NEW YORK - AppLovin Corporation (NASDAQ:APP) delivered third-quarter earnings that surpassed analyst expectations, driving its stock price up 27% in premarket trading Thursday. The mobile app technology company delivered robust revenue growth and raised its guidance for the upcoming quarter.
AppLovin reported adjusted earnings per share of $1.25 for the third quarter, beating the analyst consensus of $0.92 by $0.33. Revenue for the quarter reached $1.2 billion, a 39% increase YoY and above the analyst estimate of $1.13 billion. The company's Software (ETR:SOWGn) Platform revenue, a key growth driver, surged 66% YoY to $835 million.
Looking ahead, AppLovin provided an optimistic outlook for the fourth quarter of 2024. The company expects revenue between $1.24 billion and $1.26 billion, surpassing the analyst consensus of $1.18 billion. Adjusted EBITDA is projected to be in the range of $740 million to $760 million, with an adjusted EBITDA margin of 60%.
Also, management reaffirmed its confidence in sustaining 20-30% growth in ad network revenue driven solely by the gaming business, highlighted by a 66% year-over-year increase and a quarterly acceleration to 17%.
"We had another fantastic quarter in Q3. Our AXON models continue to improve through self-learning and, more importantly this quarter, from technology enhancements by our engineering team," said AppLovin in its earnings release.
The company's net income for the quarter soared 300% YoY to $434 million, with a net margin of 36%. AppLovin also reported strong cash flow, generating $551 million in net cash from operating activities, up 177% YoY.
In a move to enhance shareholder value, AppLovin's board of directors increased the company's share repurchase authorization by $2.0 billion, bringing the total remaining authorization to $2.3 billion.
Commenting on the report, Morgan Stanley (NYSE:MS) analysts voiced a cautious outlook on APP stock. They note that while management remains confident ad network's growth, they "continue to view it as a high bar."
" Total (EPA:TTEF) Addressable Market (TAM) expansion from other categories could be additive, but remains early/unproven," analysts added.
Meanwhile, Stifel analysts reiterated a Buy rating on APP stock and raised the target price from $185 to $250. The move comes based on strength in the company's Software Platform business, which Stifel believes "should continue to drive AEBITDA margin expansion and improve FCF generation."
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