AppLovin Corp. 10-Q Summary: Q2 2026
Business Context and Reporting Period
This Quarterly Report on Form 10-Q covers the period ended June 30, 2026. AppLovin Corporation operates as a single reportable segment providing AI-powered advertising solutions (AppLovin Ads, MAX, Adjust, Wurl). The company recently 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 | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Revenue | $1,923.7 million | $1,258.8 million | $3,766.1 million | $2,417.7 million |
| Net Income | $1,266.5 million | $819.5 million | $2,472.2 million | $1,396.0 million |
| Diluted EPS | $3.76 | $2.39 | $7.32 | $4.06 |
| Operating Margin | 77.7% | 76.1% | 77.9% | 74.4% |
| Adjusted EBITDA Margin | 83.9% | 80.9% | 84.2% | 80.9% |
| Cash & Equivalents | $3,053.3 million | (Balance Sheet as of June 30, 2026) | ||
| Long-Term Debt | $3,515.1 million | (Balance Sheet as of June 30, 2026) | ||
| Free Cash Flow (YTD) | $2,150.1 million | $1,593.8 million | (Six Months Ended June 30) |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 53% year-over-year (YoY) in Q2 and 56% YoY for the six months ended June 30, 2026. This was driven by a 58% increase in net revenue per installation for AppLovin Ads, partially offset by a 2% decrease in installation volume.
- Expense Trends:
- R&D: Increased 127% YoY in Q2, primarily due to higher stock-based compensation ($68.9 million vs. $17.2 million) related to engineering talent retention.
- Cost of Revenue: Increased 46% YoY in Q2, driven by $52.1 million in additional network infrastructure costs.
- G&A: Decreased 27% YoY in Q2 due to lower bad debt expense and reduced professional services costs.
- Other Income: Other income, net, turned positive at $62.4 million in Q2 2026 (vs. a loss of $22.3 million in Q2 2025), driven by fair value gains on non-marketable equity securities and higher interest income.
- Share Repurchases: The company repurchased 3.3 million shares for $1.5 billion during the first six months of 2026. As of June 30, 2026, $1.8 billion remained available under the repurchase program.
Guidance, Outlook, and Risks
Management Commentary: Management attributes growth to the effectiveness of the Axon AI recommendation system and expansion into new verticals like e-commerce and Connected TV (CTV). The company continues to invest heavily in R&D and datacenter costs to support AI capabilities.
Risks and Contingencies:
- Legal Proceedings: The company is defending against putative securities class action lawsuits and shareholder derivative complaints filed in early 2025 alleging false statements regarding financial growth and advertising solutions. The company believes these allegations lack merit.
- Regulatory Environment: Significant risks exist regarding evolving privacy laws (GDPR, CCPA), AI regulations, and data transfer restrictions (e.g., Executive Order 14117 regarding data transfers to countries of concern).
- Third-Party Reliance: The business is heavily dependent on third-party platforms (Apple App Store, Google Play) whose policy changes (e.g., IDFA, tracking protection) could adversely impact ad targeting and revenue.
- Debt Obligations: The company carries $3.6 billion in senior unsecured notes. While liquidity is strong, debt service obligations limit operational flexibility.
Investor Verification Checklist
- Revenue Quality: Verify the sustainability of the 58% increase in net revenue per installation and monitor installation volume trends.
- R&D Efficiency: Assess the return on the significant increase in R&D spend (up 127% YoY), specifically regarding stock-based compensation.
- Legal Exposure: Monitor the status of the securities class action litigation and potential settlement costs or reputational impact.
- Platform Risk: Track any new policy changes from Apple or Google regarding data privacy and ad tracking that could affect the Axon AI system.
- Capital Allocation: Review the pace of share repurchases ($1.5 billion YTD) against the remaining $1.8 billion authorization and future debt maturity schedules.