AppLovin reported 66% year-over-year growth and almost $1.7 billion in revenue in Q4 2025, on Thursday evening. Its net income (i.e., profit) went from $600 million in Q4 2024 to $1.1 billion in the past quarter. But shares dropped by 20% to around $370 as of today, a continuation of the wild ride the company’s stock price has taken over the past few years.
“There is a real disconnect between market sentiment and the reality of our business,” CEO Adam Foroughi told investors during the earnings call.
AppLovin’s headwinds have come from all quarters. The company is a torchbearer for the subscription software category, which has been hammered by Wall Street investors lately as vulnerable to replication by generative AI coding. AppLovin is also the target of a substantial short-seller campaign of individual investors and anonymous hedge funds that have released condemnatory reports.
The ecommerce question
During the call, the investors’ questions were largely focused on AppLovin’s nascent ecommerce advertising product. They clearly like the idea of AppLovin’s expansion into new ad channels and marketer verticals beyond mobile gaming, but haven’t seen the numbers to prove the ecommerce business is real.
Foroughi defended AppLovin’s position in the market with refreshing candor. It is many years, for instance, since top executives at Google or Meta would be caught dead using the word “CPM.”
Let alone noting that, “as we know, most people are ADD and don’t really watch the ad on TV these days,” which Foroughi said. Followed by: “Our ads are over 30 seconds of engagement. The user can’t do anything else. They’re already on their phone. It’s a full-screen lockup.”
A Googler could be excommunicated or worse if they described an ad as a “full-screen lockup.” Only half joking.
Foroughi also noted to one investor that AppLovin is focused primarily on DTC and Shopify-based merchants, partly because “if we help Coca-Cola place more dollars in advertising, we’re not moving the needle of anything in the economy. Coca-Cola is sort of blindly putting dollars out there.”
But aside from a few moments that probably had a comms person cringing, Foroughi also brought a refreshingly close look at real advertising metrics in ways that also help understand why platforms like Google and Meta are pushing demand through black box AI ad serving products like Performance Max and Advantage Shopping Campaigns.
One or two years ago, Foroughi said, AppLovin’s ad conversion rate per 1,000 impressions for its ecommerce advertising was about 1%. That number is still undisclosed, but is on the way up to mid-single-digit percent rates, according to Foroughi. For mobile gaming advertisers, he said, AppLovin regularly converts about 50 out of every 1,000 or so ads served.
And the difference in tangible value between those levels of confidence is huge.
“When there’s a high-value user, sometimes our model bids thousands of dollars on a CPM basis,” Foroughi said.
Just to give a sense of how dramatically more valuable an impression is when the ad platform has a high degree of confidence in a potential conversion.
“The model knows what works for these customers,” he said. “So it’s just not something that’s conceivable except in a marketplace where you have budgets that are already given to us.”
In other words, it wouldn’t make sense for advertisers bidding themselves in their siloed account seats. But AppLovin, looking across its inventory and all the advertisers in its ecommerce program, might understand the impression at that worth.
But the process will take time, Foroughi cautioned. Top mobile gaming advertisers run tens of thousands of ad creatives at a given time, he said. Even the most active ecommerce advertisers currently run hundreds of ad units.
And AppLovin has proprietary video and rich media creative that many advertisers don’t have available to hand. One of the most common barriers to adoption for potential ecommerce advertisers is that they simply don’t possess the right creative assets, he said. A pilot program that includes 100 advertisers uses generative AI to produce those unit types.
AppLovin’s ads
The earnings call spent almost as much time investigating AppLovin’s own marketing decisions as on client ad revenue, including a debate about whether AppLovin uses Google AdWords to find new customers.
Wells Fargo analyst Alec Brondolo asked where AppLovin goes to find new customers for the ad platform – “I see the ads on Google Search; I see the ads on Facebook and Instagram,” he said.
There’s the business talk show-slash-video podcast TBPN, Foroughi noted, which has a gong that is sponsored by the Axon by AppLovin ad business.
“Then they go to Google,” Foroughi said, meaning people who hear the sponsored gong by Axon. “And we don’t have any SEO yet,” he acknowledged.
Anecdotally, an incognito mode Google search for “Axon” shows a sponsored listing from AppLovin, then the first organic spot is a company called Axon that sells first-responder drones to government and law enforcement agencies, as well as tasers (it used to be the TASER Company). There’s an unrelated Wikipedia entry for an “axon,” and even on page 2 there’s an Axon company that sells machines that heat-shrink and wrap consumer goods and an open-source Java toolkit called Axon that all appear before Axon by AppLovin.
“All this stuff is going to improve over time,” Foroughi said. “And we think our job is to combo brand advertising alongside direct response to really unlock growth.”
Even for its publisher and game developer tech, AppLovin understands that advertising holds the key. Some mobile mediation competitor could pay to cover the few percentage points that AppLovin might outperform them, he responded to one investor who’d asked about the company’s differentiation from other mediation vendors. But that’s not enough to entice publishers from AppLovin’s mobile network.
“Where it gets really expensive for the publisher and where we’re really locked in is that we have the best advertising solutions on the market,” Foroughi said. “In fact, for a lot of these publishers, we’re over 50% of all their user acquisition spend.”
If a mobile game developer leaves AppLovin for some other mobile mediation vendor, its own user acquisition “decays,” he said, even if some other vendor pays a premium to level out monetization from the mobile mediation tech.
But can AppLovin create the same circular effect in the ecommerce business, where it doesn’t have customers that rely on the platform for their own ad spend and new customers?
That’s the $50 billion question. At least based on Foroughi’s back-napkin math for what AppLovin might earn if its ecommerce conversion rate elevates to the level of its mobile gaming campaigns.
“We’re no different than any social network that’s going out and trying to get users,” Foroughi said. “We want to get users into this advertising platform.”
