Key Highlights

  • Shares rose 18.97% pre-market today to $323.30, extending Wednesday's 10.69% gain to $271.75.
  • Third-quarter Revenue hit a record $2.18 billion, up 55% year over year and 14% sequentially.
  • Adjusted EPS of $4.30 beat estimates.
  • Adjusted EBITDA rose 59% to $1.84 billion, an 84% margin.
  • The board added $3.2 billion to the buyback authorization, lifting the total to $3.6 billion.

AppLovin (NASDAQ:APP) shares jumped 18.97% in pre-market today to $323.30 after the mobile Advertising platform reported record third-quarter revenue, beat Earnings estimates and guided the fourth quarter above consensus. The move extends Wednesday's 10.69% gain to $271.75. The stock remains down about 60% this year, with a 52-week range of $225.19 to $738.01.

Based in Palo Alto, California, AppLovin provides an AI-powered platform that helps mobile app developers acquire customers, monetize inventory and measure Marketing performance. Its offerings include an ad bidding and mediation platform, a measurement and analytics product and a connected TV platform. The company has about 887 employees.

Record Revenue and an 84% EBITDA Margin Top Guidance by About $100 Million

Revenue grew 55% to $2.18 billion, topping the high end of guidance by about $100 million. Net Income rose 72% to $1.44 billion, a 66% margin, and adjusted EBITDA reached $1.84 billion. Gaming revenue grew nearly 50% year over year, helped by a partial rollout of next-generation models.

Free Cash Flow was $1.4 billion, or 77% of adjusted EBITDA, with full-year conversion still expected at roughly 70% to 75%. Data Center costs fell as a share of revenue even as Training compute increased.

Buyback Expands to $3.6 Billion as Fourth-Quarter Guidance Tops Estimates

AppLovin repurchased and withheld 4.1 million shares for $1.4 billion in the quarter, and the board added $3.2 billion to the authorization, bringing it to $3.6 billion. Management described the larger buyback as opportunistic given a gap between the share price and intrinsic value. The company ended with $3.17 billion in cash against $3.5 billion of long-term debt, leaving net Leverage below 0.1x.

Fourth-quarter revenue guidance of $2.365 billion to $2.395 billion implies 43% to 44% growth, ahead of the roughly $2.25 billion consensus. Adjusted EBITDA is guided to $1.995 billion to $2.025 billion. Several research firms lifted price targets, with Evercore at $540, RBC at $520, BTIG at $450 and Goldman Sachs at $445.

Model Rollout Timeline and Slower Sequential Growth Remain Open Questions

Management gave no timeline for the full rollout of its new model, and fourth-quarter guidance points to slower sequential growth of 8% to 10%. It reiterated a long-term goal of roughly 30% annual growth and expects a bigger fourth quarter followed by a tougher first quarter. AppLovin has a market Capitalization of about $91.29 billion, a forward P/E of 14.46 and a trailing P/E of 18.29.