Outperforming Ad Tech While Ditching Its Gaming Roots
AppLovin reported its first-quarter 2025 earnings on Wednesday, May 7, delivering a financial performance that left analysts stunned and investors cheering. The company posted strong topline growth, expanded margins, and continued its transformation into a pure-play advertising platform by shedding the legacy gaming business that once defined it. With advertising now driving nearly the entirety of revenue and profit, AppLovin has become a full-fledged AI-driven ad tech powerhouse, clearly outpacing its rivals in both growth and profitability.
A Quarter That Redefined AppLovin’s Business Model
The Q1 2025 earnings weren’t just another solid beat – they marked the completion of AppLovin’s multi-year pivot from mobile game publisher to dominant advertising platform. Revenue soared to $1.48 billion, up 40% from Q1 2024’s $1.06 billion. Net income hit $576 million, representing a 144% year-over-year increase, while adjusted EBITDA grew 83% to $1.01 billion. The advertising segment did nearly all the heavy lifting, growing 71% year-over-year to $1.16 billion, thanks to the continued momentum of AXON 2.0, AppLovin’s AI-powered ad targeting engine. The Apps segment, by contrast, declined 14% to $325 million – marking not a stumble, but an intentional step back from a legacy business that AppLovin is now officially exiting.
Indeed, in a move that formalized this shift, AppLovin announced the sale of its mobile gaming division to Tripledot Studios for $800 million, half of it in cash and the other half in equity. The deal makes AppLovin a minority shareholder in one of the world’s largest independent mobile games companies, while freeing up capital and focus to pursue high-margin ad tech growth.
Revenue Growth: A League of Its Own
AppLovin’s 40% year-over-year revenue growth stands out not only for its magnitude but also for what it represents. The company’s topline expansion dramatically outpaces the growth of its closest competitor, The Trade Desk, which grew by 26% in 2024, and dwarfs the growth of programmatic advertising at large, which is expected to expand by only about 14% this year. Even more impressively, AppLovin has maintained an average of 42% growth over the last six quarters, driven largely by advertiser demand for AXON’s predictive capabilities, which optimize media spend across mobile and increasingly, e-commerce. By any standard, AppLovin has become the fastest-growing major independent player in programmatic advertising.
AppLovin Becomes a Pure-Play Ad Company
AppLovin’s business is divided into two segments: Advertising (formerly Software Platform) and Apps (mobile games). In Q1 2025, Advertising made up 78% of total revenue, a sharp increase from 64% a year ago. The Apps segment accounted for the remaining 22% – but not for long. With the Tripledot sale, the Apps business will disappear from future earnings reports, making AppLovin a true software-first company.
This evolution reflects a radical departure from AppLovin’s past. In 2019, games made up 80% of revenue. Today, they’re a footnote. AppLovin’s shift is all the more noteworthy because it has done so while maintaining strong growth, high profit margins, and a diverse product portfolio.
AXON 2.0 sits at the heart of the Advertising segment’s growth. The AI engine powers media buying across apps, web, and e-commerce, increasingly positioning AppLovin as an omni-channel DSP competitor to not just Trade Desk, but also Google, Meta and Amazon. The number of app downloads and installations that AppLovin helped generate for app developers advertising on its ad tech platform grew by 22%, and the average revenue developers realized per install increased 49% year-over-year, underlining AXON’s momentum.
Room to Grow Abroad
AppLovin reports revenue by two regions: the United States and International. In Q1 2025, international markets represented about 40% of total revenue, a figure that has held steady for the past few years. While this share is respectable – especially compared to The Trade Desk, which earns nearly 90% of its revenue from North America – it has not meaningfully increased. The current geographic mix likely reflects AppLovin’s deeper historical entrenchment in the U.S. gaming ecosystem.
With its gaming business gone, and an AI-powered ad platform that knows no borders, the opportunity now is to grow the international share to parity or beyond. Expanding into regions where performance-based advertising is underpenetrated could be the next frontier for AXON and the broader advertising platform.
Profits Surge on Advertising Scale, Margins Expand
Net income for the quarter was $576 million, yielding a net profit margin of 39%. This compares to $235 million and a 22% margin in Q1 2024 – a dramatic expansion made possible by AppLovin’s focus on software. Advertising now delivers an 81% segment EBITDA margin, up from 73% just one year ago. Meanwhile, the Apps segment posted a 19% margin, modestly higher than the 15% range it hovered in before.
AppLovin’s cost structure is lean and highly scalable. In 2024, revenue per employee neared $4 million, well above Google’s $2 million, Meta’s $1.4 million, and The Trade Desk’s $600,000.
Exceeding Own Guidance and Analyst Expectations
AppLovin crushed expectations on all fronts. Analysts had expected revenue of $1.38 billion, but the company delivered $1.48 billion. EPS came in at $1.67 versus a consensus estimate of $1.45. Adjusted EBITDA hit $1.01 billion, beating the high end of forecasts. Even after a record-setting 2024, AppLovin’s performance still managed to surprise the market – proof that its AI engine continues to deliver incremental gains not foreseen by forecasting.
The company also raised guidance for Q2 and FY25, with revenue projected to grow more than 60% year-over-year in Q2. With shedding its gaming business, AppLovin’s future looks more focused and formidable than ever.
A Stock That Moves With the Business
AppLovin’s stock surged more than 13% in after-hours trading following the earnings release. Despite being targeted by short sellers earlier this year – who questioned the scalability and authenticity of AXON’s AI – the stock has rebounded, supported by consistent execution and transparency. AppLovin now trades at a valuation above $100 billion, nearly four times that of The Trade Desk’s, and a clear signal that Wall Street sees it as the new top dog among independent AdTech vendors. And this isn’t just a one-quarter phenomenon. Over the past year, AppLovin shares are up nearly 300%, making it one of the best-performing tech stocks in the market.
War Chest and Future Moves
As of the end of Q1, AppLovin held $832 million in cash and equivalents, bolstered by strong free cash flow and the proceeds of the Tripledot deal. This capital provides ample room to invest in R&D, expand internationally, and pursue strategic acquisitions.
However, for now, AppLovin appears focused on deepening its ad tech stack organically rather than buying its way into new markets. However, its successful integration of its MoPub (2022) and Adjust (2021) acquisitions still stand out in an industry where acquisitions often fail to deliver promised synergies.
Looking Ahead: New Horizons in a Changing Ad Tech Landscape
In Q1 2025, AppLovin didn’t just deliver results – it announced a new phase of its evolution. With the mobile games business off its balance sheet and a rebrand of its software unit to simply “Advertising,” the company has simplified its identity and clarified its ambitions. AppLovin is now positioning itself to expand into e-commerce, fintech, and possibly into connected TV.
Its strengths are formidable: AI-powered ad targeting, scalable infrastructure, high-margin revenue, and a track record of executing transitions with precision. Its main weaknesses may include overreliance on mobile app environments and some lingering reputational risk from earlier controversies and short-seller scrutiny.
Still, the opportunities outweigh the risks. As more brands look for performance-driven alternatives to walled gardens, and as retail media, commerce media, and AI-targeting go mainstream, AppLovin is sitting at the center of these trends.
The broader digital advertising market is forecast to grow by about 9% – 10% this year. AppLovin, by contrast, is growing at 40%+ while delivering 80% EBITDA margins. That’s not just good – it’s elite.
Conclusion: From Underdog to Ad Tech Alpha
AppLovin’s Q1 2025 earnings make it clear that the company is no longer a dark horse. It is the new leader in independent advertising technology. With AXON 2.0 delivering strong returns, gaming now in the rear-view mirror, and new verticals on the horizon, AppLovin is shaping the future of programmatic media in its own image. If Q1 is any indication, that future is arriving faster than anyone expected.
About AppLovin
AppLovin is a leading AI-powered advertising platform that helps businesses reach, monetize, and grow their audiences across mobile and beyond. Learn more at www.applovin.com.
Leave a Reply