AppLovin Posts Q3 Beat, Hybrid Model Rollout Lifts Sentiment: Analysts

AppLovin Corp (NASDAQ:APP) rallied in early trading on Thursday, after the company reported its third-quarter results on Wednesday.

Here are some key analyst takeaways:

• Wedbush analyst Alicia Reese maintained an Outperform rating and raised the price target from $560 to $600.
• BTIG analyst Clark Lampen reiterated a Buy rating and raised the price target from $396 to $450.
• Needham analyst Bernie McTernan reaffirmed a Buy rating and price target of $475.

Check out other analyst stock ratings.

Wedbush: AppLovin reported revenue of $2.185 billion, about 5% ahead of expectations, and adjusted EBITDA of $1.842 billion. The company beat the high end of the guidance range by $102 million, Reese said in a note.

AppLovin’s revenue guidance implies 8%-10% sequential growth, representing a slowdown from the third quarter’s 14% growth. Still, management guides “only to what it can already see," Reese said. The company reported above the high end of its revenue outlook range in 14 of the last 15 quarters.

A model update in AppLovin’s core gaming business lifted growth to nearly 50% year-on-year in the third quarter, and its rollout is still ongoing, the analyst noted. "Net revenue per installation grew 55% against a 75% comp, and the two-year growth held, which does not look like a maturing take rate," she further wrote.

BTIG: The key driver of AppLovin’s quarterly results was the partial rollout of a hybrid model that combines RecSys (recommendation system) and LLM (large language models), Lampen said.

BTIG’s 2027 revenue and EBITDA estimates had been raised from of $9.851 billion to $10.482 billion and from $8.200 billion to $8.713 billion, respectively, to reflect the latest model rollout, the analyst stated. This still "leaves room for revisions through future stages of the rollout," he added.

Needham: After a setback in the second quarter, AppLovin returned to reporting quarterly results well ahead of expectations. Although the new model is only partially rolled out, it drove revenue growth to over 50% year-on-year.

"The model does better with sparse data, which should help smaller advertisers," McTernan said. Management’s fourth-quarter guidance includes only live improvements, suggesting potential upside, he added.

APP Price Action: Shares of AppLovin had risen by 29.23% to $351.18 at the time of publication on Thursday.

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