Changes in US stocks | AppLovin (APP.US) plummeted more than 20%, Q3 guidance falls short of expectations

The Zhitong Finance App learned that on Thursday, mobile advertising platform giant AppLovin (APP.US) plummeted by more than 20% to $333.71. According to financial reports, for the second fiscal quarter ending June 30, AppLovin achieved revenue of US$1.92 billion, an increase of 53% over the previous year, but it was still lower than analysts' previous estimate of US$1.94 billion. Adjusted earnings per share were $3.76, slightly exceeding market consensus of $3.75. Net profit reached US$1.27 billion, up 55% from US$820 million in the same period last year; adjusted EBITDA was US$1.61 billion, up 58% year on year. However, what alarmed the market was that this report card not only did not beat Wall Street expectations, but even fell short of AppLovin's own internal guidelines.

Co-founder and CEO Adam Foroughi confessed during the conference call that the company's game-based advertising business is highly dependent on improving the performance of its AI model. Every substantial iteration of the model allows advertisers to dare to invest more while maintaining the target return on ad spend. However, in the past second quarter, this jump in model performance did not come as expected.

For the current quarter, AppLovin gave performance guidelines reflecting the contributions of the new model. The company expects third-quarter revenue to be between US$2,055 billion and US$2,085 million, with a year-on-year increase of about 46% to 48%. The median value of US$2.07 billion is slightly lower than analysts' general expectations of US$2.08 billion. The adjusted EBITDA is expected to be between US$1.71 billion and US$1.74 billion, and the adjusted EBITDA margin is approximately 83%.

Chief Financial Officer Matt Stumpf said that the third-quarter guidance already included increased training and computing infrastructure costs due to the deployment of new models, but did not include further model releases that may be launched in the future but have not yet been realized. He reiterated that the company uses absolute EBITDA and free cash flow as core management indicators, and will continue to invest as long as computing power investment can bring incremental revenue. In the long run, the adjusted EBITDA margin is expected to remain at around 80%, but it may fluctuate in the short term due to infrastructure investment.