AppLovin reports strong Q3 growth but guides to slower fourth-quarter expansion

AppLovin reported third-quarter 2026 revenue of $2.18 billion, up 55% from a year earlier, as improvements to its advertising models supported growth in mobile gaming and consumer advertising. The company also issued mixed fourth-quarter guidance, forecasting continued growth but at a slower rate.

Strong third-quarter advertising results

Both revenue and adjusted EBITDA exceeded the high end of AppLovin’s guidance. Revenue rose 14% sequentially and exceeded the high end of guidance by approximately $100 million, primarily because of the core mobile gaming business and model improvements, CFO Matt Stumpf said.

CEO and co-founder Adam Foroughi said AppLovin partially rolled out a new generation of advertising models during the quarter. He said the models helped advertisers deploy more spending profitably against their target returns. Gaming revenue grew nearly 50% year over year, while consumer-advertiser spending rose by double digits sequentially and by triple digits from a year earlier, Stumpf said.

AppLovin did not disclose revenue for the individual advertising verticals. Its AppDiscovery product uses the AXON artificial-intelligence system to match gaming-company advertising budgets with users likely to install and play their games. The company charges advertisers based on results, including installs and sales, rather than raw impressions.

Profitability strengthened alongside revenue

Net income increased 72% year over year to $1.44 billion, representing a 66% net-income margin. Adjusted EBITDA rose 59% to $1.84 billion and had an 84% adjusted EBITDA margin, approximately 190 basis points above the prior year.

Free cash flow reached $1.4 billion, or 77% of adjusted EBITDA, compared with 53% in the second quarter. Stumpf attributed the sequential improvement partly to the timing of cash-tax payments and reiterated an expectation for full-year conversion of roughly 70% to 75%. AppLovin ended the quarter with $3.17 billion in cash and $3.5 billion in long-term debt.

The company said data-center costs declined as a percentage of revenue even as it invested in additional computing capacity for model training and development.

Fourth-quarter outlook points to slower growth

AppLovin forecast fourth-quarter revenue of $2.365 billion to $2.395 billion, representing approximately 43% to 44% year-over-year growth and 8% to 10% sequential growth. It projected adjusted EBITDA of $1.995 billion to $2.025 billion.

Stumpf said the outlook incorporated normal seasonality, further consumer growth and model improvements already in operation, as well as continued investment in training compute. The company did not provide a forecast split between gaming and consumer advertising.

Foroughi said e-commerce advertisers typically spend more heavily in the fourth quarter and less in the first. New customer acquisition could support growth through seasonally difficult periods, he said, but larger fourth quarters may be followed by tougher first quarters as the e-commerce business expands.

The reported fourth-quarter growth range would be below the 55% year-over-year revenue increase recorded in the third quarter. Recent reporting therefore described the outlook as mixed and highlighted the deceleration as the principal uncertainty surrounding AppLovin’s otherwise strong operating results.

Model rollout remained partial

Foroughi described the new model architecture as capable of training larger models and having more room for optimization than its predecessor. He compared the technical complexity of the transition with AXON 2.0 but did not commit to a full-rollout date or predict the architecture’s business impact.

According to Foroughi, the models perform better where data is sparse, including for newer and smaller advertisers. He also noted that customers can take time to validate results through incrementality studies before substantially increasing spending.

AppLovin is seeking to accelerate customer acquisition through partnerships and referrals. Foroughi said the company would also consider acquiring data or customer relationships if a transaction could bring customers onto its platform more quickly. He said very small businesses were not yet the platform’s primary opportunity; customers assisted by AppLovin’s team or sophisticated advertisers using self-service were more likely to succeed.

Connected television remained early-stage

AppLovin also has pilot advertising campaigns running on connected television. Foroughi said the product looked promising but remained early and should not be expected to contribute meaningfully to results soon. No connected-television revenue or contribution was disclosed for the quarter.

The next verifiable milestone is whether AppLovin can sustain the forecast 43% to 44% fourth-quarter revenue growth while continuing model improvements and translating stronger advertising results into cash flow. The company also did not provide a full-rollout timetable for the new model generation.