities ($USD Millions)$550.7 $701.0 $831.7
Free Cash Flow ($USD Millions)$545.1 $695.2 $825.7
Shares Outstanding (A+B, Millions)335 340 338

Versus Wall Street Consensus (S&P Global)

MetricQ1 2025 ConsensusQ1 2025 ActualSurprise
Revenue ($USD Billions)$1.382*$1.484 +$0.102
Primary EPS ($)$1.44*$1.67 +$0.23
EBITDA ($USD Billions)$0.873*$1.005 +$0.132

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Advertising Revenue ($USD Billions)Q1 2025$1.030–$1.050 Actual $1.159 Beat prior guide
Apps Revenue ($USD Millions)Q1 2025$325–$335 Actual $325 In range
Total Revenue ($USD Billions)Q1 2025$1.355–$1.385 Actual $1.484 Beat prior guide
Advertising Revenue ($USD Billions)Q2 2025—$1.195–$1.215 New
Advertising Adj. EBITDA ($USD Millions)Q2 2025—$970–$990 (81% margin) New
Apps Segment GuidanceQ2 2025Provided historicallyNo longer provided (pending sale) Withdrawn

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
AI/ML model enhancements (AXON)Directed enhancements drove Q3; Q4 saw efficiency step-ups and higher margins Further ML refinements in Q1; ongoing reinforcement learning; potential periodic step-function lifts Improving; recurring step-ups likely
Web/e-commerce expansionQ4 validated e-commerce holiday traction, mid-market focus Full-quarter contribution; hundreds of advertisers; plan to launch self-serve this quarter Scaling; self-serve imminent
Supply vs demand in gamesStrong gaming demand; publishers like non-gaming ads; MAX monetization opportunity Gaming remains primary revenue; algorithm improves conversion; publishers embrace diversity Favorable mix shift
Tariffs/macroNot a major headwind; gaming insulated Web: mid-market focus mitigates tariff exposure; low penetration limits impact Limited impact
Regulatory/App Store feesN/A in Q3; Q4 operational efficiency focusLower App Store fees could expand advertiser budgets benefiting APP Positive catalyst
Creative personalizationNotable future initiative Prioritized this year; generative AI for dynamic ad variations In development
Strategic portfolioAssessing Apps businessSigned definitive sale agreement; Q2 close targeted Execution underway

Management Commentary

  • “We further refined our machine learning models... Less significant, but impactful was the full quarter contribution from web advertisers” (CEO) .
  • “Run rate adjusted EBITDA per employee in our advertising business has risen to approximately $4 million annually” (CEO) .
  • “We’re thrilled to announce the signing of the definitive agreement to sell our games business in its entirety… sharpening our focus on advertising” (CEO) .
  • “We continue to believe that 20% to 30% is the right long-term growth rate… 3–5% reinforcement learning plus directed enhancements” (CFO) .

Q&A Highlights

  • Seasonality and sequential growth: Q2 tends to be the slowest sequential quarter; despite fewer days, Q1 grew materially due to gaming efficiency and web contribution .
  • Web advertisers and churn: sub-3% churn among advertisers at ~$250K run-rate spend; plan for self-serve to scale onboarding .
  • Self-serve rollout: staged launch beginning with existing customers; global expansion thereafter to unlock onboarding and data-network effects .
  • App Store fee relief: lower fees expected to increase UA budgets, benefiting APP’s auction dynamics and revenue .
  • Take rate and inventory: unified full-screen video inventory; take rate expands with better monetization and algorithmic matching .

Estimates Context

  • Q1 2025: APP beat consensus on revenue, EPS, and EBITDA (see table above). EPS reported diluted $1.67 vs primary EPS consensus $1.44*, indicating a broad-based beat. Values marked with * retrieved from S&P Global.
  • Q2 2025: Company guidance (Advertising revenue $1.195–$1.215B; Advertising EBITDA $970–$990M, 81% margin) implies continued high profitability; Apps guidance removed pending divestiture .
  • Consensus counts indicate robust coverage: Q1 revenue estimates 19, EPS 16; Q2 revenue 15, EPS 12*.

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Structural margin strength: Advertising margins of 81% and company-wide Adjusted EBITDA margin 68% in Q1 point to durable efficiency and significant operating leverage .
  • Growth drivers: Ongoing AXON ML enhancements plus imminent self-serve for web/e-commerce should add advertisers, data density, and incremental demand without proportional opex growth .
  • Strategic focus: Divestiture of the Apps business simplifies the story to a pure performance ad platform, potentially unlocking a higher quality multiple and clearer capital allocation .
  • Capital discipline: Robust FCF ($826M in Q1) supports buybacks and investment in data center/GPU capacity; share count down to 338M .
  • Near-term trading: Expect narrative around self-serve rollout, Q2 margin maintenance (81% advertising), and the Apps sale close; positive surprises could stem from step-function ML upgrades or faster-than-expected web advertiser onboarding .
  • Medium-term thesis: Expansion into non-gaming categories (including potential CTV) and dynamic creative personalization broaden TAM and sustain multi-year growth runway .
  • Risk monitoring: Execution risk on self-serve scale-up, potential macro seasonality in e-commerce, and integration of third-party attribution for longer consideration windows .