AppLovin (NASDAQ:APP) Beats Expectations in Strong Q1, Stock Soars

Adam Hejl /
2023/05/10 4:29 pm EDT

Mobile app advertising platform AppLovin (NASDAQ: APP) beat analyst expectations in Q1 FY2023 quarter, with revenue up 14.4% year on year to $715.4 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $720 million at the midpoint, 3.15% above what analysts were expecting. AppLovin made a GAAP loss of $4.52 million, improving on its loss of $115.3 million, in the same quarter last year.

Is now the time to buy AppLovin? Access our full analysis of the earnings results here, it's free.

AppLovin (APP) Q1 FY2023 Highlights:

  • Revenue: $715.4 million vs analyst estimates of $694 million (3.08% beat)
  • EPS: -$0.01 vs analyst estimates of $0.06 (-$0.07 miss)
  • Revenue guidance for Q2 2023 is $720 million at the midpoint, above analyst estimates of $698 million
  • Free cash flow of $286.5 million, up 75.6% from previous quarter
  • Gross Margin (GAAP): 63.4%, up from 54.9% same quarter last year

Co-founded by Adam Foroughi who was frustrated with not being able to find a good solution to market his own dating app, AppLovin (NASDAQ:APP) is a provider of marketing and monetization tools for mobile app developers and also operates a portfolio of mobile games.

The digital advertising market is large, growing and becoming more diverse, both in terms of audiences and media. This as a result drives a growing need for a software that enables advertisers to use data to automate and optimize ad placements.

Sales Growth

As you can see below, AppLovin's revenue growth has been strong over the last two years, growing from quarterly revenue of $603.9 million in Q1 FY2021, to $715.4 million.

AppLovin Total Revenue

This quarter, AppLovin's quarterly revenue was once again up 14.4% year on year. On top of that, revenue increased $13.1 million quarter on quarter, a strong improvement on the $10.8 million decrease in Q4 2022, and a sign of re-acceleration of growth, which is very nice to see indeed.

AppLovin is guiding for revenue to decline next quarter 7.24% year on year to $720 million, a further deceleration on the 16.1% year-over-year decrease in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 0.55% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.


What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. AppLovin's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 63.4% in Q1.

AppLovin Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.63 left to spend on developing new products, marketing & sales and the general administrative overhead. While it improved significantly from the previous quarter this would still be considered a low gross margin for a SaaS company and we would like to see the improvements continue.

Key Takeaways from AppLovin's Q1 Results

With a market capitalization of $6.43 billion AppLovin is among smaller companies, but its more than $1.25 billion in cash and positive free cash flow over the last twelve months give us confidence that AppLovin has the resources it needs to pursue a high growth business strategy.

We were very impressed by the strong improvements in AppLovin’s gross margin this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations, even though it still points to a decline in revenue in absolute numbers. Overall, we think this was a good quarter. The company is up 9.78% on the results and currently trades at $19.54 per share.

AppLovin may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.