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Investing.com -- Applovin Corp (NASDAQ:APP) shares surged nearly 7% in premarket trading Thursday, following third-quarter earnings that topped Wall Street forecasts and a bullish revenue outlook for the final stretch of the year.
The digital marketing firm reported strong growth in both its software platform and apps segments, continuing its momentum amid structural shifts in mobile advertising.
Earnings per share came in at $2.45 for the quarter through September, beating analyst expectations of $2.37. Revenue rose a substantial 68% year-over-year to $1.41 billion, exceeding the $1.34 billion consensus forecast.
Ad revenue jumped 12% quarter-on-quarter, well ahead of AppLovin’s 6% target, fueled mainly by continued model enhancements in gaming.
"APP posted another strong quarter with 12% q/q ad rev growth driven mainly by gaming and with strong upside ahead in non-gaming," Morgan Stanley analysts led by Matthew Cost noted.
Adjusted EBITDA surged 79% to $1.16 billion with margin expanding to 82%, up from 77% in the year-ago period. Net income more than doubled to $836 million, reflecting increased operating efficiency and reduced expenses in R&D and marketing.
AppLovin also offered a robust revenue outlook for the fourth quarter, guiding to a range of $1.57 billion to $1.6 billion, above Wall Street’s $1.55 billion estimate. It also expects Q4 adjusted EBITDA of between $1.29 billion and $1.32 billion, implying sustained margin strength of 82% to 83%.
The company continued aggressively returning capital to shareholders, repurchasing 1.3 million shares for $571 million in Q3 and expanding its buyback authorization by an additional $3.2 billion. Free cash flow for the quarter came in at $1.05 billion, matching operating cash flow and highlighting strong underlying liquidity.
Management emphasized confidence in future performance, highlighting the performance of its AXON advertising technology, which continued to boost ad targeting and efficiency. AppLovin also hinted at ongoing traction in e-commerce ad verticals, underscoring diversification beyond gaming.
"We expect the launch of self-serve on 10/1 will set off a key period of revisions outside of core gaming ads, as we look to 4Q as the first major proof point," analysts continued.
Best known for its ad tech and portfolio of mobile apps, AppLovin has increasingly leaned on its higher-margin Software Platform segment, particularly AXON, as privacy changes reshape the mobile marketing landscape. The unit’s continued scale and innovation remain central to growth, especially as ad spend shifts across verticals.
Investors appeared encouraged by the consistent margin expansion and strong capital returns, reinforcing sentiment that the company is executing well in a volatile sector.
(Luke Juricic contributed to this report.)