AppLovin (NASDAQ:APP) Q4: Beats On Revenue But Stock Drops 23.4% On Weak Guidance

Jabin Bastian /
2022/02/16 4:20 pm EST
Add to Watchlist

Mobile app advertising platform AppLovin (NASDAQ: APP) reported Q4 FY2021 results that beat analyst expectations, with revenue up 55.6% year on year to $793.4 million. On the other hand, guidance for the full year missed analyst expectations with revenues guided to $3.7 billion at the midpoint, or 4.8% below analyst estimates. AppLovin made a GAAP profit of $31.4 million, improving on its loss of $19 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) Q4 FY2021 Highlights:

  • Revenue: $793.4 million vs analyst estimates of $776.3 million (2.2% beat)
  • EPS (GAAP): $0.08
  • Free cash flow of $83.3 million, down 32.8% from previous quarter
  • Full Year 2022 revenues guided to $3.7 billion at the midpoint, or 4.8% below analyst estimates
  • Gross Margin (GAAP): 66.5%, up from 61.1% same quarter last year

“We continue to execute on our mission to build and grow the largest, most-effective platform for advertisers and publishers in the digital world,” said Adam Foroughi, CEO and co-founder of AppLovin.

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 incredible over the last year, growing from quarterly revenue of $509.8 million, to $793.4 million.

AppLovin Total Revenue

And while we saw even higher rates of growth previously, the revenue growth was still very strong; up a rather splendid 55.6% year on year. On top of that, revenue increased $66.5 million quarter on quarter, a solid improvement on the $58.1 million increase in Q3 2021, and happily, a slight acceleration of growth.

For the upcoming financial year management expects revenue to be $3.7 billion at the midpoint, growing 32.4% compared to 88.4% increase in FY2021.

There are others doing even better than AppLovin. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. 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 66.5% in Q4.

AppLovin Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.66 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 Q4 Results

Sporting a market capitalization of $28.2 billion, more than $1.52 billion in cash and with positive free cash flow over the last twelve months, we're confident that AppLovin has the resources it needs to pursue a high growth business strategy.

We were impressed by the exceptional revenue growth AppLovin delivered this quarter. And we were also glad to see the improvement in gross margin. On the other hand, it was unfortunate to see that AppLovin's revenue guidance for the full year miss analyst's expectations and indicates quite a significant slowdown in growth. Overall, it seems to us that this was a complicated quarter for AppLovin. The company is down 23.4% on the results and currently trades at $52.65 per share.

AppLovin may have had a tough quarter, but does that actually create an opportunity to 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.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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