AppLovin (APP) shares tumbled nearly 20% on Wednesday, putting the stock on pace for its worst single-day performance in more than a year.
The mobile advertising technology company posted second-quarter earnings of $3.76 per share on revenue of $1.92 billion, narrowly missing analyst forecasts of $3.77 per share on $1.95 billion in revenue.
AppLovin’s business is built around an AI-powered software engine that helps companies monetize apps by placing targeted advertisements inside mobile games.
The slight earnings miss was compounded by forward guidance that failed to inspire confidence among investors who had assigned the stock a premium valuation based on high growth expectations.
For the third quarter, AppLovin projected revenue between $2.055 billion and $2.085 billion, while analysts had been expecting $2.083 billion, landing near the top end of the company’s own range.
The company also projected third-quarter adjusted EBITDA in the range of $1.71 billion to $1.74 billion, representing an adjusted EBITDA margin of 83%.
AppLovin generated $869.0 million in net cash from operating activities during the second quarter, along with $863.3 million in free cash flow.
Management acknowledged it did not deliver its usual model improvement in the gaming segment during the quarter, a disclosure that added to investor concern.
William Blair analysts noted the “modest” revenue miss and soft guidance could leave some investors wondering “whether AppLovin experienced a fundamental slowdown or simply encountered timing-related volatility in its model development cycle.”
Despite those concerns, William Blair maintained its “outperform” rating on the stock, pointing to AppLovin’s continued and growing market share as a reason for confidence.
The stock had already retreated significantly from its 52-week high of $745.61 before Wednesday’s selloff, making it particularly exposed to any earnings disappointment.
The results serve as a stark reminder that even strong absolute growth rates can fall short when investor expectations have been set at an exceptionally elevated level.
