AppLovin's rebound delivered more than a sales beat
The advertising company cleared the forecasts it set after a disappointing quarter. A recovery in cash generation helps explain its larger share-buyback plan.
Three months after acknowledging a quarter that fell short of its own standards, AppLovin has cleared the sales and adjusted-profit targets it set for the September quarter. Its cash generation has recovered, too.
The advertising company reported $2.18 billion of third-quarter revenue, above the $2.055 billion to $2.085 billion range it gave in August. Adjusted EBITDA reached $1.84 billion, also above the top of its $1.71 billion to $1.74 billion forecast.
The more useful test of that rebound is how much cash the business produced, and how much remained after buying back shares.
The promise behind the rebound
On the August earnings call, chief executive Adam Foroughi said second-quarter results had fallen below the company's standards. Revenue had landed just below the midpoint of its forecast, while adjusted EBITDA came in below its range. Improvements to its advertising models had been lighter than expected, and computing costs had increased.
The September-quarter forecast included model improvements already deployed and the higher computing costs. The new results therefore clear a concrete target set after that disappointment.
AppLovin helps advertisers find customers and helps app publishers earn money from advertising. In its latest report, it attributes much of the quarterly growth to better performance from AppLovin Ads. Net revenue per installation increased 55% from a year earlier, while installation volume rose 2%. The business earned much more from the activity on its platform without a similar increase in installations.
More of the profit became cash
Chief financial officer Matt Stumpf made another commitment in August: cash conversion should improve in the third quarter, with full-year free cash flow expected to reach roughly 75% of adjusted EBITDA.
Research by Ticker Byline shows that the promised quarterly recovery arrived: free cash flow equaled about 77% of adjusted EBITDA in the third quarter, compared with 53.5% in the second.
Free cash flow rose to $1.42 billion from $863.3 million in the previous quarter. AppLovin calculates it by subtracting equipment purchases and finance-lease principal payments from operating cash flow. Adjusted EBITDA is a profit measure that excludes interest, taxes, stock-based compensation and several other costs.
The first nine months produced $3.57 billion of free cash flow, or about 71% of adjusted EBITDA. The fourth quarter will determine whether the full year reaches the earlier conversion goal.
Cash also explains the larger buyback plan
AppLovin paid $2.81 billion for share repurchases during the first nine months and another $55.8 million for employee share-award tax withholding. Together, those payments were about $701 million below free cash flow. Cash rose to $3.17 billion from $2.49 billion at the end of 2025, with no new debt proceeds in the nine-month cash-flow statement.
In October, the board added $3.2 billion to its repurchase authorization, leaving $3.6 billion available after the increase. That gives the cash recovery a direct consequence for shareholders: a larger program through which the company can reduce its share count.
Reported profit also grew strongly. Third-quarter net income reached $1.44 billion, or $4.30 per diluted share, compared with $835.5 million, or $2.45, a year earlier. The latest total included a $46.9 million unrealized gain on private investments.
Management's initial fourth-quarter forecast calls for revenue of $2.365 billion to $2.395 billion and adjusted EBITDA of $1.995 billion to $2.025 billion. The AppLovin company profile tracks those targets alongside the cash figures, debt and buybacks. The next results will show whether the stronger conversion continues as the business grows.