AppLovin’s first quarter results were well received by the market, as the company achieved substantial year-over-year revenue growth, driven by enhancements to its advertising technology and continued expansion into web-based advertising. CEO Adam Foroughi credited the quarter’s performance to improved machine learning models, which enabled mobile gaming clients to scale campaigns more effectively, and to a complete quarter of contribution from web advertisers. Foroughi stated, “We further refined our machine learning models enabling mobile gaming companies to scale their campaigns on our platform,” and highlighted the transformative role of web advertiser growth. The company also finalized an agreement to sell its games business, sharpening its focus on advertising operations.

Is now the time to buy APP? Find out in our full research report (it’s free).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions AppLovin’s Q1 Earnings Call

• Jason Bazinet (Citi) questioned the sequential revenue growth outlook and how past periods of flat or declining ad revenue might inform investor expectations. CEO Adam Foroughi emphasized that current business drivers, such as machine learning and new tools, have fundamentally changed growth patterns from prior years.
• Matthew Cost (Morgan Stanley) asked about progress in expanding into new web advertising categories and advertiser pain points. Foroughi explained that onboarding is currently limited by resources, but the self-service dashboard will enable broader market access over time.
• Omar Dessouky (Bank of America) inquired about churn rates among web advertisers and whether spend per advertiser is rising. Foroughi disclosed that churn for significant web advertisers was under 3%, and stressed that low market penetration means ample room for growth as tools mature.
• James Heaney (Jefferies) requested updates on the pace of web advertiser additions and the platform’s ability to support advertisers with longer sales cycles. Foroughi pointed out that onboarding pace is constrained by team size but will accelerate with automation, and that the current model is best suited for products with short conversion windows.
• Alec Brondolo (Wells Fargo) asked about the impact of App Store regulatory changes on mobile game advertising spend. Foroughi suggested that lower fees for developers could translate into higher marketing budgets, benefiting AppLovin’s platform.

Catalysts in Upcoming Quarters

In the upcoming quarters, our analysts will closely monitor (1) the adoption rate and performance of the new self-service dashboard among advertisers, (2) further advancements in machine learning models for both gaming and web advertising, and (3) the pace at which AppLovin expands its presence in non-gaming categories. Additional attention will be paid to the execution of the games business divestiture and any regulatory or macroeconomic developments that could impact advertiser demand.

AppLovin currently trades at $346.20, up from $303.73 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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