APPLovin | 800% Gain in 1 Year

AppLovin’s Q4 Success | Record Revenue, Ecommerce Gains, and Future Outlook

App has been one of the top performing stocks in my portfolio,also pumped over 80% since our last free signal. Let’s take a closer look at its recent Q4 earnings and other key data.

Management Overview
CEO Adam Foroughi described Q4 2024 as a pivotal time for the company, highlighting its expansion beyond gaming into ecommerce advertising. He called this move a significant milestone, with the potential to reach over 10 million businesses worldwide.

Foroughi also revealed the company’s plans to sell its Apps business through an exclusive term sheet valued at approximately $900 million. This deal includes $500 million in cash and a minority stake in the new private entity. Expressing gratitude, he stated, "We’re excited for your future and deeply appreciative of your contributions to our success."

CFO Matt Stumpf reported Q4 revenue of $1.37 billion, reflecting a 44% year-over-year increase, alongside an adjusted EBITDA of $848 million at a 62% margin. He highlighted that the company generated $695 million in free cash flow during the quarter—an impressive 105% rise from the previous year.

Future Outlook
For Q1 2025, the company forecasts revenue between $1.03 billion and $1.05 billion for its Advertising division, with adjusted EBITDA expected to range from $805 million to $825 million, maintaining a margin of 78%-79%.

The Apps segment is projected to generate revenue between $325 million and $335 million, with adjusted EBITDA of $50 million to $60 million. Stumpf also mentioned that the Apps business sale is set to be finalized in Q2 2025, pending regulatory approval.

Financial Performance
Advertising revenue reached $999 million in Q4, generating $777 million in adjusted EBITDA with a 78% margin. Stumpf attributed a slight decline in quarter-over-quarter profitability to increased data center expenses.

The Apps segment generated $373 million in revenue, with $71 million in adjusted EBITDA at a 19% margin. However, revenue in this category declined by 1% year over year

For the full year 2024, the company posted $4.7 billion in revenue a 43% year over year increase while adjusted EBITDA rose 81% to $2.72 billion.

Q&A Highlights
Clark Lampen (BTIG): Asked if non-gaming industries would be included in the ecommerce expansion. Foroughi responded that all categories have performed well on the platform, reinforcing confidence moving forward.
Ralph Schackart (William Blair): Inquired about model improvements. Foroughi credited Q4 growth to seasonality, ecommerce traction, and ongoing optimizations but noted that no major changes occurred in the quarter.
Jason Bazinet (Citi): Asked about scaling ecommerce operations. Foroughi emphasized the importance of self service capabilities, stating that automated tools would play a crucial role in growth.

Sentiment Analysis
Analysts expressed interest and optimism regarding the ecommerce expansion but raised concerns about execution and timing. While the overall tone was positive, questions centered on the company’s ability to scale effectively.

Management remained confident, particularly about the advertising platform’s potential and the Apps divestiture. Foroughi consistently highlighted the vast growth opportunities ahead.

Compared to the previous quarter, analysts showed heightened interest in ecommerce progress. While management maintained a strong stance, they acknowledged ongoing challenges in enhancing self service tools.

Quarter over Quarter Insights
The company met its Q4 guidance, surpassing Q3’s revenue and adjusted EBITDA figures. Advertising revenue grew from $835 million in Q3 to $999 million in Q4.
The strategic focus shifted significantly with the decision to sell the Apps business, marking a departure from the stability emphasized in Q3.
Management expressed greater confidence in scaling ecommerce compared to its more cautious outlook in the prior quarter.

Risks and Concerns
Management acknowledged the necessity of developing self service tools and automation to meet ecommerce demand. Foroughi noted that the company intends to approach this expansion carefully. some Analysts raised concerns about the timeline for launching self service tools and whether ecommerce could generate substantial contributions in 2025 plus increased GPU costs and reliance on emerging verticals were cited as potential risks.

Final Takeaway
AppLovin’s Q4 2024 performance demonstrated strong financial growth, particularly in its Advertising segment, while also signaling early success in ecommerce. The decision to divest the Apps business marks a strategic shift toward a pure advertising model. With Q1 2025 advertising revenue projected at $1.03 billion to $1.05 billion and a focus on self-service tools, the company aims to unlock greater opportunities in the global advertising market. However, execution challenges remain a key area of focus for investors.