AppLovin (APP) shares tumbled as much as 28% in after-hours trading on Wednesday after the advertising technology company issued third-quarter guidance below Wall Street estimates, though it announced the closure of an SEC probe. CEO Adam Foroughi attributed the Q2 revenue miss to slower-than-usual AI model improvements in the core gaming advertising business. The company also faced higher spending on computing power to train improved models. CFO Matt Stumpf confirmed the SEC closed its inquiry into the company without any action, resolving a probe that examined data-collection practices.
AppLovin Reports Q2 Revenue of $1.924 Billion, Misses Estimates
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. Diluted earnings per share came in at $3.76, in line with $3.75 estimates. At the time of writing, the stock pared some losses and was trading down 17% after hours.
AppLovin Issues Q3 Guidance Below Wall Street Expectations
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. The company guided adjusted core profit of $1.71--$1.74 billion, below an estimated $1.75 billion.
CEO Cites Slower AI Model Improvements as Revenue Miss Factor
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 Closes AppLovin Inquiry With No Enforcement Action
CFO Matt Stumpf said on the earnings call 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. As of February 2026, the agency still described the probe as "active and ongoing." "The SEC has recently advised us that it concluded its inquiry with no recommended action. We're pleased to have it resolved," Stumpf said. No enforcement action or findings of wrongdoing were issued, he added. Management emphasized that Q3 is already off to a strong start with the latest AI model improvements live, and the business is back on its expected trajectory.
Retail Traders Maintain Bullish Sentiment Despite Stock Drop
On Stocktwits, retail sentiment around APP stayed within the 'extremely bullish' territory over the past 24 hours, while message volume rose from 'high' to 'extremely high' levels. A Stocktwits user termed the after-hours selloff an "overreaction." Another user voiced concerns that the earnings are a sign that the AI-spurs-growth story is starting to weaken. APP stock has fallen 38% year-to-date.
FAQ
Why did AppLovin stocks drop 28% after-hours on Wednesday?
AppLovin stocks dropped as much as 28% after-hours after the company issued third-quarter guidance below Wall Street estimates. The Q3 revenue guidance of $2.055--$2.085 billion fell short of the $2.08 billion consensus, and adjusted core profit guidance of $1.71--$1.74 billion missed the $1.75 billion estimate.
What did AppLovin's CEO say caused the Q2 revenue miss?
CEO Adam Foroughi said the Q2 revenue miss stemmed from slower-than-usual AI model improvements in the core gaming advertising business. He explained that "the 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." Higher spending on computing power to train improved models also weighed on the quarter.
What is the status of the SEC probe into AppLovin?
CFO Matt Stumpf confirmed on the earnings call that the SEC has closed its inquiry into AppLovin with no recommended action. The probe, first reported in late 2025, examined the company's data-collection practices. No enforcement action or findings of wrongdoing were issued.
