Mobile app advertising platform AppLovin (NASDAQ: APP) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 44% year on year to $1.08 billion. The company expects next quarter's revenue to be around $1.13 billion, coming in 1.8% above analysts' estimates. It made a GAAP profit of $0.89 per share, improving from its profit of $0.22 per share in the same quarter last year.
Is now the time to buy AppLovin? Find out by accessing our full research report, it's free.
AppLovin (APP) Q2 CY2024 Highlights:
- Revenue: $1.08 billion vs analyst estimates of $1.08 billion (small miss)
- EPS: $0.89 vs analyst estimates of $0.73 (22.1% beat)
- Revenue Guidance for Q3 CY2024 is $1.13 billion at the midpoint, above analyst estimates of $1.10 billion
- Gross Margin (GAAP): 73.8%, up from 65.5% in the same quarter last year
- Free Cash Flow of $450.6 million, up 14.7% from the previous quarter
- Market Capitalization: $22.7 billion
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 both a mobile game studio and provider of marketing and monetization tools for mobile app developers.
Advertising Software
The digital advertising market is large, growing, and becoming more diverse, both in terms of audiences and media. As a result, there is a growing need for software that enables advertisers to use data to automate and optimize ad placements.
Sales Growth
As you can see below, AppLovin's 22.3% annualized revenue growth over the last three years has been decent, and its sales came in at $1.08 billion this quarter.
Despite missing analysts' revenue estimates, this was a high-growth quarter for AppLovin with quarterly revenue up 44% year on year, above the company's historical trend. However, its growth did slow down compared to last quarter as the company's revenue increased by just $22 million in Q2 compared to $104.9 million in Q1 CY2024. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.
Next quarter's guidance suggests that AppLovin is expecting revenue to grow 30.2% year on year to $1.13 billion, improving on the 21.2% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 18.2% over the next 12 months before the earnings results announcement.
Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefitting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.
Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
AppLovin has shown terrific cash profitability, driven by its cost-effective customer acquisition strategy that enables it to stay ahead of the competition through investments in new products rather than sales and marketing. The company's free cash flow margin was among the best in the software sector, averaging an eye-popping 35% over the last year.
AppLovin's free cash flow clocked in at $450.6 million in Q2, equivalent to a 41.7% margin. This quarter's result was good as its margin was 11.6 percentage points higher than in the same quarter last year. Its cash profitability was also above its one-year level, and we hope the company can build on this trend.
Key Takeaways from AppLovin's Q2 Results
It was great to see AppLovin improve its gross margin this quarter. We were also glad next quarter's revenue guidance came in higher than Wall Street's estimates. On the other hand, its revenue unfortunately missed analysts' expectations. Zooming out, we think this was a mixed quarter. The areas below expectations seem to be driving the stock move, and the stock traded down 7.1% to $62.40 immediately after reporting.
So should you invest in AppLovin right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.