AppLovin Stock Explodes 20% After Delivering a Monster Quarter

What happened

AppLovin reported third-quarter revenue up 55% year over year and net income up 72% to $1.44 billion. Adjusted EBITDA, a measure of operating profitability, rose 59% to $1.84 billion. Its fourth-quarter revenue and adjusted EBITDA forecasts exceeded analyst estimates, and it reported $1.42 billion in free cash flow.

Confirmed

Global impact / market context

Faster sales growth and a forecast above analyst estimates suggest AppLovin’s advertising business is performing more strongly than expected. Higher free cash flow gives the company cash to repurchase shares, which can reduce the number of shares investors own and support their stake in future earnings.

Analyst inference

The reported 20% share rise shows investors responded strongly to the results and forecast, but the article gives no broader market comparison. The forecast points to continued growth, while its eventual effect depends on the company delivering the expected revenue and operating earnings.

Analyst inference

What to watch

1. Check whether fourth-quarter revenue reaches the company’s midpoint forecast of about $2.38 billion, which was above Wall Street’s $2.25 billion estimate. Analyst inference
2. Compare fourth-quarter adjusted EBITDA, a measure of operating profitability, with the $2.01 billion outlook and analysts’ $1.88 billion estimate. Analyst inference
3. Track share repurchases against the $3.6 billion authorization available at October’s end; the article reports $1.4 billion spent during the quarter. Analyst inference

Evidence

• gurufocus.com