Key Takeaways:
AppLovin shares plunged 22% in after-hours trading as Q2 revenue of $1.92 billion missed the $1.94 billion consensus, triggering a selloff across major software stocks.
"Our pace of meaningful model improvement was lighter than normal during the quarter, and the next step up in model performance landed just after quarter end," CEO Adam Foroughi said on the earnings call.
Revenue rose 53% year over year from $1.26 billion. Adjusted EPS of $3.76 edged past the $3.75 estimate. Adjusted EBITDA climbed 58% to $1.61 billion, about 2% below the $1.64 billion consensus. Net income surged 55% to $1.27 billion. The company repurchased $551.3 million of stock during the quarter and ended with $3.05 billion in cash.
For Q3, AppLovin guided revenue of $2.055-$2.085 billion, with a midpoint of $2.07 billion below the $2.08 billion consensus. Adjusted EBITDA guidance of $1.71-$1.74 billion also trailed the $1.75 billion estimate, implying an 83% margin.
Foroughi attributed the revenue shortfall to slower-than-usual AI model improvements in the core gaming advertising business, noting the next model upgrade went live just after quarter end. He said the company expects to compound at roughly 30% annually over the longer term. E-commerce customers set a new record, spending 28% more than during last year's peak season.
CFO Matt Stumpf said the SEC closed its inquiry into the company's data-collection practices with no recommended action. The probe, first reported in late 2025, examined whether AppLovin used unauthorized "fingerprinting" techniques to harvest user IDs from platform partners including Apple, Google, and Meta. As of February 2026, the agency still described the probe as active.
The miss rippled across the software sector. Oracle fell 3.6%, Salesforce dropped 4.6%, ServiceNow declined 2.7%, and Adobe slipped 2.6% in premarket trading as investors reassessed growth expectations for AI-driven software names.
The selloff extends a difficult year for AppLovin, whose stock is down 38% year to date. The after-hours decline pushed shares below the $418.50 support level that had held during recent consolidation. The stock entered the report already under pressure, trading 13.4% below its 50-day moving average and 18.6% below its 200-day average.
The revenue miss and muted guidance show that even high-growth AI advertising platforms face scrutiny when growth decelerates. Investors will watch whether the Q3 model improvements translate into a return to beat-and-raise quarters when the company reports next.
This article is for informational purposes only and does not constitute investment advice.
