AppLovin Corporation Q2 FY2025 earnings call

• Q2 2025 was a strong quarter driven by gaming advertising strength, with MAX marketplace growth consistently double digits. - Launched the new AXON ads manager, a self-service portal with benefits like direct advertiser controls, credit card billing, agent automation, and improved integrations. - Plan to open AXON ads manager on a referral basis starting October 1, 2025, with global public launch in first half of 2026. - In Q3 2025, targeting Advertising revenue between $1.320 billion and $1.340 billion, adjusted EBITDA between $1.070 billion and $1.090 billion, with an 81% adjusted EBITDA margin. - Generated $768 million in free cash flow in Q2, repurchased shares, and reduced weighted average diluted common shares outstanding.

In Q2 2025, the Advertising business was the key segment. Revenue increased by 77% from the prior year to approximately $1.260 billion. Adjusted EBITDA nearly doubled to $1.020 billion, achieving an 81% adjusted EBITDA margin. The majority of revenue growth was driven by the core gaming business. The Apps business was sold, with its financial results included in discontinued operations.

• For Q3 2025, Advertising business anticipates revenue between $1.320 billion and $1.340 billion, adjusted EBITDA between $1.070 billion and $1.090 billion, targeting 81% adjusted EBITDA margin. - Incorporates the benefit from the divestiture of the Apps business in the Q3 guidance.

Q: On plans to start doing paid marketing next year, talk about how the decision was arrived at, channels, and return evaluation.

A: Adam said the advertising solution for web commerce and other categories looks strong with small advertiser penetration, and they'll use performance marketing with lucrative financial model, likely using own models and various channels.

Q: On self-serve platform, frame the opportunity.

A: Adam said the self-serve platform launch is exciting, with the pilot state in Q4 leading to high growth, and the new tools built will increase advertiser count and upside in numbers.

Q: On game engine data and competitors like Unity, A: Adam said they can't speak to other's data, but their models are good, and market penetration in gaming is high, with focus on expanding to all businesses.

Q: On referral program and functional aspects, A: Adam said iterative period, clients likely to invite peers organically, and no immediate plans for referral bonuses.

Q: On capital allocation, A: Matt said continuing to allocate capital to organic initiatives, hiring talent, and returning capital to shareholders via share buybacks.

Q: On international expansion, A: Adam said international and U.S. markets have half-half revenue, with broad reach in referrals and no constraints on opening platform.

Q: On core gaming in the quarter, A: Adam said no double-digit step function, but numbers are bigger, with iterative lifts and advertisers reinvesting.