Dive Brief:

• AppLovin reported a revenue increase of 39% year over year to $1.2 billion in Q3, according to a letter to shareholders. The results topped analyst expectations and sent shares soaring. 
• The ad-tech company’s software platform segment was up 66% YoY to $835 million for the period. AppLovin attributed the gains to further development of its artificial intelligence-powered Axon engine.
• Advertising now makes up the bulk of its software platform revenue, and AppLovin will rename the segment to “Advertising” moving forward to reflect that change. AppLovin’s app business was up 1% in Q3 to $363 million.   

Dive Insight:

Advancements in AI-driven advertising gave AppLovin a performance boost in Q3 and helped enshrine the ad-tech firm known for its mobile gaming solutions as a favorite U.S. tech stock amid a larger boom for automation software.

Underpinning the momentum is AppLovin’s Axon engine, which was revamped as a 2.0 version powered by AI in 2023 to improve targeting capabilities and agility and made major breakthroughs during the most recent financial period. Leadership said such technological step changes are hard to predict but will continue to occur as AI remains an emergent field for both the company and industry at large. Few details were offered as to what unlocked the latest jump in AI sophistication beyond executives crediting AppLovin’s engineering and research science teams. 

AppLovin expects it will see growth between 20% and 30% from its core set of mobile gaming advertisers moving forward, CEO Adam Foroughi said on a call discussing the Q3 results with analysts. AppLovin has also cracked into e-commerce as a new vertical, and plans to scale its bets there in 2025. 

“Early data has exceeded our expectations, with the advertisers in the pilot seeing substantial returns, often surpassing those from other media channels, and in many cases, experiencing nearly 100% incrementality from our traffic,” said Foroughi of e-commerce on the call. 

While the executive noted that e-commerce’s impact on revenue is not yet material, he reported that the offering is the company’s fastest-growing area.

AppLovin has shifted staff from other projects to its e-commerce team and made efforts to streamline its resources to support a promising initiative. AppLovin in April helped social commerce platform Flip relaunch its marketing platform for brands with Axon technology, along with investing $50 million in a Series C funding round for the startup.