Full Transcript: AppLovin Q2 2026 Earnings Call

AppLovin (NASDAQ: APP ) reported second-quarter financial results on Wednesday. The transcript from the company's second-quarter earnings call has been provided below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

92 billion, a 53% year-over-year increase, though just below the midpoint of guidance. 61 billion, up 58% year-over-year. The company cited a timing issue with model improvements as a reason for missing guidance but noted that improvements are now live and Q3 is off to a strong start. AppLovin's consumer segment saw advertiser spend grow 28% above Q4 2025 levels, indicating strong performance despite seasonality.

Strategic initiatives include improving core models, advancing architectural work to scale compute, enhancing creative tools, and forming partnerships to attract more advertisers. The company opened its platform under AppLovin Ads Manager, focusing first on mid-market advertisers to optimize platform performance. 74 billion, reflecting 46%-48% revenue growth year-over-year. 7 billion in total debt, and repurchased $551 million worth of shares.

The SEC inquiry into AppLovin concluded with no recommended action, resolving any regulatory concerns. Management expressed confidence in the long-term growth trajectory, anticipating the business can compound at roughly 30% annually. Full Transcript David Hsiao, Head of Investor Relations Welcome to AppLovin's earnings call for the second quarter ended June 30, 2026. I'm David Hsiao, Head of Investor Relations.

Joining me today to discuss our results are Adam Foroughi, our co-founder and CEO, and Matt Stumpf, our CFO. com. During today's call we will be making forward-looking statements including, but not limited to, the future development and reach of our platform, our expected growth opportunities, the expected future financial performance of the company and other future events. These statements are based on our current assumptions and beliefs and we assume no obligation to update them except as required by law.

Our actual results may differ materially from the results predicted. We encourage you to review the risk factors in our most recently filed Form 10-Q for the fiscal quarter ended March 31, 2026. Additional information may also be found in our quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2026 which will be filed today. We will also be discussing non-GAAP financial measures.

These non-GAAP measures are not intended to be superior to or a substitute for our GAAP results. Please be sure to review the GAAP results and reconciliations of our GAAP and non-GAAP financial measures in our earnings release and financial update available on our Investor Relations site. This conference call is being recorded and a replay and transcript will be available for a period of time on our IR website. Now I'll turn it over to Adam and Matt for some opening remarks.

Then we'll have the moderator take us through Q&A. Adam Foroughi, CEO and Co-Founder Thanks everyone for joining us today. I'm going to get right to it. This quarter we delivered almost $2 billion in revenue, which was just below the midpoint of our guidance range and our adjusted EBITDA was just below the range.

We've always managed this business with the goal of outperforming our own expectations, and this quarter we fell short of that standard. What matters is that we know what happened and it's already been addressed. Q3 is off to a strong start and the business is back on the trajectory we expect. Let me explain.

Gaming is still the majority of our revenue and the single biggest driver of its growth is model performance. When our models improve, advertisers can profitably deploy more spend at their target return on ad spend goals and budgets naturally step up. This quarter came down to timing: our pace of meaningful model improvement was lighter than normal during the quarter and the next step up in model performance landed just after quarter end. Importantly, nothing we saw suggested weakening advertiser demand or a change in the competitive environment.

In fact, MAX publisher earnings grew double digits quarter over quarter and our share of publisher waterfalls remained consistent. With those improvements now live and heading into what is a seasonally stronger part of the year, the business is re-accelerating. Now let me talk about consumer which had an outstanding quarter. Advertiser spend set another record finishing 28% above Q4 2025 levels.

And remember, Q4 is the seasonal peak for these advertisers. Growing well past peak season levels in a seasonally slow quarter tells you how steep this curve is. Consumer isn't yet large enough to fully smooth a quarter like this, but that will change as we continue to ramp up our consumer business every quarter. Stepping back, I want to put our long term growth in context—how we think about the next decade.

We built gaming into a far larger business far faster than we believed possible and gaming keeps improving. What consumer adds is runway. We run one auction across multiple advertiser categories and every category we bring in extends the opportunity in front of us. Over the longer term, as we continue improving gaming and expanding consumer, we believe this business can compound at roughly 30% annually.

6 billion, up more than 50% year over year. While this result lands just below our guidance range, the incremental investments were exactly where we believe they should be—in our technology. We've been investing in architectural changes that let us build more complex models, models that benefit far more from additional training compute. That investment includes additional compute spend on the model improvements now live in Q3, and every dollar of it is dependent on return—when additional compute produces substantially more revenue through better model performance, that's a trade we'll make every day.

These higher training and inference costs are built into our guidance for next quarter. During the quarter we also opened up our platform to the public under its original name, AppLovin Ads Manager. As we said last quarter, we never expected the public launch to change the business overnight. We're sequencing deliberately—mid-market advertisers first, where the platform performs best today, with the long tail unlocking as our data compounds.

The same way gaming developed, we'll execute on this through partnerships and you'll see us continue to invest there. Before I close, here's what we're focused on as a team. First, improving our core models, which is the primary driver of our near term growth. Second, advancing the architectural work that lets us benefit more from scaling compute, which we believe unlocks meaningfully larger gains over time.

Third, improving our creative tools and ad formats so advertisers can optimize their use of our platform to achieve even better outcomes. Fourth, bringing more high quality advertisers onto the platform through strategic partnerships. Let me close with this. We've spent years building an advertising platform whose economics improve as our models improve.

Advertiser demand is healthy. Our models continue to improve. Consumer is scaling rapidly. Nothing we saw this quarter changed our conviction in the long term opportunity ahead.

With that, I'll turn it over to Matt to walk through the financial. Matt Stumpf, CFO Thanks, Adam, and thanks to everyone for joining us today. This quarter is a good example of the underlying strength of our business. 92 billion, growing 53% year over year and 4% sequentially, driven by the core gaming business and continued scaling in the consumer vertical.

61 billion, up 58% year over year, with margins expanding approximately 300 basis points from the same period last year. Quarter over quarter flow-through to adjusted EBITDA was 70%. The primary driver of the sequential increase in costs was higher compute associated with training our existing models and with new model development, and that higher compute run rate is reflected in our outlook. We manage this business to EBITDA dollars and free cash flow rather than to a margin percentage, and we'll continue to deploy dollars when we see an opportunity to produce more revenue.

Free cash flow for the quarter was $863 million. As I previewed on last quarter's call, conversion was below our normal cadence in the second quarter due to the timing of international cash tax and interest payments. This is a timing dynamic, not a change in the earnings power of our business. We expect free cash flow conversion to improve in the third quarter and to normalize to roughly 75% of adjusted EBITDA for the full year.

1 times trailing 12-month adjusted EBITDA, well within the approximately 1 times where we'd expect to operate over the long term. 8 billion remaining under our share repurchase authorization. Our choice to moderate the pace of our buybacks this quarter relative to the roughly $1 billion we deployed in the first quarter reflects consideration of our lower free cash flow during the quarter and does not indicate a change in conviction or in how we intend to use the authorization going forward. One other item before I turn to our outlook.

We continue to get questions on the reported SEC inquiry, so let me close the loop. It was a voluntary request, which we never deemed material. The SEC has recently advised us that it concluded its inquiry with no recommended action. We're pleased to have it resolved.

085 billion, representing 46% to 48% year over year growth or 7% to 8% sequentially. 74 billion, representing 48% to 50% year over year growth with an adjusted EBITDA margin of approximately 83%. That outlook reflects the model improvements that are already live and performing, continued scaling in our consumer vertical, normal seasonality, and the higher training and compute costs I mentioned. It does not assume additional model releases that have not yet been deployed.

To close, this was not the quarter we hold ourselves to and we've been direct with you about why. What hasn't changed is the shape or strength of this business: nearly $2 billion of quarterly revenue growing better than 50% year over year, margins above 80% and extremely strong cash generation. And with the next step up in model performance already live, our outlook reflects a business getting back to the trajectory we expect. With that, let's move to Q&A.

OPERATOR We'll now begin the question and answer session. Please be sure to unmute and turn on your video before asking your question. We will take as many questions as time permits and since we have many questions today, please be patient as we move through the list. Okay, our first question will come from Jason Bazinet with Citi.

Please unmute and ask your question. Jason Bazinet, Analyst at Citi Maybe I've missed it, but I think this is the first time I've heard you talk about partners to bring in more customers. Can you just expand on the partnership opportunity that you see? Adam Foroughi, CEO and Co-Founder Yeah, thanks Jason.

We have done a couple deals so far with third-party companies. One of the larger analytics companies in the market in e-commerce, and we found that if we go to the source that works with these companies on the other side, the advertisers that we want, it's a more targeted way to get the right kinds of advertisers onto our platform. So rather than just start by buying ads and bringing in long tail, which is harder to make work with where the model evolution is today, we're going through these partnerships to try to get very targeted customers into the platform.

Jason Bazinet, Analyst at Citi So this is like Triple Whale or Adam Foroughi, CEO and Co-Founder You sort of nailed it. Jason Bazinet, Analyst at Citi All right, got it. Thank you. OPERATOR Our next question will come from James Heaney with Jefferies.

James Heaney, Analyst at Jefferies Great. Thank you, guys. I just wanted to get under the hood of the gaming advertising business and maybe it's difficult to explain it in a simple response, but just curious exactly what the sort of model breakthroughs that you were looking for that didn't happen. Just trying to understand the timing of it and kind of what happened in the quarter.

Adam Foroughi, CEO and Co-Founder Yeah. Thanks, James. If you go back the last 12 quarters, every quarter we've had really good growth, except for Q2 and single digits. I think every other quarter since taxon 2 has been double digits.

Now we're Q2 starts as the seasonally weakest quarter. But every quarter that we've had these outsized growth rates, we've had improvements to our model. So our team isn't just sitting there doing nothing for the last 12 quarters. It's constant improvement.

We just don't really break it out. So if you recall, our gaming growth model we'd given you all back in the day included one sizable improvement per year, but constant improvement to the models as well as on an ongoing basis. In this case in Q2, we didn't have the same amount of uplift that we normally have in any other prior quarter that came right after the quarter. So that's why Q3 has started really, really well and that's why we've guided strong going forward.

James Heaney, Analyst at Jefferies Great. And then just one more question if I can. I think last quarter you called out reaching sort of record revenue and the consumer vertical in April. Curious if you can provide an update on the progress that you saw in the second quarter.

How much of that growth was just built on existing customers versus maybe what you saw from new advertisers? Thanks. Adam Foroughi, CEO and Co-Founder Yeah, I mean, new advertisers are beneficial, but the base of the business is already pretty good. And so new customers aren't going to go live and really drive impact to that growth rate.

So when we say 20 double, I think I said 26% growth in the talk track over Q4, that's a substantial uptick in this category. Usually e-commerce Q1 dips a lot from Q4, Q2 then has to trail back up and then Q3 and Q4 really build on the year with half the dollars spent in Q4. And so having that kind of growth in Q2 implies that the customers that we have on the platform are seeing a lot of success. 28%.

28% to be correct. James Heaney, Analyst at Jefferies Great, thank you guys. OPERATOR Yeah, your next question will come from Steven Ju with UBS. Steven Ju, Analyst at UBS Yeah, thanks guys.

So I think the feedback that we're getting from advertisers in the e-commerce segment seems to be that as they spend money on the platform they're nowhere near hitting that sort of efficient frontier of ROAS ceilings. So I'm just wondering if we're kind of hearing from a positive biased group of folks or if that's what you're hearing overall from a broader group of the advertisers that you're talking to. And secondarily I think Adam, you talked about starting with the mid sized merchants and going long tail, but I think in the past you had indicated some hesitation on working with some of the larger advertisers.

I'm just wondering if that perspective has changed the last three to six months or so as it seems like some of the mobile game advertisers are also pretty large. Adam Foroughi, CEO and Co-Founder Yeah, I mean I'll go with the second one first, Stephen. So in gaming our model is pretty mature and we've got a lot of data and so the architecture is just more developed. If you have a new game in the market today that hasn't even launched and you go onto our platform, the return goals are hit really, really quickly.

So there's almost no learning budget. The model is really sophisticated at nailing it. For anything in e-commerce or consumer, we're still early in evolution. We've got less data penetration in the market by a lot.

We've got less sophisticated model at this point. And so if there's a small shop that goes live it's less likely that with very few dollars spent it's going to hit their goals and they're going to scale. Some of them do but in a lot of the smaller ones they're not able to achieve it. Now if there's a mid-market brand they know that there's learning cost to marketing campaigns so they'll invest more, get to their goals and scale.

So what we found is that mid-market is a sweet spot right now. As data builds we have no reason to believe that tail's not going to be covered too given in gaming, we're able to support any type of game at any level. On your first question, if I understood it correctly, you're basically saying advertisers haven't reached their maximum amount of spend for the return that they're getting. And we're new.

Yeah, we're a new platform. Right. Like these companies, first of all, they manage their budgets really slowly.