AppLovin Corp. 10-Q Summary: Q1 2026
Business Context and Reporting Period
This Quarterly Report on Form 10-Q covers the period ended March 31, 2026. AppLovin Corporation operates as a single reportable segment providing AI-powered advertising solutions, primarily through its Axon Ads Manager platform. The company divested its Apps Business in June 2025, which is now reported as discontinued operations. The company is a large accelerated filer headquartered in Palo Alto, California.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Revenue | $1,842.4 million | $1,159.0 million |
| Net Income | $1,205.6 million | $576.4 million |
| Diluted EPS | $3.56 | $1.67 |
| Operating Income | $1,439.9 million | $840.0 million |
| Operating Margin | 78.2% | 72.5% |
| Adjusted EBITDA | $1,556.9 million | $937.8 million |
| Adjusted EBITDA Margin | 84.5% | 80.9% |
| Free Cash Flow | $1,286.7 million | $825.7 million |
| Cash and Equivalents | $2,758.7 million | $542.5 million |
| Long-term Debt | $3,514.0 million | $3,513.0 million |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 59% year-over-year, driven by a 93% increase in net revenue per installation on Axon Ads Manager, partially offset by an 18% decrease in installation volume.
- Profitability: Net income from continuing operations rose 67% to $1.2 billion. The effective tax rate increased to 15.8% (from 8.9% in Q1 2025) due to higher pre-tax income and changes in jurisdictional mix.
- Expense Trends:
- R&D: Increased 67% to $94.1 million, primarily due to higher stock-based compensation ($36.5 million increase) to support AI development.
- Cost of Revenue: Increased 34% to $203.6 million, driven by $39.9 million in additional network infrastructure costs.
- G&A: Decreased 15% to $44.0 million due to lower bad debt expense and professional services costs.
- Capital Allocation: The company repurchased 2.17 million shares of Class A common stock for approximately $1.0 billion. As of March 31, 2026, $2.3 billion remained available under the repurchase program.
Outlook, Risks, and Unusual Items
- Management Commentary: Management attributes growth to the effectiveness of the Axon AI recommendation engine. They continue to invest heavily in R&D and datacenter costs to expand into new verticals like e-commerce and Connected TV (CTV).
- Legal Proceedings: The company is defending against putative securities class action complaints and shareholder derivative suits filed in 2025 alleging false statements regarding financial growth and advertising solutions. The company believes these allegations lack merit.
- Risk Factors:
- Third-Party Platforms: Significant reliance on Apple and Google; policy changes (e.g., privacy tracking, IDFA) could materially impact business.
- Regulatory Environment: Evolving laws regarding AI, data privacy (GDPR, CCPA), and cross-border data transfers pose compliance risks.
- Debt Obligations: The company carries $3.6 billion in senior unsecured notes. While liquidity is strong, debt service obligations limit operational flexibility.
- Unusual Items: Q1 2025 included a $188.9 million goodwill impairment charge related to the discontinued Apps Business, which is not present in Q1 2026 results.
Investor Verification Checklist
- Verify the sustainability of the 93% increase in net revenue per installation versus the 18% drop in volume.
- Monitor the status of the securities litigation and potential settlement costs.
- Assess the impact of ongoing investments in R&D (up 67%) on future margins.
- Review the company's exposure to Apple and Google policy changes regarding data privacy and tracking.
- Confirm the remaining capacity and execution pace of the $2.3 billion share repurchase program.