TLDR
- AppLovin (APP) reported Q3 EPS of $4.30 on $2.18 billion in revenue, both above estimates.
- Free cash flow hit $1.4 billion, up from $863 million in Q2.
- The company spent $1.4 billion on buybacks and raised its authorization to $3.6 billion.
- Q4 revenue guidance of $2.365 billion to $2.395 billion topped the $2.25 billion consensus.
- The stock gained as much as 24% after hours, but is still down about 60% this year.
AppLovin (APP) stock jumped in after-hours trading on Wednesday, gaining as much as 24% after the third-quarter report. It had already closed the regular session up more than 10%.
One outlet put the after-hours gain closer to 16%, so the exact figure depends on the source. Even with the pop, the stock is still down about 60% for the year.
The company earned $4.30 per share. Analysts were looking for about $4.03 to $4.04.
Revenue came in at $2.18 billion, up 55% from a year ago. Forecasts ranged from $2.08 billion to $2.1 billion.
Net income rose 72% to $1.44 billion, a 66% net income margin. Adjusted EBITDA margin was 84%.
Revenue growth also edged up from 53% in the second quarter. The quarter beat the company’s own guidance, too.
The Cost Question
Heading into the report, the big debate was cost. Better AI models need more computing power, and that gets pricey.
Free cash flow reached $1.4 billion, up from $863 million in the second quarter. Net cash from operating activities matched at $1.4 billion.
So the computing bill grew, but the cash grew faster. Analysts had asked whether the AI ad models could keep improving, and this quarter gave them fresh numbers to chew on.
Where the Cash Went
Here is a neat match. AppLovin spent $1.4 billion to repurchase and withhold 4.1 million of its Class A common stock, the same size as its free cash flow.
At quarter end, 331 million Class A and Class B common stock were outstanding. The board then added $3.2 billion to the buyback authorization, bringing the total to $3.6 billion as of the end of October.
Management said the increase reflects “continued confidence” in the business. The company is also moving beyond gaming into retail and e-commerce.
For the fourth quarter, AppLovin expects revenue of $2.365 billion to $2.395 billion. Wall Street had been looking for $2.25 billion.
The after-hours move came after Wednesday’s close. Thursday’s regular session will be the next chance for the stock to trade on the results.
