AppLovin Revenue Jumped 53%. So Why Did the Stock Just Plunge 20%?

AppLovin's revenue growth was strong but slightly missed expectations.

Investors weren't loving AppLovin 's (NASDAQ: APP) Q2 results, and a difficult year for the stock just got worse. The stock crashed last week after it missed revenue expectations, and its shares have been cut in half this year, as of this writing.

Let's dig into the adtech company 's results and prospects to see if this dip is a good buying opportunity.

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Since the launch of its artificial intelligence (AI) adtech platform, Axon 2.0, in 2023, AppLovin has seen tremendous growth. While its Q2 results came up short of analyst expectations, its growth was still strong. The company's revenue climbed 53% to $1.92 billion, which was just shy of the $1.94 billion analyst consensus.

The company said the miss was due to its model not improving at its typical pace, and that the next big boost in model performance did not occur until after the quarter ended. Axon 2.0 helps gaming-industry advertisers attract more customers, and as its AI model improves and advertisers see better returns on their spending, ad spending on its platform tends to increase. It said it saw no signs of increased competition or weakening demand and that growth is already reaccelerating.

AppLovin believes its gaming ad business can compound at 30% annually over the long term. As such, it is investing in computing power and architectural changes that will help it build more complex models.

While revenue came up just short of expectations, adjusted EPS came in slightly above expectations. Earnings per share (EPS) from continuing operations climbed 57% from $2.39 a year ago to $3.76, beating the consensus by $0.01. Adjusted earnings before interest, taxes, depreciation, and amortization ( EBITDA ), meanwhile, jumped 58% year over year to $1.6 billion.