AppLovin (APP) Q3 2026 earnings review
AppLovin's sales speed up again, but cash lags its profit
AppLovin's advertising business sped up again after a slow spring quarter, and profit followed. Revenue climbed 55% from a year ago and 14% from the previous quarter, above the top of the company's own range. The fourth-quarter plan keeps the quarterly pace near 9%.
| Revenue | $2,185M +55% from a year ago; +14% from last quarter |
|---|---|
| Adjusted EBITDA margin | 84.3% plan was about 83% |
| Share of adjusted EBITDA turned into cash | 77% 54% last quarter |
| Fourth-quarter revenue outlook | $2,365–2,395M middle of the range: 9% growth from this quarter |
⚖️ Verdict: 🟢 Bullish
The story got better because the spring slowdown did not continue and the new plan holds a faster pace. Computing costs also took a smaller part of the extra revenue, so the margin ended above plan. The bad news: free cash flow was 77% of adjusted EBITDA, and by our math the year's target needs about 85% next quarter.
The question now is whether AppLovin can keep growing this fast without a new model release every quarter. Either consumer advertisers carry enough weight to fill the gaps between releases, or growth still comes in steps and the next pause will follow. The fourth quarter against its 9% plan, and any consumer spending figure, will tell.
🐂 Bull Case
Growth Sped Up Again After the Spring Slowdown
AppLovin earns its revenue when its software places ads inside mobile games and for online retailers. Growth arrives in steps, because each new version of its ad-targeting model lifts spending. The spring quarter had no such release, so revenue rose only 4% from the quarter before.
This quarter the step came. Revenue reached $2.18 billion, up 14% from the previous quarter and above the top of the company's own range. The fourth-quarter plan calls for about 9% quarterly growth, faster than the previous plan set for this quarter.
- Growth from a year ago: 55%, after 53% in the spring
- Revenue against the plan: 5.5% above the middle of the range, after a 0.3% shortfall in the spring
The dependence on model releases remains, because the outlook excludes unlaunched models, so a quarter without one would again land near the low end. But the plan rests on a higher base, set after the summer release landed.
What to watch: fourth-quarter revenue against the $2,365–2,395 million range in February. A result above the top would mean a second release or holiday retail spending added growth the plan left out.
Computing Costs Took Less of Each New Dollar
AppLovin's main variable cost is the data-centre computing that runs its ad models, booked inside cost of revenue. Management said last quarter that it spends about 10 cents of each extra revenue dollar on computing. A larger step in that spending held back adjusted EBITDA, the profit measure AppLovin plans around, in the spring.
This quarter the cost line barely moved while revenue jumped. Cost of revenue, the cost of serving the ads, fell to 11.0% of revenue from 12.4% a year ago. By our math it absorbed only about 6 cents of each new revenue dollar compared with the spring. So 87% of the extra revenue reached adjusted EBITDA, up from 70%.
The outlook supports that reading. AppLovin plans an adjusted EBITDA margin of 84–85% for the fourth quarter, above the 83% it set for this one. That leaves room for computing spend to grow with revenue, but not for another spring-sized step.
What to watch: cost of revenue as a share of sales in the fourth quarter. A share back above 12% would mean AppLovin added computing capacity faster than revenue again, putting the margin plan at risk.
Buybacks Doubled and Used Almost All the Cash
AppLovin returns cash to shareholders through share repurchases, and last quarter it slowed the buying because free cash flow had dropped. This quarter it spent $1.4 billion on 4.1 million shares, by our math almost all of the quarter's free cash flow.
The board also added $3.2 billion to the programme, "Given continued confidence in the Company's future", the company said. Shares outstanding fell to 331 million, 2% fewer than a year ago, so each share now earns a larger part of profit.
What to watch: the fourth-quarter buyback total next to free cash flow. A figure near this quarter's would show the summer slowdown was about cash timing, as management said, and not a policy change.
Positives this quarter didn't test
The release carries no executive commentary and no figures on who is spending, so three drivers of the growth case got no new reading. Each would move the case once AppLovin gives the number.
- Consumer advertisers (online retailers buying through AppLovin): spending set a record last quarter, 28% above late-2025 levels; a higher holiday figure would confirm a second growth source.
- Mid-market advertisers arriving through analytics partnerships, new last quarter: the count onboarded since the June opening of AppLovin Ads Manager, its self-serve ad-buying tool.
- Gaming advertisers after the summer model release: a growth rate for games would show whether record consumer spending adds to gaming or replaces it.
🐻 Bear Case
Profit Growth Leans on Income Outside Operations
AppLovin headlined net income up 72% from a year ago. Income from operations, the profit from selling ads before interest, investments and tax, rose 58%. The gap between the two comes from items outside advertising.
Other income reached $86 million this quarter against a $7 million loss a year ago, and the release does not say what it holds. Last quarter the line held investment gains and interest income. By our math net income would have risen 63% without it.
- Stock-based compensation: 3.9% of revenue, up from 2.4% a year ago
- Research and development: 4.7% of revenue, up from 3.1% a year ago
- Adjusted EBITDA: excludes all of the stock pay and most of the other income
The fourth-quarter plan is set in adjusted EBITDA, so neither item disturbs the margin AppLovin reports against. But stock pay is a real cost because it adds shares, and it took 1.5 percentage points more of revenue than a year ago.
What to watch: the breakdown of other income in the quarterly filing. A large investment gain would mean the 72% headline overstates the operating business's growth by about 9 percentage points, by our math.
Cash Still Trails the Year's Conversion Target
AppLovin measures its cash generation as free cash flow divided by adjusted EBITDA, the share of profit that turned into cash. Management said in August that the share would improve this quarter and reach roughly 75% for the year.
The first part came true. Free cash flow was $1.42 billion, or 77% of adjusted EBITDA. That is up from 54% in the spring, because receivables grew less, but still short of the pace the second half needs.
- First nine months: 71% of adjusted EBITDA turned into cash, by our math
- Cash taxes paid this year: $926 million, against $167 million a year earlier
- Fourth quarter needed for the target: about 85% of planned adjusted EBITDA, by our math
The gap matters because AppLovin has not reached 85% in any quarter this year, and cash taxes now run near $300 million a quarter. So the target needs either a lighter tax quarter or receivables that stop growing while revenue rises 9%.
What to watch: full-year free cash flow against adjusted EBITDA in February. A share below 75% would mean cash taxes and working capital have reset conversion lower permanently.
Risks this quarter didn't answer
Four standing concerns needed numbers the release does not contain. The 14% quarterly revenue growth argues against the most serious, competition inside AppLovin's own ad auction, but only an auction figure settles it.
- Competition in the auction: last quarter publisher earnings on MAX, AppLovin's ad-mediation software, outgrew AppLovin's own revenue; a repeat would mean rivals win more auctions.
- Creative tools: a generative video tool promised before the June launch was still unfinished in August; its status decides how many small advertisers can start.
- Install volumes: installs from AppLovin's ads fell 10% in the first half, so growth came from price per install; the filing shows whether that continued.
- Platform rules: changes by Apple and Google on user tracking and app stores, and AI regulation, get no mention in the release.
💲 Other KPIs
Money owed by advertisers grew more slowly than revenue, up 49% from a year ago. By our math receivables equal about 101 days of revenue, down from 105 a year ago. So payment terms have not loosened as the business grows, although the nine-month rise still absorbed $571 million of operating cash.
Debt above cash shrank to $342 million from $1.03 billion at the start of the year. That happened even after $2.9 billion of buybacks, because operating cash flow ran ahead of them. Cash stands at $3.17 billion against $3.52 billion of long-term debt, which has not changed in size for nearly two years.
🔮 Guidance
New. The plan has revenue rising about 9% from this quarter and 44% from a year ago at the middle of the range. The yearly rate slows because last year's fourth quarter jumped 18% from the quarter before. AppLovin has beaten the middle of its range by 4.1% on average over six quarters. If the pattern holds, revenue reaches about $2.48 billion, or 13% quarterly growth by our math.
New. Adjusted EBITDA, the profit measure the company plans around, would rise about 9% from this quarter and 44% from a year ago at the middle. By our math the plan lets 86 cents of each extra revenue dollar reach that profit line, about the same as this quarter. The yearly rate slows for the same reason as revenue: the comparison quarter was last year's biggest step.
New. The margin plan sits just above this quarter's 84.3% and above the 83% the company set for this quarter three months ago. The range means computing costs grow in line with revenue rather than ahead of it. So the step-up in spending that cut the spring margin is not in the plan.
❓ Key Questions
How much growth came from the July model release?
Revenue rose 14% from the prior quarter after 4% in the spring. The release's share tells whether the fourth-quarter plan, which leaves out models not yet launched, is cautious again or already full.
What is inside the $86 million of other income?
The line swung from a small loss a year ago and by our math added about 9 percentage points to net income growth. Gains on investments are one-time; interest on a growing cash pile is not.
What share of revenue now comes from consumer advertisers?
AppLovin last gave a share, about 10%, in mid-2025 and since then only growth comparisons. Without it, no outsider can tell whether the retail business adds to gaming or replaces part of it.
Has the generative video tool shipped to new advertisers?
Management called it the fix for advertisers who dropped out at the creative stage, and in August it was still unfinished. Its status decides how fast AppLovin Ads Manager, the self-serve tool, can add small advertisers.
Will cash conversion reach the 75% target this year?
By our math the fourth quarter must convert about 85% after 71% through nine months. The release does not repeat the August target, so a restatement or a new figure matters for the cash case.