AppLovin Corp (NASDAQ:APP) shares are dropping after the company reported mixed second-quarter financial results.
- AppLovin stock is testing lower boundaries. Why are APP shares at support?
AppLovin Q2 Earnings Highlights
For the quarter, AppLovin posted revenue of more than $1.92 billion, falling short of the approximate $1.94 billion Wall Street had penciled in. On the bottom line, the company delivered $3.76 in earnings per share, topping the $3.67 consensus figure by 2.45%. Compared to a year ago, sales climbed 52.94% and profit per share jumped 57.32%.
The business generated $869 million in operating cash flow during the period, with free cash flow landing at $863.3 million. Roughly $551.3 million went toward buying back shares over the three months, and the company closed out the quarter holding close to $3.05 billion in cash reserves.
Looking to the current quarter, management is projecting revenue between nearly $2.06 billion and $2.09 billion, versus the $2.07 billion Street forecast, alongside adjusted EBITDA of $1.71 billion to $1.74 billion.
CEO Adam Foroughi owned the shortfall directly, telling investors, “We’ve always managed this business with the goal of outperforming our own expectations, and this quarter, we fell short of that standard.” According to Foroughi, the miss boiled down to sequencing — a machine learning upgrade that was supposed to roll out mid-quarter instead didn’t go live until the beginning of July.
Once implemented, he said, the update generated an immediate boost to results, and he stressed that “nothing we saw suggested weakening advertiser demand or a change in the competitive environment.”
Analysts React With Price Target Cuts
- BTIG’s Clark Lampen holds his Buy call on AppLovin but trims his price target to $574 from $640.
- Omar Dessouky of BofA Securities keeps his Buy rating in place while cutting his target to $430, down from $705.
- Wells Fargo’s Alec Brondolo downgrades the stock to Equal-Weight from Overweight and slashes his target to $357 from $575.
- Bernie McTernan at Needham reiterates his Buy stance but drops his target to $500 from $700.
- Goldman Sachs’ Eric Sheridan sticks with his Neutral rating and lowers his target to $465 from $585.
- Benchmark’s Mike Hickey stays at Buy while reducing his target to $500 from $775.
- Wedbush’s Alicia Reese maintains her Outperform rating and pulls her target down to $610 from $640.
According to BTIG analyst Clark Lampen, the quarter represents “a blip, not a break,” with the shortfall traced to a stalled improvement in the gaming-side model mid-quarter, a problem he believes has already been fixed given the stronger trajectory heading into the third quarter.
Needham analyst Bernie McTernan offered a similar read, noting this marked the first time in 14 straight quarters that AppLovin landed below the top of its own guidance band, though he characterized it as a temporary “speed bump” rather than a demand issue, pointing to continued double-digit sequential growth in MAX’s publisher-side revenue as evidence.
APP Shares Are Tumbling
APP Price Action: Applovin shares were down 17.88% at $343.10 at the time of publication on Thursday. The stock is trading at a new 52-week low, according to Benzinga Pro.
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