APP Stock Plunges 28% After-Hours On Revenue Miss And Soft Guidance — But CFO Says SEC Probe On Firm Now Closed
CEO Adam Foroughi said the Q2 revenue miss stemmed from slower-than-usual AI model improvements in the core gaming advertising business.
Higher spending on computing power to train improved models also weighed on the quarter, the company said.
CFO Matt Stumpf also said that the SEC closed its probe into the company without any action.
AppLovin (APP) shares tumbled as much as 28% in after-hours trading on Wednesday after the advertising technology company issued third-quarter guidance that fell short of Wall Street’s lofty expectations, though it simultaneously announced the closure of an SEC probe into its business practices.
At the time of writing, the stock pared some losses and was trading down 17% after hours.
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APP’s Q2 Report
AppLovin’s revenue rose 53% year-over-year to $1.924 billion in the quarter but came in just below the roughly $1.94 billion consensus. Adjusted core profit climbed 58% to $1.61 billion, landing slightly under the company’s prior guidance range, but diluted earnings per share came in at $3.76, in line with $3.75 estimates.
For the third quarter, AppLovin guided revenue of $2.055–$2.085 billion, lower at the midpoint than Wall Street estimates of $2.08 billion, and adjusted core profit of $1.71–$1.74 billion, below an estimated $1.75 billion.
Why The Shortfall?
AppLovin’s entire growth story is powered by its AI models or the smart algorithms that decide which ads to show to which people, so advertisers get better results.
CEO Adam Foroughi said the Q2 revenue miss stemmed from slower-than-usual AI model improvements in the core gaming advertising business. “Our pace of meaningful model improvement was lighter than normal during the quarter, and the next step up in model performance landed just after quarter end,” he explained. Advertiser demand remained healthy, and e-commerce customers set a new record, spending 28% more than during last year’s peak season.
Higher spending on computing power to train improved models also weighed on the quarter, the company said. Foroughi added that the company believes the business can compound at roughly 30% annually over the longer term.
SEC Inquiry Closed
On the earnings call, CFO Matt Stumpf said that the SEC probe into the company is now closed.
The inquiry, first reported in late 2025, examined AppLovin’s data-collection practices. It stemmed from a sealed whistleblower complaint filed earlier that year, along with multiple short-seller reports. Those reports alleged the company had violated platform partners’ service agreements—particularly with Apple, Google, and Meta—by using unauthorized “fingerprinting” techniques to harvest proprietary user IDs and deliver more precisely targeted advertising.