Mobile app advertising platform AppLovin (NASDAQ: APP) beat Wall Street’s revenue expectations in Q4 CY2024, with sales up 44% year on year to $1.37 billion. On top of that, next quarter’s revenue guidance ($1.37 billion at the midpoint) was surprisingly good and 3.7% above what analysts were expecting. Its GAAP profit of $1.73 per share was 37.5% above analysts’ consensus estimates.
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AppLovin (APP) Q4 CY2024 Highlights:
- Revenue: $1.37 billion vs analyst estimates of $1.26 billion (44% year-on-year growth, 8.6% beat)
- EPS (GAAP): $1.73 vs analyst estimates of $1.26 (37.5% beat)
- Adjusted EBITDA: $776.7 million vs analyst estimates of $764 million (56.6% margin, 1.7% beat)
- Revenue Guidance for Q1 CY2025 is $1.37 billion at the midpoint, above analyst estimates of $1.32 billion
- EBITDA guidance for Q1 CY2025 is $870 million at the midpoint, above analyst estimates of $795.1 million
- Operating Margin: 44.3%, up from 28.3% in the same quarter last year
- Free Cash Flow Margin: 50.6%, up from 46% in the previous quarter
- Market Capitalization: $125.9 billion
Company Overview
Co-founded by Adam Foroughi, who was frustrated with not being able to find a good solution to market his own dating app, AppLovin (NASDAQ:APP) is both a mobile game studio and provider of marketing and monetization tools for mobile app developers.
Advertising Software
The digital advertising market is large, growing, and becoming more diverse, both in terms of audiences and media. As a result, there is a growing need for software that enables advertisers to use data to automate and optimize ad placements.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Over the last three years, AppLovin grew its sales at a 19% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell slightly short of our benchmark for the software sector, which enjoys a number of secular tailwinds. Luckily, there are other things to like about AppLovin.
This quarter, AppLovin reported magnificent year-on-year revenue growth of 44%, and its $1.37 billion of revenue beat Wall Street’s estimates by 8.6%. Company management is currently guiding for a 29.5% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 22.5% over the next 12 months, an acceleration versus the last three years. This projection is noteworthy and indicates its newer products and services will spur better top-line performance.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
AppLovin is extremely efficient at acquiring new customers, and its CAC payback period checked in at 15.5 months this quarter. The company’s rapid recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments.
Key Takeaways from AppLovin’s Q4 Results
We were impressed by AppLovin’s optimistic EBITDA guidance for next quarter, which blew past analysts’ expectations. We were also glad its revenue outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock traded up 20.9% to $459.87 immediately following the results.
AppLovin put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
