AppLovin (NASDAQ:APP) Misses Q2 Sales Targets

Mobile app advertising platform AppLovin (NASDAQ: APP) missed Wall Street’s revenue expectations in Q2 CY2025, but sales rose 16.5% year on year to $1.26 billion. On the other hand, next quarter’s outlook exceeded expectations with revenue guided to $1.33 billion at the midpoint, or 1.3% above analysts’ estimates. Its GAAP profit of $2.39 per share was 20.4% above analysts’ consensus estimates.

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Company Overview

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.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last three years, AppLovin grew its sales at a decent 22.1% compounded annual growth rate. Its growth was slightly above the average software company and shows its offerings resonate with customers.

This quarter, AppLovin’s revenue grew by 16.5% year on year to $1.26 billion but fell short of Wall Street’s estimates. Company management is currently guiding for a 11% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 13.3% over the next 12 months, a deceleration versus the last three years. Despite the slowdown, this projection is commendable and suggests the market sees success for its products and services.

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Customer Acquisition Efficiency

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

AppLovin is extremely efficient at acquiring new customers, and its CAC payback period checked in at 3.9 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give AppLovin more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.

Key Takeaways from AppLovin’s Q2 Results

It was encouraging to see AppLovin’s revenue and EBITDA guidance for next quarter beat analysts’ expectations. On the other hand, the quarter itself was weak, with revenue and EBITDA slightly falling short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 1.9% to $383.51 immediately following the results.

AppLovin’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.