Executive Summary

Q2 2025 delivered strong profitability with Revenue $1.26B (+77% YoY), Adjusted EBITDA $1.02B (+99% YoY) and Adjusted EBITDA margin 81%; diluted EPS was $2.39; Free Cash Flow was $768M .
Management raised Q3 2025 guidance to Revenue $1.32–$1.34B and Adjusted EBITDA $1.07–$1.09B, maintaining 81% margin; CFO noted guidance incorporates a small uplift from the apps divestiture .
Strategic catalysts: Axon Ads Manager self-serve opening via referral on Oct 1 and expansion to major international markets; paid marketing to recruit advertisers expected post full launch in 2026, with emphasis on automation and generative ad tools .
Structural shift: Apps portfolio sale closed June 30; Q2 includes discontinued operations and $425M net cash inflow, streamlining focus to advertising; 0.9M shares repurchased ($341M) and diluted shares fell to ~342M .

What Went Well and What Went Wrong

What Went Well

81% Adjusted EBITDA margin with $1.02B Adjusted EBITDA highlights operating leverage; CFO cited 81% revenue-to-EBITDA flow-through QoQ, reflecting lean operations .
Gaming remains primary growth driver; models continue to improve and Max marketplace supply grew double digits; management confident in sustaining 20–30% YoY growth from gaming alone .
Self-serve Axon Ads Manager launched quietly; referral program opens Oct 1 with international expansion, reducing onboarding friction (Shopify app, attribution integrations, dynamic product ads) .

What Went Wrong

Sequential revenue declined vs Q1 due to structural mix change (apps sold and presented as discontinued operations) despite strong YoY growth; Q2 total revenue $1.26B vs Q1 $1.48B .
E-commerce onboarding was constrained to prioritize product readiness, limiting near-term non-gaming contribution (still ~10% range); management expects ramp starting in Q4 seasonality and broader release .
Some advertisers desire Meta-like features (e.g., exclusion lists); management prioritizes full-funnel automation over manual controls and acknowledges differing attribution constraints for high-ticket/long-consideration purchases .

Financial Results

Revenue, EPS, and Margins vs Prior Periods and Estimates

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue ($USD)	$1,372,779	$1,484,021	$1,258,754
Diluted EPS ($)	$1.73	$1.67	$2.39
Net Income Margin %	44%	39%	65%
Adjusted EBITDA ($USD)	$848,024	$1,005,027	$1,018,347
Adjusted EBITDA Margin %	62%	68%	81%

Estimates comparison (Wall Street consensus – S&P Global):

Q1 2025: Revenue consensus $1,382,259,190*, EPS consensus $1.44235*; actual Revenue $1,484,021 , diluted EPS $1.67 → beat.
Q2 2025: Revenue consensus $1,220,255,140*, EPS consensus $1.98468*; actual Revenue $1,258,754 , diluted EPS $2.39 → beat.
Values retrieved from S&P Global.*

Segment Breakdown (pre-divestiture context)

Segment Metric	Q4 2024	Q1 2025
Advertising Revenue ($USD)	$999,487	$1,158,974
Apps Revenue ($USD)	$373,292	$325,047
Advertising Adjusted EBITDA ($USD)	$776,699	$943,228
Apps Adjusted EBITDA ($USD)	$71,325	$61,799

Note: Q2 2025 Apps results presented as discontinued operations following the sale to Tripledot (closed June 30, 2025) .

KPIs

KPI	Q4 2024	Q1 2025	Q2 2025
Net Cash from Operating Activities ($USD)	$701,003	$831,712	$772,226
Free Cash Flow ($USD)	$695,162	$825,731	$768,063
Cash & Cash Equivalents ($USD)	$741,411	$551,024	$1,192,608
Weighted Avg Diluted Shares	346,423,848	344,877,542	342,194,433

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($USD)	Q3 2025	N/A	$1,320–$1,340	Raised vs prior quarter baseline (Q2 guide was $1,195–$1,215 for Advertising)
Adjusted EBITDA ($USD)	Q3 2025	N/A	$1,070–$1,090	Raised vs prior quarter baseline ($970–$990 for Advertising in Q2)
Adjusted EBITDA Margin %	Q3 2025	N/A	81%	Maintained high margin

Note: CFO indicated Q3 guide includes slight revenue uplift from the apps divestiture impact .

Earnings Call Themes & Trends

Topic	Q4 2024 (Prev-2)	Q1 2025 (Prev-1)	Q2 2025 (Current)	Trend
AI/Tech initiatives	Strong margin expansion from model improvements; Advertising margin 78%	Self-serve dashboard to select customers; dynamic ad creation; integrations; AXON model iterations; near-term focus on automation	Axon Ads Manager referral opening Oct 1; generative ad tools; agents for campaign analysis; broader international rollout	Expanding automation and self-serve capabilities
Supply (Max marketplace)	N/A	N/A	Double-digit supply growth in Max; platform-wide CPM/demand improvements	Strengthening supply
Tariffs/Macro	N/A	Limited impact expected given mid-market web advertisers and low penetration; gaming resilient	N/A	Neutral/limited impact
Regulatory/legal	N/A	App Store fee changes seen as tailwind for UA spend over time	Apple vs Epic impact expected 2–4 quarters out; potential pricing tailwind later; no current impact	Medium-term tailwind
Product performance	Advertising core growth; robust profitability	Gaming drove majority; e-comm pilot at ~600 advertisers and ~$1B run-rate; constrained onboarding	Majority of growth from gaming; e-comm onboarding to widen via referrals/international	Gaming strong; e-comm set to re-accelerate
International	N/A	Global audience; future global self-serve; phased opening	Opening to most major international markets Oct 1; referrals likely global	Accelerating global expansion

Management Commentary

“Q2 twenty twenty five was another great quarter, driven by continued strength in gaming advertising… we are confident we can sustain 20 to 30% year over year growth driven by just gaming.” — CEO Adam Foroughi .
“Quarter over quarter flow through from revenue to adjusted EBITDA was a very strong 81%… we generated $768,000,000 in free cash flow… diluted common shares outstanding… down to 342,000,000 this quarter.” — CFO Matt Stumpf .
“On 10/01/2025, we plan to open the Axon Ads Manager on a referral basis… then guide our global public launch in the 2026.” — CEO Adam Foroughi .
“On June 30, 2025 we completed the sale of our Apps business to Tripledot Studios… results related to our Apps business are presented as discontinued operations.” — Press release .

Q&A Highlights

Self-serve and referrals: Program aims for organic peer invites; minimal or no paid referral incentives; opens international inventory; curated onboarding to ensure quality .
Paid marketing: Management expects to use performance marketing to recruit advertisers post broader launch; will spend only if LTV/CAC is compelling; impact booked in sales & marketing but expected to be margin-accretive .
Guidance mechanics: Q3 guide includes a slight uplift from apps divestiture; underlying reinforcement learning trend ~3–5% QoQ growth with periodic step-function model enhancements .
Attribution/features: Advertisers seek Meta-like controls (e.g., exclusion lists), but platform strategy prioritizes automation; dynamic product ads and improved attribution integrations rolled out .
Regulatory tailwinds: Apple vs Epic fee changes could boost UA spend; timing expected over several quarters before material pricing impact .

Estimates Context

Q2 2025 beat on both revenue and EPS vs consensus: Revenue $1,258.8M vs $1,220.3M*, EPS $2.39 vs $1.985* .
Q1 2025 was also a beat: Revenue $1,484.0M vs $1,382.3M*, EPS $1.67 vs $1.442* .
Values retrieved from S&P Global.*

Key Takeaways for Investors

Profitability profile remains exceptional (81% Adjusted EBITDA margin; $768M FCF in Q2), supporting premium valuation narratives despite structural mix changes post apps divestiture .
Raised Q3 guide and continued margin strength provide near-term support; modest revenue uplift from the apps sale included in outlook .
Gaming growth engine intact with double-digit Max supply expansion and ongoing model improvements; management targets 20–30% YoY growth from gaming alone .
E-commerce cohort set to re-accelerate in Q4 seasonality and broaden via referral onboarding and international expansion; watch for self-serve adoption and advertiser count inflection .
Product roadmap (self-serve, agents, generative ads) should enhance advertiser LTV and automate workflows, potentially sustaining high incremental margins even with paid acquisition .
Capital allocation remains shareholder-friendly (buybacks, disciplined S&M spend); diluted shares trend downward, amplifying EPS leverage .
Monitor execution milestones: Oct 1 referral opening, international inventory access, Q4 e-commerce ramp, and cadence of AXON model enhancements for step-function gains .

Notes on non-GAAP: Adjusted EBITDA and Free Cash Flow are defined and reconciled in the company’s materials; Q2 Adjusted EBITDA $1,018M and margin 81%; FCF $768M **[1751008_0001751008-25-000069_exhibit991-2q25earningspre.htm:6]** **[1751008_0001751008-25-000069_exhibit991-2q25earningspre.htm:5]**.  
Structural note: Apps sale to Tripledot closed June 30, 2025; Apps results shown as discontinued operations in Q2 **[1751008_0001751008-25-000069_exhibit991-2q25earningspre.htm:0]**.

AppLovin Corp (APP)·Q2 2025 Earnings Summary