AppLovin, which helps advertisers find customers through ads in other companies’ apps, increased revenue by 53% in the second quarter of 2026 despite a 2% decline in app installations generated through AppLovin Ads. Higher revenue per installation drove growth, and most of the additional revenue became operating profit. The business generated enough cash to fund technology development and share repurchases. In the first half, however, growing customer receivables and higher tax payments helped keep operating cash flow growing more slowly than reported profit.
Reporting basis: AppLovin Corporation’s consolidated results under U.S. generally accepted accounting principles (GAAP). These combine the company and its wholly owned subsidiaries and remove transactions between them. This analysis covers April–June 2026 and January–June 2026, compared with the same periods of 2025. Balance-sheet comparisons are June 30, 2026 versus December 31, 2025. The selected Form 10-Q was filed August 5, 2026; SEC accession 0001751008-26-000059, CIK 0001751008. Information cutoff: October 7, 2026. Later-source context is identified separately; forecasts remain management forecasts.
Source: SEC filing index, August 5, 2026; Form 10-Q, cover and Note 1.
1. Higher revenue per installation drove the growth
Higher advertising revenue per installation offset fewer installations. Advertisers give AppLovin campaign goals, such as acquiring customers while meeting a target return on advertising spending. Its Axon recommendation system selects advertising opportunities. If campaigns become more effective, customers can spend more while still meeting their goals.
The company sits between advertisers buying space and publishers supplying it. AppLovin does not control that space before the advertiser receives it. It therefore reports the amount charged to advertisers after subtracting amounts paid or payable to publishers. This is revenue reported on a net basis. Its high profit margin is measured against that smaller revenue amount, not against all advertising money passing through the platform.
Revenue is recognized when an advertisement is shown or a specified action, such as a click or installation, occurs. A customer need not have paid the invoice at that point. Substantially all contracts can be canceled at any time, so current revenue is evidence of current use rather than a long-term contracted order book.
Source: Form 10-Q, Note 3, pp. 12–13; Management’s Discussion and Analysis, pp. 18–21.
| Consolidated continuing business; dollars in millions except percentages | Second quarter 2025 | Second quarter 2026 | First half 2025 | First half 2026 |
|---|---|---|---|---|
| Revenue | 1,258.754 | 1,923.686 | 2,417.728 | 3,766.135 |
| Operating profit | 957.682 | 1,494.277 | 1,797.664 | 2,934.210 |
| Operating margin, calculated | 76.1% | 77.7% | 74.4% | 77.9% |
| Net income from continuing operations | 771.856 | 1,266.538 | 1,495.394 | 2,472.151 |
| Continuing net margin, calculated | 61.3% | 65.8% | 61.9% | 65.6% |
Source: Form 10-Q, consolidated statement of operations, p. 4.
Reporting basis: Figures exclude the former Apps business.
Calculation notes: Each margin is the corresponding profit divided by revenue. It shows how much of each revenue dollar remained as that measure of profit.
Management attributes quarterly revenue growth primarily to a 58% rise in net revenue per installation, partly offset by a 2% reduction in installation volume. The first-half pattern was stronger still: revenue per installation increased 75%, while volume fell 10%. These measures support an improvement in the money AppLovin earns per outcome. They do not establish a 58% increase in a uniform advertising price, because campaign goals, customer mix, and publishers’ compensation can differ.
The operating measures do not exactly explain the reported revenue increase. Multiplying 1.58 by 0.98 implies quarterly growth of 54.8%, compared with actual growth of 52.8%. For the first half, multiplying 1.75 by 0.90 implies 57.5%, compared with actual growth of 55.8%. Ordinary rounding to whole percentages cannot fully explain either gap. The filing does not reconcile the AppLovin Ads installation measures to consolidated revenue, so the supported conclusion is management’s directional explanation: higher net revenue per installation more than offset lower installation volume.
Growth was geographically broad. Revenue tied to U.S. users rose 50.3% to $989.6 million, while revenue tied to users elsewhere rose 55.6% to $934.1 million. These groups contributed $331.3 million and $333.6 million, respectively, to the increase. Geography describes the location of the person seeing the ad, not necessarily the advertiser’s headquarters.
Source: Form 10-Q, Note 3, p. 12; revenue discussion, p. 23.
The historical record supports a multiyear improvement, with uneven quarterly progress. In its second-quarter 2024 shareholder letter, AppLovin reported Software Platform revenue of $711.0 million, up from $406.1 million a year earlier. It attributed that increase to Axon improvements. Revenue had risen from $678.4 million in the first quarter of 2024, a much smaller sequential increase of 4.8%.
Source: AppLovin second-quarter 2024 shareholder letter, pp. 3–4 and 15. Historical Software Platform figures are segment results, not historical consolidated revenue.
In 2026, second-quarter revenue increased 4.4% from the first quarter, calculated from the current filing. That smaller increase from the preceding quarter can coexist with strong growth from a year earlier. The comparison shows why annual growth alone does not describe current momentum. Management’s explanation involving the timing of model improvements is examined in Section 7; the growth rates alone do not establish that cause.
2. Profit growth survived higher spending on computing and engineers
The continuing business produced higher margins even while its main technology costs increased. Quarterly revenue rose $664.9 million, while total operating costs rose $128.3 million. The remaining $536.6 million increased operating profit. This is an observed result for the quarter, not a permanent rule for how costs will behave.
Computing infrastructure accounted for much of the cost increase. Datacenter costs increased from $128.9 million to $181.0 million in the quarter. That increase explains most of the $70.7 million rise in cost of revenue. Yet datacenter costs fell from about 10.2% to 9.4% of reported revenue because revenue grew faster.
Research and development expense more than doubled to $99.9 million. Employee costs accounted for $54.8 million of the $55.9 million increase. Within research and development, stock-based compensation rose from $17.2 million to $68.9 million, explaining most of the increase. Compensation paid through shares is a real employment cost, even though recording the expense generally does not require an immediate cash payment.
Source: Form 10-Q, Note 8, p. 15; Note 11, p. 17; cost discussions, pp. 23–24.
Marketing costs also increased as AppLovin spent more on advertising programs. General and administrative costs moved the other way, falling $14.7 million. Lower bad-debt expense accounted for $9.5 million of that reduction, and lower professional-service costs accounted for another $5.2 million. These savings helped profit, but lower bad-debt expense alone does not establish a release of previously accumulated credit reserves.
First-half results strengthen the case that the improvement extended beyond one quarter. Operating profit rose 63.2%, and the operating margin increased roughly 3.6 percentage points. The scale benefit was substantial even after higher computing expenses and employee compensation. The business nevertheless needs continuing engineering work to preserve that benefit; the spending supports the product producing the revenue.
Source: Form 10-Q, consolidated statement of operations, p. 4; expense discussions, pp. 23–24.
Profit below the operating line had additional help. Quarterly other income increased by $84.7 million. Management identified a $51.7 million favorable swing in investment remeasurement, $21.3 million more interest income, and $12.0 million more net currency gains as the main contributors. Those are pretax effects; the filing does not assign a separate after-tax amount to each.
The investment gains deserve separation from advertising performance. Private-equity fund holdings were valued at $173.0 million at June 30, compared with $118.7 million at year-end. They generated $31.3 million of unrealized gains in the quarter and $50.6 million in the first half. These holdings generally cannot be redeemed on demand, so higher accounting values do not provide the same spending capacity as customer cash receipts.
Source: Form 10-Q, Note 4, pp. 12–13; other income discussion, p. 25.
Taxes absorbed more of the profit. Tax expense divided by pretax profit—the effective tax rate—rose from 12.7% to 15.9% for the quarter and from 10.9% to 15.8% for the first half. Management attributed the increase in tax expense to higher pretax income, the mix of foreign earnings, and reduced stock-compensation tax benefits, partly offset by a larger foreign-derived income deduction. Higher pretax income can raise the tax bill without raising the tax rate; the filing does not quantify each factor’s contribution to the rate change. The deduction reduces taxable income under rules for eligible foreign-derived income.
The distinction between operations and other effects matters. Quarterly operating profit increased $536.6 million before the favorable nonoperating swing, while the income-tax provision increased $126.8 million. The evidence therefore supports strong growth in the core business without treating every dollar of net-income improvement as repeatable advertising profit.
Source: Form 10-Q, Note 10, p. 17; statement of operations, p. 4; tax discussion, p. 25.
AppLovin also presents profit with financing costs, taxes, the gradual expense of long-lived assets, and several other items removed. It calls this measure Adjusted EBITDA—adjusted earnings before interest, taxes, depreciation, and amortization. The additional adjustments include removing stock-based compensation. The measure helps explain management’s operating targets, but it is neither GAAP profit nor cash collected from customers.
| Reconciliation; dollars in millions | Second quarter 2025 | Second quarter 2026 |
|---|---|---|
| Reported net income | 819.531 | 1,266.538 |
| Remove income from discontinued operations | -47.675 | 0.000 |
| Add interest expense | 51.409 | 51.156 |
| Adjust other income/expense under company definition | 12.798 | -59.863 |
| Add income-tax provision | 112.148 | 238.988 |
| Add amortization, depreciation and write-offs | 31.064 | 32.563 |
| Remove nonoperating currency gain | -1.210 | -2.364 |
| Add stock-based compensation | 34.552 | 85.783 |
| Add transaction-related expense | 5.097 | 0.059 |
| Add restructuring costs | 0.633 | 0.963 |
| Adjusted EBITDA, company non-GAAP measure | 1,018.347 | 1,613.823 |
Source: Form 10-Q, non-GAAP reconciliation, p. 19. The other-income adjustment leaves recurring operational currency effects in the measure.
Adjusted EBITDA grew 58.5%, with its margin rising from 80.9% to 83.9%. Because the share-compensation exclusion increased materially, that margin should be read alongside the 77.7% GAAP operating margin. Both improved, which supports the operating conclusion without requiring the reader to accept every management adjustment as nonrecurring.
3. Selling the Apps business made comparisons cleaner—but not automatic
Advertising profit grew strongly on a comparable basis; total net-income growth contains a disposal-related distortion. AppLovin sold its owned mobile-game business to focus resources on advertising. The sale closed June 30, 2025, and the current filing separates that business from continuing operations for all income-statement periods presented.
The company received $715.6 million of consideration: $430.6 million in cash and Tripledot shares valued at $285.0 million. The shares represented approximately 22% of outstanding ordinary shares, or 20% on a fully diluted basis, at closing. AppLovin accounts for the holding as an equity-method investment, recognizing its share of results rather than consolidating Tripledot’s sales and expenses.
Source: Form 10-Q, Note 2, pp. 10–11.
The old Apps business produced $47.7 million of after-tax income in the second quarter of 2025 but a $99.4 million after-tax loss in the first half. The first-half loss included a $188.9 million goodwill impairment. The disposal itself generated a $106.2 million pretax gain after transaction costs; the tax accounting also included a $125.6 million deferred-tax-asset write-off. These amounts cannot simply be added back to net income without reconciling their tax treatment.
As a result, total second-quarter net income increased 54.5%, while continuing net income increased 64.1%. In the first half, the direction reverses: total net-income growth was 77.1%, compared with 65.3% for continuing operations. The continuing figures are the better comparison for the business AppLovin now operates.
Source: Form 10-Q, Note 2 and consolidated statement of operations, pp. 4 and 10–11.
The separation is strategic, not absolute. AppLovin still held $290.0 million of equity-method investments at June 30. Tripledot and its subsidiaries also generated $18.0 million of AppLovin revenue in the quarter and $42.9 million in the first half through advertising relationships, net of publisher payments. The quarterly amount was less than 1% of consolidated revenue, limiting its importance to the current growth story.
AppLovin now reports one operating segment. AppLovin Ads supplies substantially all revenue; MAX helps publishers sell advertising space, Adjust measures marketing results, and Wurl serves streaming-video advertising and distribution. Product breadth supports the advertising system, but the filing does not provide separate profits demonstrating several independent earnings engines. The company is more focused, and its financial dependence on successful advertising delivery is correspondingly clear.
Source: Form 10-Q, Notes 11–12, p. 17; business model, p. 18.
4. Customer balances and tax payments held cash below profit
First-half operating cash flow grew more slowly than reported profit. Cash generated by operating activities increased 34.7% to $2.160 billion, about 87% of net income. Customer payment timing, cash taxes, and accounting gains and expenses all affect the difference. The ratio does not mean the entire shortfall is profit waiting to be collected, and by itself it does not establish either weak or strong earnings quality.
The largest negative adjustment in the operating cash-flow reconciliation was customer receivables. AppLovin recognized revenue before receiving all the related payments, and the cash-flow statement records a $352.6 million use from growing receivables. Other operating assets used $56.9 million. Supplier balances supplied $29.6 million of temporary funding, while reductions in accrued and other liabilities used $125.0 million.
| First-half consolidated profit-to-cash reconciliation; dollars in millions | 2025 | 2026 |
|---|---|---|
| Reported net income | 1,395.950 | 2,472.151 |
| Amortization, depreciation and write-offs | 126.940 | 66.228 |
| Goodwill impairment | 188.943 | 0.000 |
| Stock compensation, excluding cash-settled awards | 97.026 | 168.981 |
| Remove disposal gain, net of transaction costs | -106.229 | 0.000 |
| Other adjustments | 41.617 | -42.130 |
| Increase in receivables | -291.551 | -352.557 |
| Change in prepaid expenses and other assets | 20.691 | -56.890 |
| Increase in accounts payable | 39.040 | 29.617 |
| Change in accrued and other liabilities | 91.511 | -124.967 |
| Operating cash flow | 1,603.938 | 2,160.433 |
Source: Form 10-Q, consolidated cash-flow statement, p. 8.
Reporting basis: The 2025 statement includes discontinued operations, so this comparison does not isolate cash generated by the continuing advertising business.
Together, changes in operating assets and liabilities consumed $504.8 million in 2026, compared with $140.3 million in 2025. The $364.5 million increase in that cash use explains much of why operating cash flow grew more slowly than profit. The reconciliation’s other adjustments added $193.1 million in 2026, versus $348.3 million in 2025. That $155.2 million reduction also limited cash-flow growth; the prior-year adjustments included the former Apps business’s impairment and disposal gain.
Calculation notes: Summing the adjustment rows above gives $193.079 million for 2026 and $348.297 million for 2025. The $1,076.201 million increase in net income, less $155.218 million from lower adjustments and $364.488 million from greater operating-asset and liability cash use, equals the $556.495 million increase in operating cash flow.
Management says higher collections from growing revenue were partly offset by publisher payments, operating spending, and income taxes.
Cash taxes were especially important: $639.8 million in the first half, versus $100.6 million a year earlier. Cash taxes are payments made during the period, while the tax provision estimates the expense attributable to reported earnings. Their difference should not be added to the working-capital bridge as a separate cash use, because the statement already captures the relevant adjustments and payments.
Source: Form 10-Q, cash-flow statement, p. 8; operating cash discussion, p. 26.
For the second quarter alone, operating cash was $869.0 million and company-defined free cash flow was $863.3 million, compared with $772.2 million and $768.1 million in 2025. Thus, quarterly operating cash grew 12.5%. The 2025 cash figures include the former Apps business, so this growth rate does not isolate the continuing business in the way the continuing-profit comparison does. Management attributed the smaller share of adjusted earnings becoming free cash flow to international tax and interest-payment timing and expected that share to improve in the third quarter.
Sources: AppLovin second-quarter earnings release, August 5, 2026, quarterly cash reconciliation; company earnings-call transcript, p. 4.
The first-half balance-sheet increase in receivables was 19.3%, to $2.171 billion. Payment terms are generally 30 days after month-end. However, dividing that balance by net reported revenue would not provide a clean collection-days measure: the company intermediates advertiser spending and publisher payments, and revenue is already net of advertising inventory costs. The filing does not provide a comparable gross-billings denominator or an aging schedule sufficient to diagnose collection deterioration.
Lower bad-debt expense offers some counterevidence to a worsening credit picture, but it cannot settle the question. Subsequent collections and aged unpaid invoices would be more decisive. For now, the supported implication is a growing cash requirement to support advertising activity, rather than proof that customers are failing to pay.
Source: Form 10-Q, balance sheet, p. 3; Note 3, p. 12; administrative-expense discussion, p. 24.
5. Cash funded buybacks while the balance sheet strengthened
AppLovin paid for its repurchases from cash generation and still increased its cash balance. Its free-cash-flow definition subtracts purchases of property and equipment and principal payments on finance leases from operating cash. Including lease principal matters because leased equipment also requires repayment even when the company does not buy the equipment outright.
| First-half 2026 cash allocation; dollars in millions | Amount |
|---|---|
| Operating cash generated | 2,160.433 |
| Property and equipment purchases, positive spending | 1.840 |
| Finance-lease principal, positive spending | 8.528 |
| Company-defined free cash flow | 2,150.065 |
| Cash share repurchases | 1,532.952 |
| Cash tax withholding on employee equity awards | 46.451 |
| Remainder after repurchases and employee tax withholding, calculated | 570.662 |
Source: Form 10-Q, cash-flow statement and free-cash-flow reconciliation, pp. 8 and 20. Free cash flow is non-GAAP; the remainder is not the total change in cash because other investing, financing, and currency movements remain.
Small equipment purchases do not mean AppLovin spends little on technology. Cloud services appear in operating expenses, and compensation funds development work. New lease arrangements can create assets and payment obligations without an immediate equipment purchase. During the first half, the company recorded $60.3 million of assets representing its right to use leased property or equipment in exchange for lease obligations, net of changes to existing leases. It also acquired $11.9 million of software licenses for which payment was still due.
Total investing cash use was $7.7 million, including lease-related initial direct costs and equipment purchases. Financing used $1.583 billion, principally repurchases and employee tax withholding. There were no proceeds from new bond or bank debt and no repayments of that principal; the company did make the finance-lease principal payments shown above. After a $3.9 million adverse currency movement, cash rose $566.2 million to $3.053 billion. No separate restricted-cash balance appears in this reconciliation.
Source: Form 10-Q, cash-flow statement, p. 8; investing and financing discussion, pp. 26–27.
Repurchases return cash to selling shareholders and reduce the number of shares participating in future earnings. They can also offset shares issued to employees, but use cash that could fund development, acquisitions, or debt repayment. Management said it slowed repurchases in the second quarter to reflect lower free cash flow. That response preserved cash flexibility while continuing the program.
Source: AppLovin earnings-call transcript, August 5, 2026, p. 4.
No cash dividends were reported. The company retired approximately 3.275 million repurchased shares rather than holding them as treasury shares. Total outstanding shares declined from 338.313 million to 335.291 million after employee issuances and withholding. The $1.545 billion equity charge for repurchases differs from the $1.533 billion cash payment; the filing also reports $18.5 million of repurchases in accrued liabilities. The equity entry and cash spending therefore should not be treated as interchangeable.
Share-based compensation remained meaningful at $169.3 million in the first half, including cash-settled awards. The cash-flow add-back was $169.0 million because it excludes those awards. Buying back shares more than offset shares issued during the period, but the compensation expense still belongs in the assessment of the cost of employing staff.
Source: Form 10-Q, statements of equity and cash flows, pp. 6–8; Notes 7–8, pp. 14–15.
The quarterly diluted share count—the average shares outstanding plus the additional shares included for potentially dilutive employee awards—fell 1.5% from a year earlier, to 337.031 million. Continuing profit per share using that count increased from $2.26 to $3.76, or 66.4%, slightly faster than continuing net income. Fewer shares helped, but profit growth was the dominant cause. A reduction in potentially dilutive employee awards also affected the diluted count, so the entire change cannot be assigned to repurchases.
Assets less liabilities—the shareholders’ accounting equity—increased from $2.135 billion to $3.163 billion. Accumulated profits, called retained earnings, rose by $926.7 million after $2.472 billion of net income and the $1.545 billion repurchase charge. These accounting balances are not separate pools of cash.
The equity account for share contributions and compensation, called additional paid-in capital, increased $128.5 million. Share compensation and equity issuances increased it, while employee share withholding reduced it. Translating foreign operations into dollars produced a $26.8 million loss recorded directly in equity, separate from currency gains included in net income.
Source: Form 10-Q, statements of comprehensive income and equity, pp. 5–6; Note 9, p. 16.
6. Liquidity is substantial, but cloud contracts and leases also need cash
The immediate funding position is strong, and the first bond maturity falls in 2029. Cash alone exceeded current liabilities by $1.799 billion at June 30. AppLovin also had a $1.0 billion revolving facility with no borrowings outstanding. This is a source of backup funding, subject to its contractual requirements, rather than additional cash already owned.
| Consolidated balance sheet; dollars in millions | December 31, 2025 | June 30, 2026 |
|---|---|---|
| Cash | 2,487.096 | 3,053.306 |
| Net receivables | 1,819.366 | 2,171.017 |
| Prepaid and other current assets | 124.330 | 167.993 |
| Net property and equipment | 122.445 | 111.948 |
| Goodwill | 1,539.986 | 1,518.587 |
| Net intangible assets | 396.714 | 355.661 |
| Equity-method investments | 287.666 | 289.959 |
| Other noncurrent assets | 482.007 | 600.660 |
| Total assets | 7,259.610 | 8,269.131 |
| Accounts payable | 746.977 | 778.942 |
| Accrued and other current liabilities | 586.811 | 475.016 |
| Long-term debt, carrying amount | 3,512.987 | 3,515.072 |
| Other noncurrent liabilities | 278.164 | 337.085 |
| Total liabilities | 5,124.939 | 5,106.115 |
| Equity | 2,134.671 | 3,163.016 |
Cash and receivables explain most of the $1.010 billion increase in assets. Goodwill fell $21.4 million entirely through currency translation, rather than a new impairment. Intangible assets fell $41.1 million as amortization, additions, and currency effects changed their carrying amounts; first-half amortization was $51.3 million. Customer relationships remained the largest intangible asset, at $280.6 million.
Net property and equipment declined $10.5 million. Neither that decline nor the small cash-purchase figure establishes a maintenance-versus-expansion spending split; the filing does not disclose one. Other noncurrent assets rose $118.7 million. The $54.3 million increase in private-equity fund values is a disclosed contributor. New lease obligations also added assets representing the right to use leased property or equipment. However, the condensed filing does not fully explain each component of the change in other noncurrent assets. It would be misleading to call the full increase a cash investment. No material inventory balance is separately reported, consistent with the business’s role in arranging advertising rather than selling physical goods.
Source: Form 10-Q, Notes 4 and 6, pp. 12–14; supplemental cash-flow disclosures, p. 8.
Bond principal totals $3.550 billion; the balance-sheet amount is lower because issuance costs and discounts are deducted. The contractual schedule is:
| Bond maturity | Principal, $ millions | Annual coupon |
|---|---|---|
| December 2029 | 1,000 | 5.125% |
| December 2031 | 1,000 | 5.375% |
| December 2034 | 1,000 | 5.500% |
| December 2054 | 550 | 5.950% |
These coupons imply $192.725 million of annual bond interest, paid semiannually. The revolving facility also matures in December 2029, subject to extension options. The facility limits debt after deducting cash, measured against an earnings figure, to a ratio of 3.50 to 1.00. That limit can temporarily rise to 4.00 to 1.00 after certain qualifying acquisitions. The agreement defines which debt, cash, and earnings enter this calculation; it is not interchangeable with the simpler debt-minus-cash figure below. The annual filing reported compliance at December 31, 2025.
At that date, remaining undiscounted operating-lease payments were $33.655 million and finance-lease payments $140.272 million, including $15.162 million and $22.500 million due in 2026. Those schedules predate the new 2026 leases.
Source: 2025 Form 10-K, Notes 8–9, pp. 68–70, filed February 19, 2026.
At June 30, bond principal less cash was only $496.7 million, a calculated figure that excludes leases and operating liabilities. First-half interest expense was $102.3 million, versus $2.934 billion of operating profit. The current earnings base provides considerable interest-paying capacity, though it does not remove the need to repay principal eventually.
Cloud commitments are another claim on future cash. Against a three-year minimum commitment of $1.3 billion agreed in August 2024, AppLovin had paid $953.5 million by June 2026. The remaining minimum was therefore $346.5 million. That is not necessarily a separate incremental expense beyond normal operations: future cloud use can satisfy the commitment. It does, however, limit how quickly spending can be reduced if demand weakens.
The cash reserve, continuing cash generation, and unused facility make near-term financing pressure limited. The practical constraint is capital allocation: repurchases, computing growth, and any acquisitions compete for the same cash that can otherwise prepare the company for the 2029 maturities.
Source: Form 10-Q, Note 5, p. 13; liquidity and debt-risk discussions, pp. 26–27 and 53–54.
7. New advertisers widen the opportunity, but execution still depends on models
Expansion beyond gaming is promising, but it has not yet removed dependence on gaming and continued model improvements. On the August call, management said gaming remained the majority of revenue. It attributed the slower quarter to model improvements arriving just after June, reported stable publisher-auction positioning, and said higher computing costs were included in its next-quarter outlook. These are management’s explanations, not independently measured market-share results.
Management also said spending by consumer advertisers, including online retailers, was 28% above fourth-quarter 2025 levels. However, this business was still too small to smooth gaming fluctuations. The public Ads Manager launch targeted mid-sized advertisers first, supported by partnerships. This spending measure is not net revenue and cannot establish the consumer business’s profit contribution.
Source: AppLovin earnings-call transcript, August 5, 2026, pp. 1–4.
There is a concrete product purpose behind that expansion. AppLovin’s February 25 launch of Discovery Campaigns aimed to find shoppers who had never interacted with an advertiser’s brand. Prospecting Campaigns instead focus on people who have not previously purchased. The distinction matters because advertisers seeking genuinely new customers may value different outcomes from campaigns that reach people already familiar with them.
The company says these tools use historical purchase information, including through Shopify integration. Its early test claims are promotional evidence, not a disclosed revenue cohort or an independently verified profitability study. The business case will become stronger if new advertisers continue spending after initial trials while maintaining acceptable acquisition costs.
Source: AppLovin, “Introducing Discovery Campaigns,” February 25, 2026.
Competition supplies a useful counterweight to AppLovin’s strong results. Unity’s August 6 release reported growth in Grow Solutions, its business serving advertising and app monetization. Unity attributed that growth to its Ads Network and Vector technology, partly offset by declines in ironSource. This establishes growth in a competing business; the explanation linking it to technology improvements is Unity’s assessment.
| Reported revenue; approximately $ millions | Second quarter 2025 | Second quarter 2026 |
|---|---|---|
| AppLovin, consolidated continuing business | 1,259 | 1,924 |
| Unity, Grow Solutions | 287 | 389 |
Sources: AppLovin Form 10-Q, statement of operations, p. 4; Unity second-quarter 2026 earnings release, August 6, 2026, Grow Solutions discussion.
Reporting basis: AppLovin’s consolidated continuing business and Unity’s Grow Solutions have different product scopes and accounting mixes. These figures are not a market-share comparison.
Neither company’s growth alone establishes where advertisers shifted budgets. The narrower conclusion is that AppLovin faces a growing competitor that also credits recommendation technology for its results. Continued product improvement therefore remains important to defending AppLovin’s position.
For the third quarter, AppLovin forecast revenue of $2.055–$2.085 billion and Adjusted EBITDA of $1.710–$1.740 billion. The revenue range implies 6.8%–8.4% sequential growth, calculated against the reported second quarter. The indicated adjusted margin is approximately 83%, below the second quarter’s 83.9%. Management did not provide a forecast reconciliation to GAAP profit because certain adjustments could not be reliably estimated.
Source: AppLovin second-quarter 2026 earnings release, August 5, 2026, third-quarter guidance.
That combination would mean more revenue and adjusted profit dollars despite a slightly lower margin. It is consistent with spending more to improve the advertising product. The business test is whether the additional computing and engineering expense produces enough advertiser success to sustain spending, rather than whether every quarter preserves the highest recent margin.
8. Platform access and legal exposure remain business constraints
Strong financial results do not eliminate dependence on other companies’ rules. AppLovin relies on mobile ecosystems controlled by Apple and Google. Changes in access to data, app distribution, or measurement can reduce the effectiveness of its advertising tools. As counterevidence to an immediate disruption, the filing says prior platform privacy changes had a relatively muted aggregate effect on results. AppLovin describes adapting its data practices and updating MAX to support Google’s consent-management requirements. Because advertiser contracts are generally cancelable, weaker results can reach revenue faster than in a business protected by long contracts.
Apple’s Developer Program License Agreement also prohibits deriving device information to uniquely identify users through fingerprinting. These rules explain why privacy compliance affects the product itself: the information available to choose and measure ads is constrained. They do not, by themselves, establish that AppLovin violated a rule.
Sources: Form 10-Q, ecosystem discussion and risk factors, pp. 20 and 30–52; Apple, User Privacy and Data Use, “Ask permission to track” and fingerprinting guidance, accessed October 7, 2026.
The quarterly filing describes securities litigation alleging misleading statements about AppLovin’s advertising solutions and growth. The motion to dismiss the amended Brownback complaint was fully briefed in February 2026. Related shareholder derivative cases were stayed pending that decision. AppLovin disputes the allegations and says it cannot reasonably estimate a maximum exposure or loss range.
Note 5 reported no material legal contingencies requiring accrual or disclosure at June 30. That accounting conclusion does not mean the cases have no risk. Adverse outcomes could involve payments, legal costs, or management distraction; the filing supplies no supported amount for a loss scenario. Separately, management said on the August call that the SEC had concluded its inquiry with no recommended action. That statement does not resolve the civil cases.
Sources: Form 10-Q, Note 5 and legal proceedings, pp. 13 and 29; AppLovin earnings-call transcript, August 5, 2026, p. 4.
Tax exposure also needs perspective. The filing reported no material first-half change in unrecognized tax benefits and expected no material change over the next twelve months. Nevertheless, profit across different countries and changing deductions can affect future tax expense. The increase already visible in the effective rate shows why strong pretax growth need not translate proportionately into after-tax profit.
Control is concentrated as well. Adam Foroughi, Herald Chen, and their relevant affiliates collectively held approximately 67% of voting power at June 30. That gives them substantial influence over major corporate decisions, including acquisitions and capital allocation. Their ability to act consistently can support long-term projects, while limiting other shareholders’ influence over those choices.
Source: Form 10-Q, Note 10, p. 17; voting-control discussion, pp. 55–56.
9. The business can finance its next stage, but effectiveness must keep improving
AppLovin’s financial strength now gives it considerable room to fund the work on which its growth depends. Advertising revenue and GAAP operating margins improved together, and cash generation covered substantial repurchases without new borrowing. The sold Apps business no longer obscures the underlying earnings comparison when continuing operations are used correctly.
The central operating challenge is sustaining the higher revenue per installation that offset declining installation volume in the periods reviewed. That can be a powerful model when better targeting lets customers spend profitably. It also makes the timing and cost of improvements important: computing expense arrives before the full commercial benefit is certain, and cancelable customers can reduce spending if results weaken.
The next evidence that would strengthen the assessment is sustained advertiser spending after the recent model changes, accompanied by timely collection of customer bills. Continued growth may still require a larger total receivables balance, even if customers pay on time. Broader consumer adoption could reduce dependence on gaming, but separate revenue and profit evidence is still needed to measure that contribution. The supported conclusion is a highly profitable, well-funded advertising business whose next stage depends on continued product effectiveness and disciplined use of cash.
Calculation notes:
- Growth equals current-period amount divided by the same prior-year period, minus one. Margins equal the relevant profit divided by continuing revenue. Percentage-point changes subtract the two margins. Tables retain the filing’s thousand-dollar precision after conversion to millions; prose rounds amounts.
- Quarterly revenue growth: 1,923.686 / 1,258.754 − 1 = 52.8%. Continuing profit growth: 1,266.538 / 771.856 − 1 = 64.1%. First-half operating profit growth: 2,934.210 / 1,797.664 − 1 = 63.2%. First-quarter 2026 revenue, derived from the half less the second quarter, is 1,842.449 million dollars.
- First-half operating-asset and liability cash use: −352.557 − 56.890 + 29.617 − 124.967 = −504.797 million dollars; prior year: −291.551 + 20.691 + 39.040 + 91.511 = −140.309 million dollars.
- Cash reconciliation, millions of dollars: 2,487.096 + 2,160.433 − 7.688 − 1,582.651 − 3.884 = 3,053.306. For 2025, the $451.197 million cash increase includes discontinued operations. Removing their $44.381 million cash decrease gives the $495.578 million increase in the continuing cash balance: 697.030 + 451.197 − (−44.381) = 1,192.608. This balance reconciliation does not isolate continuing operating cash flow.
- Equity reconciliation, millions of dollars: 2,134.671 + 2,472.151 + 168.981 + 5.280 − 45.754 − 1,545.495 − 26.818 = 3,163.016. Balance-sheet identities: 5,106.115 + 3,163.016 = 8,269.131 at June 30; 5,124.939 + 2,134.671 = 7,259.610 at December 31.
- Annual bond coupons, millions of dollars: 1,000 × 5.125% + 1,000 × 5.375% + 1,000 × 5.500% + 550 × 5.950% = 192.725. This excludes leases, facility fees, and debt-cost amortization. Bond principal less cash is 3,550 − 3,053.306 = 496.694 million dollars; it is not a covenant calculation.
- The filing presents financial-statement amounts in thousands of U.S. dollars, except per-share data. This report converts those amounts to millions. Revenue and income cover April–June or January–June as labelled; assets are balances at the specified dates. The filing’s cash-flow statement covers six months. Quarterly cash-flow amounts come from the separately cited earnings release.
Sources: Form 10-Q, consolidated financial statements, pp. 3–8. The SEC filing index also lists an extracted XBRL instance; the numerical verification here rests on the financial statements, not a separate validation of that machine-readable file.
This report is for information and business analysis only. It is not investment advice.