AppLovin Corporation's stock plunged roughly 20% after the company posted second-quarter results that showed sizable profit gains but failed to meet Wall Street's revenue expectations. The quarter, which ended June 30, featured strong bottom-line metrics and large cash generation, yet a sales miss and a conservative near-term revenue outlook weighed on investor sentiment.
On the profitability front, AppLovin reported adjusted earnings per share of $3.76, narrowly ahead of the analyst consensus of $3.75. Net income rose to $1.27 billion for the quarter, an increase of 55% from $820 million in the same period a year earlier. Adjusted EBITDA was reported at $1.61 billion, up 58% from $1.02 billion in the prior-year quarter.
However, revenue of $1.92 billion fell short of the $1.94 billion estimate, despite representing a 53% year-over-year increase from $1.26 billion in the prior-year period. That top-line shortfall, coupled with forward guidance that landed just under expectations, appears to have been the main driver of the sharp share decline.
For the third quarter, AppLovin guided revenue to a range of $2.06 billion to $2.09 billion, with a midpoint of $2.07 billion that sits slightly below the analyst consensus of $2.08 billion. The company also projected adjusted EBITDA for the third quarter in a range of $1.71 billion to $1.74 billion, with an implied adjusted EBITDA margin of 83%.
Cash-flow metrics were strong in the period. AppLovin generated $869.0 million in net cash from operating activities and reported free cash flow of $863.3 million for the quarter.
Investors reacted to a mix of robust profitability and an underperforming top line. The disparity between impressive margin and cash-generation metrics and a revenue figure that missed consensus highlights the market’s sensitivity to revenue trends even when earnings are accelerating.
In sum, the second-quarter results delivered powerful profit expansion, but the revenue miss and third-quarter revenue midpoint slightly below expectations prompted a steep share-price response.