Mobile app advertising platform AppLovin (NASDAQ: APP) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 40.3% year on year to $1.48 billion. On the other hand, next quarter’s revenue guidance of $1.21 billion was less impressive, coming in 14.3% below analysts’ estimates. Its GAAP profit of $1.67 per share was 16.2% above analysts’ consensus estimates.
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AppLovin (APP) Q1 CY2025 Highlights:
- Revenue: $1.48 billion vs analyst estimates of $1.38 billion (40.3% year-on-year growth, 7.3% beat)
- EPS (GAAP): $1.67 vs analyst estimates of $1.44 (16.2% beat)
- Adjusted EBITDA: $943.2 million vs analyst estimates of $867.2 million (63.6% margin, 8.8% beat)
- Advertising Revenue Guidance for Q2 CY2025 is $1.21 billion at the midpoint
- EBITDA guidance for Q2 CY2025 is $980 million at the midpoint, above analyst estimates of $914.1 million
- Operating Margin: 44.7%, up from 32.1% in the same quarter last year
- Free Cash Flow Margin: 55.6%, up from 50.7% in the previous quarter
- Market Capitalization: $103.1 billion
Company Overview
Co-founded by Adam Foroughi, who was frustrated with not being able to find a good solution to market his own dating app, AppLovin (NASDAQ: APP) is both a mobile game studio and provider of marketing and monetization tools for mobile app developers.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, AppLovin’s 22.2% annualized revenue growth over the last three years was decent. Its growth was slightly above the average software company and shows its offerings resonate with customers.
This quarter, AppLovin reported magnificent year-on-year revenue growth of 40.3%, and its $1.48 billion of revenue beat Wall Street’s estimates by 7.3%. Company management is currently guiding for a 11.6% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 15.1% over the next 12 months, a deceleration versus the last three years. Still, this projection is commendable and suggests the market is forecasting success for its products and services.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
AppLovin is extremely efficient at acquiring new customers, and its CAC payback period checked in at 15 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give AppLovin more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.
Key Takeaways from AppLovin’s Q1 Results
We like that the company handily beat revenue and EBITDA expectations this quarter. We were also impressed by AppLovin’s optimistic EBITDA guidance for next quarter, which blew past analysts’ expectations. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 14.2% to $346.74 immediately following the results.
Indeed, AppLovin had a rock-solid quarterly earnings result, but is this stock a good investment here? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.
