AppLovin Corp Q1 FY2025 earnings call

• Q1 2025 was robust despite advertising seasonality, with growth from refined ML models and full quarter contribution from web advertisers. • Signed definitive agreement to sell games business to focus on advertising. • Priorities for 2025: relentlessly improve ML models, advance e-commerce/web ads with refined models, integrations, and self-service dashboard; enhance ad testing and automated ad creation. • Addressed tariffs: web advertising not heavily impacted due to low market penetration. • Embrace competition, confident in leadership with data moat and AI. • App Store fee relief could benefit AppLovin as advertisers have more funds for marketing.

The Advertising business generated $1.16 billion in revenue and $943 million in adjusted EBITDA, achieving an 81% margin. Revenue growth was driven by AI-driven technology and full quarter contribution from web-based advertising. The company signed a definitive agreement to sell its games business in its entirety, with consideration including $400 million in cash and a 20% ownership stake in the combined business.

For the second quarter of 2025, the Advertising segment anticipates revenue between $1.195 billion and $1.215 billion, with adjusted EBITDA between $970 million and $990 million, targeting an adjusted EBITDA margin of 81%.

• Short seller scrutiny addressed but could impact stock performance. • Dependence on continuous improvement of AI models. • Web advertising is in early stages, facing potential challenges in onboarding and scaling. • Tariffs could affect some web advertisers, though low market penetration mitigates immediate risk.

Q: Jason Bazinet asked about Q2 guidance and historical growth relevance.

A: Adam discussed seasonality, AI flywheel effect, and self-service dashboard impact on growth.

Q: Matthew Cost asked about new categories and advertiser pain points.

A: Adam talked about focusing on current customers, model improvement, and self-service rollout.

Q: Omar Dessouky asked about churn and net revenue per install.

A: Adam and Matt discussed low churn in gaming, early stages in web advertising, and net revenue per install not including e-commerce actions.

Q: Chris Kuntarich asked about web advertiser progress.

A: Adam talked about model improvement, ROAS, and considerations for exclusionary audiences.

Q: James Heaney asked about web advertiser additions and longer consideration windows.

A: Adam discussed onboarding pace, self-service impact, and attribution constraints for longer consideration products.

Q: Ralph Schackart asked about self-service launch impact.

A: Adam talked about advertiser testing, global expansion, and self-service dashboard rollout stages.

Q: Matthew Thornton asked about initiatives timeline and web contribution.

A: Adam and Matt discussed priorities, web contribution potential, and growth expectations.

Q: Unidentified Analyst asked about model synchronization.

A: Adam and Matt discussed separate models, e-commerce model early stage, and data feedback loops.

Q: Clark Lampen asked about Q2 growth and studio divestment impact.

A: Adam and Matt discussed Q2 growth drivers and minimal impact of studio divestment.

Q: Alec Brondolo asked about App Store fee impact.

A: Adam discussed fee relief benefit, competitive auction effect, and ecosystem growth.

Q: Jim Callahan asked about self-serve dashboard access and gaming macro.

A: Adam and Matt discussed self-serve rollout stages and gaming insulation from economic issues.

Q: Martin Yang asked about self-serve dashboard access and impact.

A: Adam talked about rollout stages, model improvement with more customers, and quality assurance.

Q: Eric Sheridan asked about TikTok and margins.

A: Adam discussed TikTok proposal and margin efficiency, Matt talked about margin profile and growth plans.

Q: Rob Sanderson asked about app vs web trends and self-attribution.

A: Adam and Matt discussed merging app/web, web contribution, and self-attribution plans with third-party integrations.