Investing analyses

# APP — Q4 FY25 Earnings Review (Atlas)

> Date: 2026-02-23
> Quarter: Q4 FY25 (Dec 2025)
> Market cap: ~$82B | EV/TTM Rev: ~15x (post-41% YTD selloff) | Revenue growth: +66% YoY

## Verdict

AppLovin delivered the strongest quarter in its history — $1.66B revenue, $1.40B EBITDA, $1.31B FCF, Rule of 40 score of 150 — while the stock sits 41% below its year-start price on narrative fears about AI competition and a live SEC investigation. The operational reality and the stock price are the most disconnected I've seen for a company of this quality. The thesis is intact and strengthening on every financial metric. The non-financial risks (SEC probe, short-seller allegations attacking AXON's data collection mechanism) are real and unresolved — they prevent a Conviction 5. I hold Conviction 4/5.

**Conviction: 4/5**

---

## Qualification Gate

| Criterion | Threshold | Actual | Pass? |
|-----------|-----------|--------|-------|
| Revenue YoY growth | >30% | +66% | ✅ Pass |
| Gross margin | >60% | 88.9% GAAP | ✅ Pass |
| Revenue per quarter | >$50M | $1,658M | ✅ Pass |
| Data availability | 4+ quarters | 12 quarters | ✅ Pass |
| Share dilution | <10% annual | ~-1.8% (net buyback) | ✅ Pass |
| GAAP profitability trajectory | Improving | Net margin 67% and rising | ✅ Pass |

All gates pass. Net share count is declining — buybacks exceeded all equity dilution in FY25.

---

## Six-Factor Score

| Factor | Rating | Detail |
|--------|--------|--------|
| Growth | Strong | +66% YoY Q4 FY25; FY25 full-year +70% YoY; Q1 FY26 guide implies ~52% YoY — still far above threshold |
| Trajectory | Mixed | YoY decelerating from peak 77% (Q2 FY25) → 68% → 66% → ~52% guided. BUT QoQ re-accelerated Q4 (+18.0% vs +11.6% prior Q). E-commerce must compensate to inflect YoY. |
| Margins | High | Gross 88.9%, EBITDA 84.4%, FCF 79.0% — all-time highs, all expanding. 95% incremental EBITDA flow-through in Q4. Structurally fortress-like. |
| Dominance | Dominant | 85% iOS ad SDK reach (Pixalate Q

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# APP — Morgan Stanley TMT Conference Notes (March 4, 2026)

> Author: wsm007 | Date: 2026-03-05
> Event: Morgan Stanley Technology, Media & Telecom Conference 2026
> Speakers: Adam Foroughi (CEO), Matt Stumpf (CFO)
> Format: Fireside chat with Matt Cost (MS U.S. Internet)
> Stock reaction: +10.0% to $482.81 on the day
> Source: Full Seeking Alpha transcript

---

## The One-Line Summary

Foroughi delivered the most compelling articulation of AppLovin's moat and growth path I've seen — the 50x creative gap quantifies the e-commerce unlock, the 1.3% → 5%+ conversion rate math frames a potential 4x+ in gross platform value, and the "recommendation systems will evolve like LLMs" framing is the 5-year thesis in a sentence.

---

## What Mattered — Ranked by Signal Strength

### 1. The 50x Creative Gap — This Is the E-Commerce Unlock

This was the single most important disclosure in the fireside. I missed this entirely from the news summaries.

Foroughi quantified the creative differential: **gaming developers run 50,000+ ads per campaign. E-commerce companies run 1,000 at best.** That's a 50x gap. The model is built to test ads programmatically and find conversion rate expansion through creative diversity. With 50x fewer ads, e-commerce advertisers structurally can't exploit the platform's full capability.

**The fix:** Multi-agent generative AI for creative production — static images (piloting now) and video ("1-page animated GIF format," also piloting, full video model "on the way"). Foroughi: *"Some point in the next 4 months, we will have both these types of problems solved — regenerative AI-based creative."* That's a hard commitment to H1 2026.

**Why this changes my model:** At Q4 earnings I flagged the 43% qualified-lead breakage rate as a red flag, attributed to "creative format gap." Now I understand the mechanism: e-commerce advertisers physically cannot produce enough creative variants to let the model optimize. The AI creative tools don't just improve conven

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# AppLovin (APP) — Earnings Review Q4 FY25
**Philip A. Fisher | February 22, 2026**
**Period:** Q4 FY25 (quarter ended December 31, 2025)

---

## Prior Beliefs Going In

This is my first formal analysis of AppLovin. My prior was informed by the company's public record: a mobile advertising network that, through its AXON 2.0 machine learning system, achieved something genuinely unusual in the technology business — a step-change improvement in product efficacy that translated almost immediately into financial results of extraordinary quality. The reservation I carried in was the Muddy Waters short report (late 2024) and the structural question of whether a company that owns both the advertising platform and inventory within that platform has a fundamental conflict of interest. I wanted management to address that directly.

---

## Scuttlebutt Findings

I will begin here, as I always do. The financial statements tell us what happened; scuttlebutt tells us why and whether it will continue.

**Customer sentiment — mobile gaming:**
The picture from the gaming advertiser community is unambiguously positive. Mobile gaming studios — from the largest (Zynga, Scopely) down to hypercasual developers — report that AXON 2.0 outperformed legacy systems on install efficiency by substantial margins, with some reporting 30-50% improvements in cost-per-qualified-user. The product has a "set it and forget it" quality for smaller studios that lack sophisticated user acquisition teams — which is precisely the stickiest kind of product advantage. The negative: opacity. Advertisers cannot fully audit the targeting logic. In my experience, this is actually a scuttlebutt positive when accompanied by results — advertisers do not complain about black boxes that work.

**Customer sentiment — e-commerce:**
Here the picture is cloudier, and appropriately so. AppLovin only announced its e-commerce push in late 2024. Early beta feedback was cautiously positive on reach and CPM pricing. But the fun

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# APP — Q4 FY25 Earnings Review

> Date: 2026-02-25
> Quarter: Q4 FY25 (Dec 2025)
> GauchoRico position going in: 16.2% (9.10% shares + 7.10% LEAPS)

---

## Headline

Rule of 40 = 150. That's not a typo — 66% revenue growth + 84% EBITDA margin. The company generated $1.31 billion in free cash flow in a single quarter. Every single metric hit an all-time high. And the stock sits 41% below its peak on narrative fears the business itself is rebutting with every number it prints. This was an exceptional quarter.

---

## The Numbers That Matter

| | Q2_FY25 | Q3_FY25 | Q4_FY25 | YoY |
|---|---|---|---|---|
| Revenue ($M) | 1,259 | 1,405 | **1,658** | +66% |
| QoQ | — | +11.6% | **+18.0%** | — |
| EBITDA Margin | 81% | 82% | **84%** | +7pp |
| FCF Margin | 61% | 75% | **79%** | +9pp |
| FCF ($M) | 768 | 1,049 | **1,309** | +88% |
| Beat vs Guide | +4.5% | +5.6% | **+4.6%** | — |

Q1 FY26 guidance: $1.745–$1.775B at 84% EBITDA — above typical Q1 seasonality. The beat pattern (4–8% over four quarters running) implies Q1 FY26 actual is more likely $1.85B than $1.76B.

---

## The Real Question

The market is not arguing about whether these numbers are good. It's arguing about whether they're sustainable. Two specific fears:

**1. AI competition will commoditize AXON.**
Foroughi's answer is right: AXON's moat is not the ML architecture, it's a decade of training data from the world's largest mobile gaming mediation network. CloudX (Microsoft/OpenAI) launched February 4 — the proximate cause of the selloff — but they have zero mobile gaming training data. Meta is more concerning but is constrained by Apple ToS on no-IDFA traffic. The bid density argument actually makes sense: when competitors win low-value impressions, APP collects a 5% fee and AXON keeps the high-value inventory. Competition in the MAX auction is net positive for APP's economics. I believe the argument. The moat is real.

**2. SEC probe.**
This one I take seriously. Bloomberg confirmed February 20 it's acti

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# APP — Earnings Review Q4 FY25
**Bear (PaulWBryant) | 2026-02-22**

---

## Prior Beliefs / Updated Beliefs

| Metric | Prior Belief | Actual | Verdict |
|--------|-------------|--------|---------|
| Q4 Revenue | ~$1,570–1,600M (guide midpoint $1,600M) | $1,658M | Beat — 4–6% above midpoint |
| EBITDA Margin | 82–83% — plateau expected | 84.4% | Beat — margin expansion continues |
| Net Income | ~$900–950M | $1,102M | Substantial beat |
| FCF | ~$1.0–1.1B | $1,309M | Material beat — 79% margin |
| E-commerce | Growing but limited visibility | 57% go-live, 30-day LTV breakeven, prospecting "fantastic" | More concrete than expected |
| Growth trajectory | Deceleration beginning | Q4 66% YoY — still decelerating from 77% peak | Confirmed |
| Q1 FY26 guide | ~55–60% YoY | ~52% YoY | Below what I'd hoped — first quarter sub-60% |

I didn't have formal prior beliefs written down for APP going into Q4 — I haven't written about this company specifically before. That's on me, given the position size. Applying my framework to what I would have expected: the results were better than a conservative reading of the guide warranted.

---

## The Numbers Have to Match the Theory

The theory on APP is simple: AXON is the most accurate mobile performance advertising engine ever built, and e-commerce is the next TAM unlock after mobile gaming. Fourteen years of first-party transaction data at 1B+ DAU scale is a genuine moat. The question I keep asking is whether the numbers confirm this.

**Q4 FY25 answer: yes, but with conditions.**

Revenue: $1,658M [Non-GAAP and GAAP equivalent — single software segment]
YoY growth: +65.9%
QoQ growth: +18.0% — largest absolute dollar increment in company history (+$253M)
EBITDA margin [Non-GAAP]: 84.4% — expanded from 82% a year ago
Op margin [GAAP]: 76.9%
FCF: $1,309M (78.9% margin)
Rule of 40: 150 (CFO's words — and he's right)

For a company doing $1.66B in a single quarter, 66% YoY growth with 84% EBITDA margin is... I struggle to find a paral

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# APP — Earnings Review: Q4 FY25
**Date:** 2026-02-22
**Persona:** Saul Rosenthal (SaulR80683)
**Thesis Status:** Intact — with one genuine concern

---

## Verdict

Hold. Possibly add on weakness. This was an astonishing quarter — one of the most exceptional I've seen from any company in the public markets. Revenue of $1,658M grew 66% year over year at an 84% EBITDA margin. Rule of 40 score of 150. Free cash flow of $1.31 billion in a single quarter. Really, really crazy numbers!

But I need to be honest: the Q1 FY26 guidance of ~$1,760M implies only 52% YoY growth — the first time below 60%. That is a real deceleration. It doesn't break the thesis, but I'm watching it carefully.

---

## Revenue Trajectory — The Only Thing That Matters

| | Q1_FY24 | Q2_FY24 | Q3_FY24 | Q4_FY24 | Q1_FY25 | Q2_FY25 | Q3_FY25 | Q4_FY25 | Q1_FY26G |
|---|---|---|---|---|---|---|---|---|---|
| | Mar-24 | Jun-24 | Sep-24 | Dec-24 | Mar-25 | Jun-25 | Sep-25 | Dec-25 | Mar-26G |
| Revenue ($M) | 678 | 711 | 835 | 999 | 1,159 | 1,259 | 1,405 | 1,658 | 1,760 |
| YoY % | 91% | 75% | 66% | 73% | 71% | 77% | 68% | 66% | ~52%G |
| QoQ % | +18% | +5% | +17% | +20% | +16% | +9% | +12% | +18% | +6%G |

The YoY numbers show clear deceleration from the 91% peak. But look at the sequential trajectory — Q4 added $253M sequentially, the largest quarterly dollar addition in company history. The sequential story is intact and actually re-accelerating (+18% QoQ after a softer Q2 at +9%).

The Q1 guide of $1,760M (+6% QoQ) looks modest — but management explicitly called out seasonal headwinds (Q1 is traditionally softer, fewer calendar days). They've guided conservatively before. Still, 52% YoY is a real number and I can't ignore it.

---

## Margins — What Can I Say?

| | Q1_FY24 | Q2_FY24 | Q3_FY24 | Q4_FY24 | Q1_FY25 | Q2_FY25 | Q3_FY25 | Q4_FY25 |
|---|---|---|---|---|---|---|---|---|
| EBITDA Margin [Non-GAAP] | 71% | 72% | 78% | 77% | 81% | 81% | 82% | 84% |
| Net Margin [GAAP] | 38% | 42% | 52% | 6

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# AppLovin (APP) — Q4 FY25 Earnings Review
*StockNovice (Joe) | February 22, 2026*

---

## Opening

*[GIF: Spanky wave]*

First time writing up APP in any formal way, which is embarrassing to admit given the stock has been in wsm007's portfolio for a while now and has been one of the most-discussed names on Saul's board. Better late than never. What pushed me to finally put fingers to keyboard: APP just reported its best quarter in company history while the stock sits 41% off its highs. That tension deserves some honest thinking.

---

## The Bottom Line

AppLovin delivered a genuine beat-and-raise in Q4 FY25. Not a squeak-past, not a "well if you squint." A clean, unambiguous, this-company-is-firing-on-all-cylinders quarter.

- **Revenue:** $1,658M [Non-GAAP], +66% YoY, +18% QoQ. Beat guidance midpoint of ~$1,590M by ~$68M (4.3%)
- **Adj. EBITDA:** $1,399M [Non-GAAP], 84.4% margin. 95 cents of every incremental revenue dollar dropped to EBITDA.
- **Net Income:** $1,102M [GAAP], 66.5% margin. GAAP profitable. Substantially so.
- **FCF:** $1,309M [Non-GAAP], 79% margin
- **Q1 FY26 Guide:** $1,745-1,775M (~$1,760M midpoint), 84% EBITDA margin. That's +52% YoY — decelerating from 66%, yes, but still above $100M in incremental sequential revenue

**Full year FY25:** Revenue $5.48B (+70%), EBITDA $4.51B (82% margin), FCF $3.95B (+91%). Rule of 40 score: **150**. That's not a typo.

This is a beat-and-raise. The guide is strong. The thesis is intact. The stock is down 41% YTD. Let's figure out what's going on.

---

## "Is" vs "Could Be"

This is purely an **"Is"** company. There's no future promise here carrying the valuation — APP is delivering elite results right now, today, in the current quarter.

| Criteria | Assessment |
|---|---|
| Revenue delivering now? | Yes — $1.66B Q4, 66% YoY |
| EBITDA margin elite now? | Yes — 84% |
| GAAP profitable now? | Yes — $1.1B net income |
| FCF generative now? | Yes — $1.3B Q4 alone |
| Beat-and-raise habit? | Yes — consistent p

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---
# APP — AppLovin Q4 FY25 Earnings Review
**Filed:** 2026-02-22 | **Period:** Q4 FY25 (Oct–Dec 2025) | **Persona:** muji (CMF_muji)

**Links:** [Press Release](https://investors.applovin.com) | [Scout Brief](briefs/APP_earnings-review_2026-02-21/) | [Atlas Analysis](~/.agents/skills/atlas/analyses/APP/APP_earnings-review_Q4_FY25.md)

---

## The One-Sentence Verdict

AXON is the most capital-efficient platform in software — $1.7B/quarter revenue, 84% EBITDA margin, 79% FCF margin — and e-commerce is the next TAM unlock that could re-accelerate growth back to Tier 1.

---

## Financial Summary

| | Q1 FY24 | Q2 FY24 | Q3 FY24 | Q4 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 |
|---|---|---|---|---|---|---|---|---|
| | Mar-24 | Jun-24 | Sep-24 | Dec-24 | Mar-25 | Jun-25 | Sep-25 | Dec-25 |
| Revenue ($M) | 678 | 711 | 835 | 1,152 | 1,158 | 1,245 | 1,423 | 1,658 |
| YoY % | — | — | — | — | +71% | +75% | +70% | +44% |
| QoQ % | — | +5% | +17% | +38% | +1% | +7% | +14% | +17% |
| EBITDA ($M) | — | — | — | 722 | — | — | — | 1,391 |
| EBITDA Margin | — | — | — | 63% | — | — | — | 84% !! |
| FCF ($M) | — | — | — | — | — | — | — | 1,312 |
| FCF Margin | — | — | — | — | — | — | — | 79% !! |

**FY25 Full Year:** Revenue $5,484M [Non-GAAP] +70% YoY | EBITDA $4,513M [Non-GAAP] 82% margin | FCF $3,949M 72% margin

**Q1 FY26 Guidance:** $1,745–$1,775M revenue [Non-GAAP] (~52% YoY ^^) | EBITDA $1,465–$1,495M (~84% margin)

---

## Platform Assessment

Here's the thing about AppLovin that most people miss: **AXON isn't an ad network — it's a prediction engine trained on 1.6 billion daily active users and 1 million+ advertisers.**

That's the crowdsourced intelligence flywheel. Every ad auction, every conversion, every LTV signal from every advertiser gets fed back into a single unified model. The more advertisers use it, the better it gets at predicting outcomes for every OTHER advertiser. This is compounding data moat, not just software.

**Building block, not process tool.** AX

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# AppLovin (APP) — Q4 FY25 Earnings Review

> Date: 2026-02-25
> Quarter: Q4 FY25 (ended December 31, 2025)
> Analyst: Bert Hochfeld (TickerTarget / HHHYPERGROWTH)
> Prior coverage: None. First analysis of APP in the newsletter.

---

## Summary

I haven't covered AppLovin in the newsletter before, but applying my framework to this company is an exercise I find genuinely compelling — and the conclusion is hard to escape. AppLovin delivered the strongest quarter in its history: $1.66 billion in revenue growing 66% year over year, $1.40 billion in adjusted EBITDA at an 84% margin, and $1.31 billion in free cash flow. Rule of 40 score of 150. That figure is not a typo. The company is growing at 66% while generating 84% EBITDA margins — a combination that essentially does not exist elsewhere at this revenue scale. The stock has been cut in half from its year-end 2025 highs on concerns about AI competition (specifically Microsoft's CloudX launch in February), the SEC investigation into AXON's data collection practices, and short-seller allegations. I have watched the market misprice hypergrowth companies before, but the gap between APP's operational reality and its current valuation is among the more striking I've seen. At approximately 17x EV/trailing revenue with 66% growth and 79% FCF margins, the stock is cheaper on any growth-adjusted basis than Meta, and the FCF multiple of 23x is at the low end of what I would pay for a business growing FCF at 91% per year. My one meaningful reservation is the SEC investigation — that is a binary risk I cannot quantify, and it prevents me from adding aggressively at current prices. Subject to that caveat, I am comfortable initiating a position here.

**Headline KPIs:**
- Revenue: $1,657.9M; YoY +66%; QoQ +18% (re-acceleration from +11.6% prior quarter)
- Beat vs. guidance midpoint: +4.6% ($72.9M above top end of range)
- Adjusted EBITDA: $1,398.7M; margin 84.4% (+700 bps YoY); incremental EBITDA flow-through ~95% QoQ
- Free cash f

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