AppLovin 10-Qquarter ended 2026-03-31
Positive
Axon monetization gains drove growth despite fewer installations, with revenue outpacing infrastructure and delivery costs.
Filed 2026-05-06 17:00 ET
Key figures · Q1 FY2026 · period ended 2026-03-31
- Revenue$1.8BYoY +59.0%QoQ +11.1%
- Operating income$1.4BYoY +71.4%QoQ +12.9%
- Net income$1.2BYoY +109.2%QoQ +9.4%
- Total assets$7.7BYoY +35.1%QoQ +6.2%
- Total debt$3.5B1YoY −5.3%QoQ 0.0%
- Shareholders' equity$2.4BYoY +310.7%QoQ +10.7%
- Tangible book value$471.4MYear ago −$1.9BQoQ +138.1%
Notes (1)
- Total debt: Noncurrent long-term debt only; the balance sheet shows no current portion.
How this filing reads
- Health+0.7Cash was $2.76B and quarterly operating cash flow was $1.29B against $3.51B long-term debt.
- Momentum+0.9Revenue rose 59%, operating margin expanded to 78.2%, and continuing-operations net income increased 67%.
- Outlook+0.1Substantially all revenue remains Axon-linked, while connected-TV is nascent and expansion adoption is uncertain.
Executive Summary
AppLovin’s advertising-focused strategy delivered substantial operating leverage in Q1 2026: revenue grew 59%, operating margin reached 78.2%, and continuing-operations net income rose 67%. Growth depended on better monetization rather than greater installation volume, making sustained Axon campaign performance the key investment question. Operating cash flow exceeded earnings and funded substantial repurchases, although the net share-count reduction was modest. Expansion into e-commerce and connected TV offers diversification, but platform dependence, privacy restrictions, and uncertain adoption could challenge the current growth trajectory.
Key Financial Highlights
Q1 figures cover the three months ended 3/31/2026; balance-sheet figures are as of that date.
| Metric | Current period and material change | Investor interpretation |
|---|---|---|
| Revenue | $1.84B, +59% Y/Y | Improved advertiser monetization drove growth despite fewer installations. |
| Gross profit | $1.64B, +63% Y/Y | Revenue outpaced infrastructure and delivery costs. |
| GAAP operating income | $1.44B, +71% Y/Y; margin 78.2% vs 72.5% | Expenses grew substantially slower than revenue. |
| Company-defined adjusted EBITDA | $1.56B, +66% Y/Y; margin 84.5% | Exclusions lift profitability above the GAAP operating result. |
| Continuing-operations net income; diluted EPS | $1.21B, +67% Y/Y; $3.56 vs $2.10 | More comparable than total earnings following the Apps divestiture. |
| OCF; FCF | $1.29B, +55% Y/Y; $1.29B | Cash generation exceeded same-period net income; equipment spending was minimal. |
| Total assets | $7.71B, +6.2% since year-end | Cash and receivables supported balance-sheet expansion. |
| Total equity | $2.36B, +11% since year-end | Earnings increased equity despite substantial capital returns. |
| Tangible common equity | $471M | Goodwill and intangible assets account for most reported equity. |
| Cash and equivalents | $2.76B, +11% since year-end | Liquidity increased despite repurchases. |
- Earnings comparability: Q1 2025 total net income included a $147M discontinued-operations loss and a $189M noncash goodwill impairment. Total net income therefore grew 109%, overstating the improvement in continuing operations.
- Cash conversion: OCF equaled 107% of net income, supported by growth and collections, partly offset by publisher payments, operating spending, and taxes. FCF above is OCF less $0.413M of equipment purchases; the company additionally deducts finance-lease principal payments in its own definition.
- Capital return: Cash repurchases of $982M accompanied a net reduction of 2.02M shares, or 0.6%, to 336M outstanding. Stock-based compensation was $83.5M, concentrated in R&D; repurchases reduced shares rather than merely offsetting issuance.
- Non-operating effects: Other income increased to $42.6M from $7.51M, while the tax provision rose to $226M from $71.1M; investment-related income supported earnings, but taxes absorbed more pretax profit.
- Financing and asset composition: Long-term debt was $3.51B; goodwill was $1.52B and net intangible assets $369M. Remaining repurchase authorization was $2.3B.
Business Developments
The 6/30/2025 Apps Business sale completed AppLovin’s shift toward advertising. Consideration was $716M, including a $285M Tripledot equity stake; AppLovin retains economic exposure through that investment and advertising relationships rather than direct game operations.
Substantially all revenue now comes from Axon Ads Manager. Net revenue per installation increased 93%, offsetting an 18% decline in installations—evidence of improved monetization, not broader installation activity.
Management is investing in Axon, engineering talent, and computing infrastructure while pursuing e-commerce advertisers and exploring connected TV. R&D expense rose 67%, and network-infrastructure expense increased $39.9M; these investments support expansion but create costs ahead of uncertain adoption.
Risk Assessment
- Platform and customer dependence: Mobile advertising, especially gaming, dominates revenue; Apple, Google, and Meta influence access and targeting, while clients generally lack long-term commitments.
- Axon performance and competition: Growth relies on improving monetization despite falling installations, and competing platforms could weaken campaign returns or advertiser retention.
- Privacy, regulation, and litigation: Tracking restrictions, evolving AI rules, China-related data-transfer restrictions, and securities complaints could impair targeting or generate legal costs.
- Technology and security: Outages, inaccurate data, cyberattacks, or insufficient third-party computing capacity could disrupt measurement, billing, and advertiser trust.
- Funding and commitments: Senior unsecured notes total $3.6B principal; ≈$520M remains under the cloud-services commitment, competing with investment and repurchases for cash.
- Governance: Founders, a director, and affiliates control ≈67% of voting power, limiting outside shareholders’ influence.
Strategic Outlook and Investor Actionables
Management’s bet is that better Axon performance can sustain growth while e-commerce and new formats broaden demand beyond mobile gaming. The opportunity is additional advertiser spending on a highly scalable platform; the threat is that monetization gains prove less durable than infrastructure and talent commitments.
- Axon economics: Starting from revenue per installation +93% and installations −18%, later filings should show whether monetization continues supporting growth or weakens alongside volume.
- Market expansion: Substantially all revenue still comes from Axon, and connected TV is nascent. Success would bring reported advertiser adoption and broader revenue drivers; failure would leave dependence on mobile gaming largely intact.
- Profit and cash durability: Operating margin is 78.2% and OCF $1.29B. Expansion works if revenue outpaces infrastructure and personnel spending while cash tracks earnings; deteriorating margins or collections would challenge scalability.
- Capital allocation: $982M of cash repurchases reduced shares only 0.6%. Continued net share reductions with adequate liquidity would support the program’s rationale; rising debt or issuance offsetting repurchases would weaken it.
Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.
Model 006 · prompt 3de311c12b