APP Stock Soars Over 20% Overnight After Record Q3 – CEO Says Its AI Model Has More Room To Run

• AppLovin's CFO said the 55% Q3 revenue growth outpaced digital advertising peers’ 10%-mid-20% growth. 
• The company also converted 65% of revenue into free cash flow.
• AppLovin's partial rollout of upgraded AI advertising models boosted advertiser spending. 

AppLovin Corp. (APP) stock surged more than 20% overnight after the advertising technology company delivered record third-quarter (Q3) results, with revenue jumping 55% and net income climbing 72%. Strong profit, cash generation, and an expanded $3.6 billion share buyback authorization further boosted investor sentiment. 

AppLovin stock traded 20.6% higher overnight Wednesday after a 10% gain in the regular session. If the overnight level holds, the stock will clock its best day in 20 months. 

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AppLovin’s Growth Outpaces Digital Advertising Peers

During the Q3 earnings call, AppLovin CFO Matt Stumpf highlighted the company's performance against the broader digital advertising industry.

“To put our results in context, this earnings season, the largest platforms in digital advertising reported third quarter revenue growth between roughly 10% and the mid-20s year-over-year.”

“We grew 55%, several times faster than the market. And we did it at margins well above all of our peers across the advertising space.”

The company’s cash generation provided another point of strength. AppLovin converted about 65% of Q3 revenue into free cash flow. It finished the period with $3.17 billion in cash and $3.5 billion in long-term borrowings, leaving its net leverage below 0.1 times adjusted EBITDA. 

AppLovin’s New AI Models Offer Additional Growth Potential

AppLovin CEO Adam Foroughi said the company's upgraded AI models are already improving results, with more gains expected as the technology is rolled out further. 

The company introduced its upgraded advertising models to a portion of its business during the quarter. According to Foroughi, the initial results encouraged advertisers to increase their budgets.

“Here's the part I want you to sit with. This was a partial rollout. The transition is still in front of us, and the new generation gives us meaningfully more room to optimize in the architecture it replaces. It also improves performance most where data is sparser, newer advertisers, smaller advertisers, newer categories, exactly where our consumer vertical lives.”

AppLovin Profit: A Major Strength 

Q3 is AppLovin’s strongest quarterly performance yet, with a 55% jump in revenue to $2.18 billion and net income climbing 72% to $1.44 billion. Earnings per share for Q3 was $4.30, beating the consensus estimate of $4.03, as per Fiscal.ai. 

AppLovin reported $1.84 billion in adjusted EBITDA, up 59% from last year. Its net profit margin was 66%, while its adjusted EBITDA margin reached about 84%. The board also approved another $3.2 billion for stock buybacks, raising the total authorization to $3.6 billion. 

AppLovin expects Q4 revenue between $2.365 billion and $2.395 billion. The company expects adjusted EBITDA of $1.995 billion to $2.025 billion, with an adjusted EBITDA margin of 84% to 85%.

APP Stock: Retail Stance 

On Stocktwits, retail sentiment around the stock improved to ‘extremely bullish’ from ‘bullish’. The stock recorded a 359% increase in message volume over the past week with 1.4% gain in watchers. 

A user said, “Buy buy buy…double or triple from here in months!!”

Another user said, “Avoid AI plays / Data centers  / Neoclouds for a while. This is the safe space.” 

APP stock has crashed 59% year-to-date.  

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