Summary of AppLovin FY Conference Call (December 09, 2025) Company Overview - **Company**: AppLovin (NasdaqGS: APP) - **Industry**: Mobile Gaming and Advertising Key Points Gaming Vertical - AppLovin's primary business is in the gaming vertical, which has shown durability in growth, historically achieving a growth rate of 20%-30% [3][5] - The mobile gaming market is experiencing double-digit growth in supply, driven by the MAX Marketplace, which creates opportunities for overall market expansion [4] - Demand-side advertising through the Axon model is improving due to ongoing technology enhancements, including reinforcement learning and model improvements [4][5] Self-Serve Platform - The self-serve platform launched on October 1, 2025, focuses on performance metrics such as return on ad spend (ROAS) rather than the number of advertisers [6][7] - Initial results from e-commerce advertisers indicate strong performance, with a focus on prospecting campaigns that allow advertisers to reach new customers effectively [8][15] E-commerce and Advertising Strategy - AppLovin aims to leverage its large user base (over a billion users) to provide advertising opportunities beyond gaming, targeting a broader audience [9][10] - The company has identified that new product offerings are more successful with one-off purchase items rather than brands with high customer loyalty [12][13] - The prospecting tool has shown promising results, with some advertisers achieving up to 80% new customer acquisition rates [16] AI and Creative Development - AppLovin is investing in AI-based creative tools to help advertisers generate optimized ads for their platform, which is crucial for attracting new customers [18][20] - The company is developing generative AI tools for both image and video ad creation, with the image generation model expected to be rolled out soon [22][23] Direct Payments and Industry Impact - The potential shift to direct payments in the gaming industry could positively impact AppLovin, but the transition is expected to take time, with a gradual reduction in payment fees from 30% to an estimated 15%-20% [25][27] - The incremental profit from this shift may initially benefit mobile gaming companies before eventually flowing to advertising companies like AppLovin [28] Competitive Landscape - AppLovin differentiates itself from competitors like Meta and Google by focusing on both top-of-funnel and bottom-of-funnel advertising, allowing for incremental growth opportunities for advertisers [30][31] - The company is positioning itself to capture a larger share of advertising spend by providing unique solutions that complement existing marketing strategies [32][33] Capital Allocation and Growth Strategy - AppLovin plans to continue its stock buyback program, having increased authorization by $3.2 billion, while maintaining a lean operational structure with around 900 employees [34][36] - The company is focused on growth initiatives, particularly in e-commerce, and aims to significantly increase its customer base through effective marketing strategies [38][40] Future Outlook - The web targeting model is expected to improve rapidly, with a strong emphasis on data integration and customer experience [37][39] - AppLovin anticipates substantial growth opportunities as it expands its advertising solutions beyond gaming, potentially influencing economic expansion in various categories [33][40]

Core Insights - Whales have adopted a bearish stance on AppLovin, with 40% of investors taking bearish positions compared to 39% bullish [1] - The total amount for put options is $1,292,160, while call options total $5,238,686, indicating a significant interest in both directions [1] Trading Activity - Major market movers are focusing on a price band between $300.0 and $850.0 for AppLovin over the last three months [2] - The average open interest for AppLovin options is 414.14, with total volume reaching 2,735.00, reflecting active trading within the specified price corridor [3] Options Analysis - Significant options trades include a bullish call sweep with a total trade price of $657.8K and a bearish call trade priced at $406.0K [8] - A neutral put trade was recorded with a total trade price of $260.7K, indicating varied sentiment among traders [8] Company Overview - AppLovin operates as a vertically integrated advertising technology company, generating approximately 80% of its revenue from its demand-side platform, AppDiscovery [11] - The company’s growth strategy is centered around AXON 2, an ad optimizer that enhances ad placements based on specified return thresholds [11] Market Status - An expert from Citigroup maintains a Buy rating for AppLovin, with a target price of $820.0, reflecting positive sentiment despite current bearish options activity [14] - The current trading volume for AppLovin is 1,309,557, with the stock price at $697.0, showing a slight increase of 0.73% [16]

Core Insights - Artificial intelligence is significantly transforming spending across various industries, benefiting companies like Nvidia and AMD, while negatively impacting others [1] Semiconductor and PC Industry - Wedbush Securities highlights that soaring demand for computer memory is squeezing companies linked to traditional PC and mobile sectors, adversely affecting Intel, HP, Synaptics, Qualcomm, Qorvo, and Cirrus Logic [1] - The report indicates that due to concentrated memory supply and AI-driven demand, DRAM contract prices are expected to rise over 30% by Q4 2025, with NAND flash prices potentially increasing by at least 20% [2] - Memory constitutes about 20% of the PC bill of materials, and a 27.5% average price increase in memory could lead to a 5.5% impact on sales costs, compressing gross margins for manufacturers like HP by 300-440 basis points [2] Autonomous Vehicles - The rise of autonomous vehicles is projected to negatively impact ride-hailing companies such as Uber and Lyft, as Tesla's first fleet of driverless cars is set to launch in Austin, Texas by the end of the year [2][3] - Autonomous fleets can transport people and goods without human labor, marking a significant shift in transportation economics since the introduction of ride-hailing services a decade ago [3] - As autonomous networks scale, value will shift towards platforms that own fleets, have data accumulation, and benefit from closed-loop economic advantages, undermining the asset-light models of Uber and Lyft [3] Advertising Sector - The emergence of agentic AI is causing a significant shift in advertising spending, with Wedbush downgrading Pinterest's rating and predicting negative impacts on The Trade Desk as advertisers move towards platforms with proven conversion rates, such as Amazon, Meta, Google, and AppLovin [2][3] - In an agentic AI landscape, advertising budgets are expected to flow towards platforms that offer rich first-party data, measurable conversion rates, and short feedback loops from signal to sale [3] Software as a Service (SaaS) Companies - Major SaaS companies like Adobe, Docusign, and Workday may face negative impacts as some firms pivot towards usage-based models, while high-cost product companies are likely to be more affected [3][4] - Historically, disruptors in enterprise software first succeed in niche applications before threatening established competitors, with Adobe, Docusign, and Workday facing the greatest risks [4] - Wedbush downgraded Nice Systems from "outperform" to "neutral," lowering the target price from $170 to $120 [4] Retail Sector - The impact of agentic AI is also disrupting various areas within the retail sector, including intermediary organizations like Instacart [4]

Core Insights - AppLovin Corporation will participate in a fireside chat at the Nasdaq 53rd Investor Conference in London on December 9, 2025, at 10:35 a.m. GMT [1] Company Overview - AppLovin is a leading marketing platform that provides technologies to help businesses connect with their ideal customers [3] - The company offers end-to-end software and AI solutions for businesses to reach, monetize, and grow their global audiences [3]

Core Viewpoint - AppLovin Corp. has experienced significant stock price fluctuations, with a recent recovery attributed to better-than-expected quarterly reports and strong growth in AI-powered advertising solutions [1][2][17]. Group 1: Stock Performance - After reaching an all-time high of $525.15 in February, AppLovin's stock price fell over 35% due to a class action lawsuit and short seller reports, but rebounded to a new high of $745.61 in September, representing an 83.0% increase year-over-year [1]. - Since going public in 2021, the stock price has surged by 1,078.8%, marking it as a top growth stock [2]. Group 2: Business Focus and Growth Drivers - AppLovin is focusing on software solutions that enhance marketing and monetization for online advertisers, benefiting from strong secular growth trends [3]. - The company has made significant strides in AI-powered advertising, with its Axon AI engine optimizing ad targeting and expanding into new categories such as e-commerce, fintech, and automotive [9][10]. - AppLovin has achieved a major milestone in e-commerce advertising, marking its first significant penetration into this sector, which is expected to be a major revenue contributor [11]. - The strategic divestment of its mobile gaming unit allows AppLovin to concentrate on advertising technology, positioning itself as a competitor to major players like Google and Meta [12][16]. Group 3: Future Projections - Wall Street's consensus one-year price target for AppLovin is $728.25, indicating a 6.5% upside from the current share price, with 27 analysts recommending buying shares [18]. - Projections for AppLovin's stock price suggest it could reach $680.00 by the end of 2025, with a long-term estimate of $910.70 by 2030, reflecting a 33.2% increase from current levels [19][22].

Core Viewpoint - The digital advertising sector is experiencing significant growth driven by artificial intelligence (AI), with specific companies in this niche showing remarkable performance and potential for future expansion [1]. Group 1: AppLovin - AppLovin has seen substantial growth since launching its Axon-2 AI-powered adtech platform in 2023, with revenue increasing by 68% to $1.41 billion and EBITDA soaring by 79% to $1.16 billion in the last quarter [2]. - The company is focused on helping gaming apps attract new customers, projecting a long-term revenue growth of 20% to 30% from the gaming sector, while also expanding into web-based advertising and e-commerce [4][5]. - AppLovin's new self-serve platform aims to attract smaller gaming advertisers, and its expansion outside the U.S. is expected to further enhance growth opportunities [5]. Group 2: Meta Platforms - Meta Platforms is leveraging AI to enhance its recommendation engine, resulting in increased user engagement and improved advertising tools for advertisers, which has led to a 26% revenue increase to $51.2 billion in Q3 [7][8]. - The company is exploring monetization opportunities for its WhatsApp messaging app, which has over 3 billion users, and is gradually introducing ads to its new Threads social media site [9]. - Meta's growth is supported by a 14% increase in ad impressions and a 10% rise in average ad prices, indicating strong demand for its advertising services [8]. Group 3: Pinterest - Pinterest is utilizing AI to enhance its visual search and recommendation engine, as well as introducing features like virtual clothing try-ons and a voice-activated AI assistant [10]. - The company reported a 17% revenue increase and a 24% rise in EBITDA, with international markets showing particularly strong performance, including a 41% revenue jump in Europe and a 66% increase in the rest of the world [12]. - Pinterest's Performance+ AI-powered ad tool is improving campaign effectiveness and assisting with bidding and targeting, contributing to its overall growth [11].

Core Thesis - AppLovin Corporation is positioned as a strong player in the digital advertising space, competing effectively with major companies like Meta, Snap, and TikTok, with significant growth potential and a lean operating model [2][3][4] Financial Performance - As of December 1st, AppLovin's share price was $623.59, with trailing and forward P/E ratios of 73.54 and 43.48 respectively [1] - The company reported over $11 billion in gross ad spend as of Q1, indicating a scale comparable to the combined revenues of Pinterest, Snap, and Twitter [2] - AppLovin has achieved EBITDA margins of 80–85% and converts over 50% of EBITDA to free cash flow, showcasing its ability to generate durable cash flow [4] Market Position and Strategy - AppLovin currently commands a 3–5% budget share among surveyed customers, ranking just behind Meta and Google, with significant room for market expansion [3] - The company's capital allocation strategy focuses on deploying all free cash flow toward share buybacks, reflecting confidence in its intrinsic value [3] Growth Opportunities - The company identifies a substantial untapped opportunity in in-game advertising, estimating that this could unlock an additional $100 billion in total addressable market [4] - Future marketing efforts, including large-scale campaigns, are expected to further accelerate customer growth [4] Historical Context - The stock has appreciated approximately 141.92% since a previous bullish thesis in March 2025, indicating strong market performance driven by its software-driven growth strategy [5]

Core Insights - AppLovin (APP) has outperformed Shopify (SHOP) in 2023, showcasing stronger fundamentals at a lower price point, suggesting a more attractive investment opportunity for potential gains [2][3] Valuation and Performance Comparison - AppLovin has a lower Price to Operating Income (P/OpInc) ratio compared to Shopify, indicating a more favorable valuation [3] - Despite its lower valuation, AppLovin demonstrates higher revenue and operating income growth than Shopify [3] Market Position and Future Outlook - The current mismatch in stock prices between Shopify and AppLovin may indicate that Shopify is overvalued if it continues to underperform in revenue and operating income growth [7] - A year-over-year analysis of key metrics could reveal whether Shopify's stock price is poised for adjustment or if sustained underperformance will validate its overvaluation [7]

Core Insights - AppLovin Corp. is experiencing increased momentum in its ecommerce initiatives, with a significant rise in merchants adopting its Axon ad technology, potentially leading to a positive surprise in Q4 [1][3] - Bank of America Securities analyst Omar Dessouky maintains a Buy rating on AppLovin, projecting a price target of $860, indicating approximately 32% upside from the current price of $653 [2][8] Expansion of Axon Adoption Among Merchants - According to third-party tracking, the adoption of Axon's pixel technology among ecommerce merchants increased by about 25% month-over-month in November, bringing total installations to approximately 3,500 merchants by November 30, up from around 800 on September 30 [4] - Shopify merchants accounted for nearly 80% of the new pixel installations, indicating strong growth in this segment [4] - Data from Triplewhale shows 413 active shops advertising through the end of November, reflecting robust onboarding since early October [5] Fourth-Quarter Setup and Revenue Expectations - Expectations for Q4 2025 have softened following the Q3 results, as company guidance did not fully account for spending from newly added advertisers in November and December [6] - The ecommerce net revenue outlook remains at $340 million, despite the new cohort spending under $20 million through October 31 [6] - The average daily spend of approximately $2,000 per merchant could support the revenue forecast, allowing for potential upside if engagement continues [7] - Management has expressed confidence, stating that Axon ecommerce will be available to all merchants in the first half of 2026, with successful prospecting campaigns and potential for increased ad load as ad durations shorten [7]

Core Insights - AppLovin Corporation is transitioning from a mobile-first advertising platform to a diversified advertising powerhouse, driven by its expansion into web advertising and connected TV (CTV) through the acquisition of Wurl [1][7] - The CTV market is experiencing rapid growth as viewers shift away from linear television, and Wurl enhances AppLovin's ability to deliver targeted ad campaigns across CTV devices [2][7] - AppLovin aims to unify advertising across mobile, web, and CTV to diversify revenue streams and strengthen strategic resilience [3][7] Company Positioning - AppLovin is positioning itself to offer a unified platform for advertisers, which could elevate its competitiveness in the omnichannel advertising ecosystem [3] - The company is focusing on performance-driven advertising, prioritizing measurable outcomes over raw impressions, thereby creating deeper value for advertisers [2] Competitive Landscape - The Trade Desk is a significant rival, leveraging its Demand-Side Platform capabilities and strong CTV relationships, while Roku utilizes its operating system and first-party data to deliver targeted ad placements [4][5] - As competition intensifies, Roku is enhancing its ad tech stack to maintain relevance in the growing CTV sector [5] Financial Performance - AppLovin's stock has gained 75% over the past year, significantly outperforming the industry's 4.4% rise [6] - The company trades at a forward price-to-earnings ratio of 44.58, above the industry's 25.91, and carries a Value Score of D [8] - The Zacks Consensus Estimate for AppLovin's earnings has been rising over the past 30 days [9]