AppLovin forecasts Q4 2026 revenue of $2.365B-$2.395B as model rollout continues

• "We delivered a record quarter revenue of $2.18 billion, up 55% year-over-year" and "the largest sequential dollar step-up in revenue with well over $200 million more than last quarter," driven by a partial rollout of "the next generation of our models" that increased advertiser spend at target ROAS (CEO Adam Foroughi).
• "This was a partial rollout" and "the transition is still in front of us," with the new architecture providing "meaningfully more room to optimize" and improving performance "most where data is sparser" including "newer advertisers, smaller advertisers, newer categories" (CEO Foroughi).
• "Gaming business grew nearly 50% year-over-year" alongside the model rollout, while "Consumer had another strong quarter" with Q4 described as "the seasonal peak for these advertisers" (CEO Foroughi).
• "We believe this business can compound at roughly 30% annually over the long term" and the company’s priorities heading into next year include "complete the model transition," "really ramping up the rate of acquiring new customers," "keep improving our creative tools and ad formats" and "start expanding our efforts on CTV" (CEO Foroughi).
• "Net income grew 72% year-over-year to $1.44 billion on record revenue of $2.18 billion" with "66% net income margin and 84% adjusted EBITDA margin"; management highlighted operating leverage as "data center costs declined as a percentage of revenue" despite higher training investment (CFO Matt Stumpf).
• "Free cash flow for the quarter was $1.4 billion" and the company said it repurchased/withheld "4.1 million shares for $1.4 billion"; "our Board of Directors increased our share repurchase authorization by an incremental $3.2 billion" to "$3.6 billion" as of end of October (CFO Stumpf).

Outlook

• "We expect revenue between $2.365 billion and $2.395 billion" and "adjusted EBITDA between $1.995 billion and $2.025 billion" for Q4 2026, with the outlook reflecting "normal seasonality," "further scaling in our consumer vertical," "significant model improvements that are already live and performing" and "continued investment in training compute for new model development" (CFO Stumpf).
• On sequential growth expectations, management maintained its approach: "We’re guiding to what we know at that point in time" and cited seasonality, live model updates, and "the increase in the data center costs" as inputs to Q4 guidance (CFO Stumpf).
• Compared with last quarter’s framing of reacceleration after a timing-related model lull, management reiterated the longer-term target: "we believe this business can compound at roughly 30% annually over the long term" (CEO Foroughi).

Financial Results

• "Revenue grew 14% sequentially" and "Adjusted EBITDA was $1.84 billion, up 59% year-over-year" with "Quarter-over-quarter flow-through to adjusted EBITDA" of "87%" (CFO Stumpf).
• Cash generation and balance sheet were highlighted as: "This quarter, our asset-light model converted roughly 65% of revenue into free cash flow" and "We ended the quarter with $3.17 billion of cash against $3.5 billion of long-term debt" resulting in "net leverage below 0.1x adjusted EBITDA" (CFO Stumpf).
• Capital return details included: "Since we began the program, we have repurchased and withheld a total of 104 million shares for $9.4 billion" at "an average price of $90 per share" and "Our weighted average diluted share count has now declined for 8 consecutive quarters" (CFO Stumpf).

Q&A

• James Heaney, Jefferies: asked about "biggest improvement" vs. AXON 2 and full rollout timing; CEO Foroughi said the goal is "build bigger models, use more compute" and while "We can’t tell you or commit to when we can actually see a full rollout," "these models have a lot more room to optimize."
• Jason Bazinet, Citi: asked about referral partners; CEO Foroughi said it is "still work in progress" and described a multi-step adoption path where customers "have to prove that it works" before scaling.
• Matthew Cost, Morgan Stanley: asked if the new model changes gaming runway and about CTV; CEO Foroughi reiterated "an expectation that we can grow this business 30% year-over-year for the long term," and on CTV said "we’ve got pilot campaigns going now" but "I wouldn’t bank on it at all for being accretive to numbers anytime soon."
• Stephen Ju, UBS: raised advertiser concerns about auction pricing and ROI compression; CEO Foroughi argued checks can be "flawed" and said improved prediction can mean "the CPM will go up" while "the return on ad spend is going up."
• William Lampen, BTIG: asked if buybacks could be more aggressive; CFO Stumpf said the Q3 step-up was "opportunistically ramping up" because management saw "dislocation in the stock price versus the actual intrinsic value."
• Alec Brondolo, Wells Fargo: asked about data acquisition and APAC Pixel growth; CEO Foroughi said targets are "data relationships, customer relationships" that can "accelerate this business" and explained APAC Pixel dynamics as sometimes "brand-new sites" with "no attribution complexity" versus larger Western enterprises.

Sentiment Analysis

• Slightly negative to neutral analyst tone centered on visibility and durability (e.g., Wolfe’s question on "confidence" and UBS on ROI compression), with repeated probing on model rollout timing and consumer seasonality.
• Positive management tone emphasized confidence and early-stage upside, using phrases like "we’re really excited about the future" and describing Q3 as proof-point: "everything we told you showed up in this quarter’s numbers" (CEO Foroughi).
• Versus last quarter’s prepared-remarks reset ("we fell short of that standard" in Q2), Q3 messaging shifted to execution confidence and capital return expansion, while analysts broadened from Q2’s model-timing concerns into competition, auction dynamics, and M&A/data strategy.

Quarter-over-Quarter Comparison

• Q2 described a guidance shortfall and timing issue: "we fell short of that standard" and "the next step-up in model performance landed just after quarter end"; Q3 highlighted "a record quarter" and a "partial rollout" of the next model generation (CEO Foroughi).
• Q2 compute was framed as higher: "higher compute" drove costs; Q3 emphasized efficiency: "data center costs declined as a percentage of revenue" even with more training investment (CFO Stumpf).
• Q2 highlighted regulatory closure: "SEC...concluded its inquiry with no recommended action"; no similar regulatory update was raised in Q3 prepared remarks.

Risks and Concerns

• "Model gains won’t land on a perfect quarterly schedule" and management said it will not "promise the cadence" of improvements (CEO Foroughi).
• Consumer seasonality was underscored: "the same advertiser like-for-like will have a huge Q4" followed by "a weak Q1" and management said deeper e-commerce penetration may mean "bigger Q4 is followed by tougher Q1" (CEO Foroughi).
• Execution dependencies cited included creative and onboarding complexity for smaller advertisers, with consumer success described as higher when customers receive "handhold" support or are "sophisticated" (CEO Foroughi).

Final Takeaway

Management presented Q3 as a record quarter driven by a partial rollout of next-generation models, with Q4 guidance calling for $2.365B-$2.395B of revenue and $1.995B-$2.025B of adjusted EBITDA. Leadership emphasized remaining upside from completing the model transition, scaling consumer advertiser acquisition through partnerships, and early CTV pilots that were described as promising but not near-term accretive, alongside a larger buyback authorization and continued emphasis on free cash flow generation.

Read the full Earnings Call Transcript

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