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AppLovin Corp (APP)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 delivered strong results: revenue rose 44% YoY to $1.37B, net income reached $599M (44% net margin), and Adjusted EBITDA increased 78% YoY to $848M (62% margin) .
  • Advertising (ex-Software Platform) continued to drive performance with $999M revenue (+73% YoY) and 78% segment Adjusted EBITDA margin; Apps revenue declined 1% YoY to $373M .
  • Management announced an exclusive term sheet to divest the Apps business for ~$900M consideration ($500M cash plus minority equity), and provided segmented Q1 2025 guidance with advertising revenue of $1.03–$1.05B and Adjusted EBITDA of $805–$825M (78–79% margin) .
  • S&P Global consensus estimates were unavailable at time of analysis due to API limits; versus-company-guidance, Q4 materially beat on both revenue and Adjusted EBITDA (Q4 guide was $1.24–$1.26B revenue and $740–$760M Adj. EBITDA) .

What Went Well and What Went Wrong

What Went Well

  • Advertising segment scaled beyond gaming with first meaningful holiday shopping ad dollars and early e-commerce success; “Q4 was a major milestone…our models can perform in other categories” .
  • Robust profitability and cash generation: Adjusted EBITDA of $848M (62% margin) and Free Cash Flow of $695M in Q4; $2.07B FCF for FY24 .
  • Operational focus and efficiency: ~$3M run-rate Adjusted EBITDA per employee in advertising; priority on automation and self-serve to unlock scale .

What Went Wrong

  • Apps segment underperformed: revenue down 1% YoY with 19% segment margin; divestiture reflects de-emphasis and strategic focus on advertising .
  • Near-term flow-through pressure from data center/GPU costs after a step-function increase; management expects normalization as leverage improves .
  • Seasonality and onboarding capacity constraints: Q1 typically steps down for e-commerce; current team size limits rapid advertiser onboarding until self-serve is launched .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$1,080.1 $1,198.2 $1,372.8
Net Income ($USD Millions)$310.0 $434.4 $599.2
Net Income Margin %29% 36% 44%
Adjusted EBITDA ($USD Millions)$601.2 $721.6 $848.0
Adjusted EBITDA Margin %56% 60% 62%
Diluted EPS ($USD)—$1.25 $1.73

Segment breakdown:

SegmentQ2 2024Q3 2024Q4 2024
Advertising Revenue ($USD Millions)$711.0 $835.2 $999.5
Advertising Segment Adjusted EBITDA ($USD Millions)$520.5 $653.4 $776.7
Advertising Segment Margin %73% 78% 78%
Apps Revenue ($USD Millions)$369.1 $363.0 $373.3
Apps Segment Adjusted EBITDA ($USD Millions)$80.7 $68.2 $71.3
Apps Segment Margin %22% 19% 19%

KPIs and cash:

KPIQ2 2024Q3 2024Q4 2024
Net Cash from Operating Activities ($USD Millions)$454.5 $550.7 $701.0
Free Cash Flow ($USD Millions)$445.5 $545.1 $695.2
Cash & Equivalents ($USD Millions, period-end)$567.6 $568.0 $741.4
Shares Outstanding (Millions)334.0 335.0 340.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent/ActualChange
Total Revenue ($USD Millions)Q4 2024$1,240–$1,260 $1,372.8 Raised vs guide (beat)
Adjusted EBITDA ($USD Millions)Q4 2024$740–$760 $848.0 Raised vs guide (beat)
Adjusted EBITDA Margin %Q4 2024~60% 62% Raised vs guide (beat)
Advertising Revenue ($USD Millions)Q1 2025—$1,030–$1,050 New segmented guide
Advertising Adjusted EBITDA ($USD Millions)Q1 2025—$805–$825 (78–79% margin) New segmented guide
Apps Revenue ($USD Millions)Q1 2025—$325–$335 New segmented guide
Apps Adjusted EBITDA ($USD Millions)Q1 2025—$50–$60 New segmented guide
Total Adjusted EBITDA Margin %Q1 2025—63–64% New total guide
Segment Naming—“Software Platform”“Advertising” Renamed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
AI/model enhancementsOngoing self-learning; growth goal 20–30% long-term; new web ads pilot Directed AXON enhancements drove step change; margins strong No major step-change; growth driven by seasonality + ongoing model learning Continued improvement; step-change cadence variable
E-commerce expansionPilot launched; promising ROAS; scalable beyond gaming Material contribution expected in 2025; self-serve in pipeline Holiday shopping dollars captured; success across non-DTC categories; self-serve priority Accelerating traction; broader categories
Self-serve onboardingFuture unlock for scale; lean GTM Self-serve “next year”; organic demand Automation and AI agents planned; conservative rollout for fraud control Enabling broader demand density
Supply/CTV (Wurl)Anticipated supply expansion; CTV opportunity CTV as future performance channel; supply not constraint CTV not yet focus; consumer ads on big screen potential, with attribution challenges Long-term optionality
Data center/GPU costsCapacity investment to support growth Noted nonrecurring cost benefits; future increase signaled Step-function GPU cost increase reduced QoQ flow-through; normalization expected Near-term headwind normalizing
Capital allocationOngoing buybacks; leverage <2x target Authorization +$2B; 5M shares retired in Q3 Q4 withhold 1.6M shares ($508M); $2.1B FY24 spend on shares Aggressive share management
Apps portfolioStable; optimizing for profitability Continued optimization Term sheet to divest Apps; close targeted Q2 Strategic exit to pure advertising
Personalization/gen AIRoadmap item; not immediate Future impact expected Working on personalized ad experiences; R&D focus Medium-term driver

Management Commentary

  • “Q4 was a major milestone…we captured meaningful holiday shopping advertising dollars and witnessed the impact of an advertising category beyond solely gaming contributing to our growth.” – CEO Adam Foroughi .
  • “We signed a term sheet to divest our Apps business; total estimated consideration is $900M, including $500M in cash and a minority equity stake.” – CFO Matt Stumpf .
  • “Quarter-over-quarter flow-through from revenue to adjusted EBITDA [advertising] was 75%, slightly lower than normal due to a step function increase in data center costs; flow-through will normalize as we gain leverage on GPU costs.” – CFO Matt Stumpf .
  • “Our favorite metric going forward: adjusted EBITDA per employee…~$3M run rate in Q4 for our advertising business.” – CEO Adam Foroughi .

Q&A Highlights

  • E-commerce scaling and breadth: Success across non-DTC categories; strong ROAS; limited pilots due to lean team; self-serve + automation to unlock onboarding .
  • CTV opportunity via Wurl: Potential for performance ads on big screen with creative and attribution challenges; not a near-term layup .
  • Seasonality and guidance: Despite typical Q1 e-commerce step-down and two fewer days, company guides sequential growth due to strong baseline momentum .
  • Take rate dynamics: System optimizes for performance, not take rate; monetization improvements can expand take rate naturally .
  • Apps sale timing: Selling entirety of Apps; targeted close within Q2 subject to regulatory approvals .

Estimates Context

  • S&P Global consensus (EPS, revenue, EBITDA, target price) was unavailable due to API request limits; therefore, a comparison to Wall Street estimates cannot be provided at this time. Values retrieved from S&P Global were unavailable due to technical limits.
  • Versus company guidance, Q4 results substantially exceeded revenue and Adjusted EBITDA ranges (guide: $1.24–$1.26B revenue; $740–$760M Adj. EBITDA) , delivering $1.3728B revenue and $848.0M Adj. EBITDA .

Key Takeaways for Investors

  • Strong beat vs internal guidance with accelerating revenue and profitability; advertising segment scaling beyond gaming added seasonal holiday shopping dollars, validating non-gaming use cases .
  • Strategic pivot to pure-play advertising: Apps divestiture term sheet (~$900M) simplifies the portfolio and reallocates focus/capital to higher-margin, scalable advertising .
  • Near-term margin watch: GPU/data center step-up temporarily dampened QoQ flow-through; management expects normalization, supporting sustained high margins .
  • Self-serve launch is a major 2025 catalyst: Automation and AI agents should widen the funnel, increasing demand density and monetization of existing supply .
  • Cash returns remain aggressive: $695M Q4 FCF and $2.07B FY24 FCF fund significant share repurchases/withholds; management emphasizes capital allocation discipline .
  • Optionality in CTV and personalization: Longer-term growth from CTV performance ads and generative AI creative personalization could further expand TAM and response rates .
  • Near-term trading: Stock likely sensitive to timing of Apps sale close (expected Q2), pace of self-serve rollout, and Q1 performance vs segmented guidance amid e-commerce seasonality .