Applovin (NasdaqGS:APP) Q4 2025 Earnings call February 11, 2026 05:00 PM ET Speaker6Welcome to AppLovin's earnings call for the fourth quarter and year ended December 31, 2025. I'm David Hsiao, Head of Investor Relations. Joining me today to discuss our results are Adam Foroughi, our Co-founder, CEO, and Chairperson, and Matt Stumpf, our CFO. Please note, our SEC filings to date, as well as our financial update and press release discussing our fourth quarter and annual performance, are available at investor ...

Core Insights - AppLovin has experienced significant growth in 2023, driven by the adoption of AI in advertising and strong earnings momentum [1][3] - The launch of the AI-powered Axon 2 platform has enhanced performance across AppLovin's ad network [1] - The company is expanding its focus beyond gaming apps into non-gaming mobile apps, connected TV, streaming video, and e-commerce [2] Company Overview - Founded in 2012, AppLovin is a California-based company that provides tools for app developers to market, monetize, and scale their products [4] - The company operates a marketplace where advertisers can reach targeted audiences, while publishers earn revenue by displaying ads [5] - AppLovin's products, including MAX, AppDiscovery, and Adjust, create a comprehensive ecosystem for developers to attract users and maximize in-app revenue [5] Business Model and Technology - AppLovin's revenue primarily comes from its advertising technology, which manages both demand and supply sides of digital ads [5][6] - The company has developed a scalable model that benefits from increasing ad spending and improved campaign efficiency [6] - The Axon platform utilizes machine learning to optimize ad performance, automate processes, and deliver higher returns for advertisers across various sectors [6] Market Recognition - Benchmark raised its price target for AppLovin, highlighting the company's potential due to rising e-commerce adoption and advancements in its self-serve tools [3]

Core Insights - UiPath and AppLovin are leveraging artificial intelligence to transform their respective sectors, with UiPath focusing on robotic process automation (RPA) and AppLovin on mobile advertising technology [1][11] UiPath Overview - UiPath is a leader in the RPA market, which is expected to grow significantly in the coming years, positioning the company to capitalize on the increasing demand for AI-driven solutions [3][6] - Strategic partnerships with major technology firms like Microsoft, Amazon, and Salesforce enhance UiPath's credibility and expand its capabilities within broader enterprise ecosystems [4] - UiPath boasts a high customer retention rate of 108%, with Q2 fiscal 2026 revenues reaching $362 million, a 14% year-over-year increase, and annual recurring revenues of $1.72 billion, reflecting strong customer loyalty [5][10] - The company is well-positioned to maintain its leadership in the evolving RPA and enterprise automation sector due to its global presence and focus on intelligent automation [6] AppLovin Overview - AppLovin has established itself in mobile advertising, particularly with the launch of its AI engine, Axon 2, which has significantly improved ad performance and quadrupled advertising spend on its platform [7][9] - The estimated annual run rate for ad spend from gaming clients has reached $10 billion, positioning AppLovin among the top global ad tech firms by valuation [7] - Financially, AppLovin reported a 77% year-over-year revenue increase in Q2 2025, with adjusted EBITDA rising 99% and net income soaring 156%, indicating strong market demand and operational efficiency [9][14] Financial Estimates - The Zacks Consensus Estimate for UiPath indicates a 10% year-over-year growth in sales and a 23% increase in EPS for fiscal 2026 [10] - For AppLovin, the Zacks Consensus Estimate suggests a 17% growth in sales and a remarkable 103% increase in EPS for 2025 [14] Valuation Comparison - UiPath's forward sales multiple is 5.54X, above its 12-month median of 4.27X, while AppLovin's forward sales multiple stands at 30.85X, significantly higher than its median of 20.24X [17] Investment Recommendation - UiPath is considered a more balanced and sustainable long-term investment due to its deep enterprise integration, high customer retention, and strategic partnerships, while AppLovin, despite its impressive growth, carries higher valuation risk [18]

Core Insights - AppLovin Corporation (APP) has experienced a significant stock surge of 140% over the past six months, outperforming the broader industry growth of 66% and major competitors like Alphabet (GOOGL) and Meta Platforms (META), which saw gains of 56% and 37% respectively [1][7] Company Performance - AppLovin's Axon 2 AI engine, launched in Q2 2023, has greatly enhanced ad performance, leading to a quadrupling of advertising spend on its platform [2][4] - The company is estimated to achieve a $10 billion annual run rate in ad spend from gaming clients, positioning it among the top global ad tech firms by valuation [3] - In Q2 2025, AppLovin reported a 77% year-over-year increase in revenues and a 99% rise in adjusted EBITDA, with net income soaring 156% from the previous year [9][10] Market Outlook - Analyst projections indicate continued growth, with expected earnings of $2.36 per share for Q3 2025, representing an 89% increase year-over-year, and revenues anticipated to reach $1.34 billion, reflecting a 12% growth [10][12] - For the full year 2025, earnings are projected to increase by 103%, with revenues expected to grow by 18% [10][11] Strategic Positioning - AppLovin's strategy focuses on leveraging AI for direct monetization in mobile advertising, distinguishing it from other tech giants that are primarily enhancing enterprise productivity [8][13] - The success of Axon 2 and the expanding publisher base highlight AppLovin's competitive advantage in the mobile advertising sector [4][13]

Group 1 - The S&P 500 serves as a benchmark index for the overall stock market, representing approximately 80% of all U.S. equities by market capitalization [1] - Membership in the S&P 500 requires consistent profits and sufficient stock liquidity, in addition to a large market cap [1][2] - The selection committee regularly evaluates companies, removing those that fail to meet criteria or experience significant value drops, while adding new entrants [2] Group 2 - AppLovin has been added to the S&P 500, replacing MarketAxess, Caesars Entertainment, and Enphase Energy on September 22 [3][8] - AppLovin's stock has increased over 55 times since the beginning of 2023, indicating strong market performance [3] - The company provides an advertising solution that ensures marketers only pay for successful ad placements, utilizing third-party measurement data [5] Group 3 - AppLovin's Axon 2 advertising optimizer, launched in Q1 2023, has significantly boosted its software platform revenue from just over $1 billion in 2022 to $4.25 billion over the last four quarters [6] - The company is diversifying its business by expanding into connected-TV advertising through acquisitions of Wurl and MoPub, and developing an e-commerce advertising engine [7] - AppLovin's advanced algorithms have yielded impressive results for clients, with potential for accelerated growth in 2026 and beyond [8]

Core Insights - Founder-run companies, while representing less than 5% of the S&P 500 index, contribute nearly 15% of the total index's market capitalization, particularly in the technology sector [2] - Founder-led companies tend to outperform others, with a market-adjusted return of 12% over three years compared to a negative 26% for companies with professional CEOs [5] Company Highlights - **AppLovin**: - Market capitalization of $129.7 billion, leading in mobile advertising with its AI engine, Axon 2 [7] - Transitioned to a software-centric model, improving margins and financial performance [9] - Positioned to capture market share through scalable, AI-enabled technologies [8] - **Palantir Technologies**: - Market capitalization of $406.2 billion, focusing on software platforms for the intelligence community [11] - Strong AI strategy with a revenue guidance midpoint of $4.146 billion for 2025, indicating 45% year-over-year growth [14] - Modular sales approach expanding its U.S. commercial customer base [13] - **Blackstone**: - Largest alternative asset manager with a market capitalization of $225.7 billion and over $1.1 trillion in total assets under management [15] - Strong inflows and a capital base of $181.2 billion, positioning it to capitalize on market dislocations [17] - Focus on areas like digital infrastructure and life sciences for long-term growth [17] - **CrowdStrike**: - Market capitalization of $111.6 billion, transforming cybersecurity with its AI-native Falcon platform [18] - Expected revenues for fiscal 2026 between $4.749 billion and $4.805 billion, with adjusted operating income projected at $1-$1.04 billion for fiscal 2025 [21][22] - Leveraging AI to enhance security outcomes and operational efficiency [20]

Core Insights - The AI stock market is experiencing momentum despite concerns about sustainability, with three companies identified as strong investment opportunities for the remainder of the year [1][2] Group 1: Taiwan Semiconductor Manufacturing (TSMC) - TSMC is the world's leading semiconductor manufacturer, holding a 67% revenue share of the foundry market as of last year, making it a key player in the AI chip production landscape [4][6] - The company is expected to grow earnings by an average of 21% annually over the next three to five years, with the stock trading at 25 times this year's earnings estimates, indicating potential for further upside [8] - TSMC's strong performance is driven by significant investments in data centers, with trillions of dollars projected to flow into this sector over the next five years [7] Group 2: Alphabet (GOOG) - Alphabet has gained investor confidence following a favorable antitrust ruling that allows it to retain its Chrome browser, which is crucial for its digital advertising strategy [9][10] - The company generated $67 billion in free cash flow over the last 12 months and has $95 billion in liquidity, providing it with substantial investment flexibility [12] - Alphabet's stock is seen as undervalued compared to its peers, with a P/E ratio of 25, and it is expected to benefit from ongoing investments in AI capabilities and share repurchases [11][13][14] Group 3: AppLovin - AppLovin is leveraging AI to enhance its digital advertising platform, with its Axon 2 AI engine launched in 2023 driving significant financial growth [15][16] - The company reported $1.26 billion in revenue for the most recent quarter, a 77% increase year-over-year, and a net income of $0.8 billion, up 164% [16] - Despite a high price-to-sales (P/S) ratio of 37, AppLovin's stock has surged 75% year-to-date and 2,000% since 2022, indicating strong market performance [17][18]

Core Insights - AppLovin is set to be added to the S&P 500 index on September 22, marking a significant milestone in its growth journey [1][14] - The company has experienced a remarkable stock price increase of 1,480% over the past three years, contrasting with Unity's 13% decline during the same period [3][10] - AppLovin's revenue growth has averaged over 27% year over year since the launch of its Axon 2 software in Q2 2023 [7][10] Company Performance - AppLovin generates revenue by ensuring its customers' ad campaign goals are met, rather than through traditional ad impressions or clicks [9] - The company expects to generate over $1.3 billion in revenue in Q3 2023, with its software business alone contributing $500 million [10] - AppLovin is expanding its offerings by introducing a self-serve platform, which is expected to be foundational for its growth in the next decade [11][12] Market Position and Strategy - AppLovin is diversifying its market focus beyond mobile gaming, with e-commerce being a key area of expansion [12][13] - The company's ability to grow rapidly in a stagnant market suggests strong software capabilities and potential for sustained long-term growth [13] - The inclusion in the S&P 500 may expose AppLovin to more investors and lead to short-term stock boosts due to index fund purchases [16] Future Outlook - The significance of AppLovin's inclusion in the S&P 500 may diminish over time, as historical examples show that such additions do not guarantee long-term investment success [17] - Future success for AppLovin will likely depend on its ability to attract more customers and succeed in new verticals beyond mobile gaming [18]

Core Insights - AppLovin Corporation (APP) and Arm Holdings plc (ARM) are both leveraging artificial intelligence (AI) to enhance their business models, with AppLovin focusing on AI-driven advertising and Arm providing chip architectures for AI hardware performance [1][2] Group 1: AppLovin Corporation (APP) - AppLovin has established itself as a leader in mobile advertising with its AI engine, Axon 2, which has significantly improved ad performance, leading to a quadrupling of advertising spend on its platform [3][4] - The company reported a 77% year-over-year revenue increase in Q2 2025, with adjusted EBITDA rising 99% and net income soaring 156%, indicating strong operational efficiency and market demand [6] - AppLovin's forward P/E ratio is 39.36X, which is more attractive compared to ARM's 73.32X, suggesting a favorable valuation given its stronger earnings growth outlook [9][18] - The Zacks Consensus Estimate predicts a 17% year-over-year sales increase and a remarkable 98% surge in earnings for the current year, highlighting the company's operational leverage [12][15] Group 2: Arm Holdings plc (ARM) - ARM is becoming a key player in AI and IoT, with major tech companies relying on its energy-efficient chip architecture for AI-driven innovations [7][8] - Despite its growth potential, ARM faces risks due to its significant exposure to the Chinese market, where the adoption of RISC-V technology could challenge its position [9][11] - ARM is expected to report an 18% sales growth and a modest 3% increase in EPS, indicating a steadier growth trajectory as it invests in AI-enabled chip innovation [15] Group 3: Comparative Analysis - While both companies are positioned to benefit from AI advancements, AppLovin's ability to convert innovation into profitability more efficiently sets it apart [19] - AppLovin's valuation appears more grounded relative to its earnings potential, offering a favorable risk-reward profile compared to ARM's premium pricing and external risks [18][19] - AppLovin currently holds a Zacks Rank 1 (Strong Buy), while ARM has a Zacks Rank 3 (Hold), indicating a stronger investment outlook for AppLovin [20]

Core Insights - AppLovin Corporation (APP) has experienced a 20% increase in stock price over the past three months, outperforming the broader industry and major digital ad competitors [1][7] - The launch of AppLovin's AI engine, Axon 2, has significantly enhanced ad performance, leading to a quadrupling of advertising spend on its platform [2][3] - AppLovin's annual run rate in ad spend from gaming clients is estimated at $10 billion, positioning the company among the top global ad tech firms by valuation [3] Financial Performance - In Q2 2025, AppLovin reported a 77% year-over-year increase in revenues, a 99% rise in adjusted EBITDA, and a 156% surge in net income [9][7] - For the full year 2024, revenues increased by 43% year-over-year, while adjusted EBITDA grew by 81% [9] Analyst Projections - The Zacks Consensus Estimate for Q3 2025 earnings is $2.32 per share, reflecting an 86% increase from the previous year, with revenues expected to reach $1.34 billion, indicating an 11.7% year-over-year growth [10][11] - Full-year 2025 earnings are projected to increase by 98%, with revenues expected to grow by 17% in 2025 and 26% in 2026 [10][11] Strategic Positioning - AppLovin's Axon 2 serves as a critical catalyst for recovery in mobile advertising, especially in a challenging post-Identifier for Advertisers environment [4] - The company is leveraging AI to drive direct monetization in mobile advertising, distinguishing itself from other tech giants focusing on enterprise productivity [8][13]