APP 2Q25: Sacrificing Near-Term Revenue for Long-Term Growth

This marks our third quarter previewing APP, and I've been bullish in the previous two. In my 4Q24 preview, I identified e-commerce as a massive driver for AppLovin. In the 1Q25 preview, I comprehensively refuted the short reports and analyzed the Apple tax impact on AppLovin, noting that gaming revenue might be stronger than consensus expected, as hardcore games' revenue share at AppLovin has grown significantly, with revenue now nearly matching casual games.

For 2Q25 preview, I'm frankly quite conflicted about the messaging. On one hand, street describe this quarter as an "excellent setup" for AppLovin because "expectations are low." Yet clearly, after consecutive huge beats from GOOG, META, and RDDT, the entire advertising industry has tremendous momentum.

On the other hand, APP doesn't appear as strong as I anticipated. The company is clearly doing the right things, but these actions may not help near-term revenue.

This report contains substantial information that requires careful consideration. If you disagree with my views, I welcome comments below the report or discussions in our chat channel.

After reading this report, I strongly recommend continuing with the Unity Preview for a clearer industry perspective.

Let's begin the APP Preview.