AppLovin Corporation (NASDAQ: APP) has emerged as one of Wall Street's hottest stocks following a dramatic financial performance report for the fiscal year ending December 31, 2024. The company, originally known for its gaming technologies, has reported remarkable earnings, fueling investor interest as shares surged over 30% recently upon the announcement of adjusted earnings per share of $1.73. This boost propelled the company’s market capitalization beyond $170 billion, surpassing giants like Uber and Pfizer.
According to AppLovin’s annual report, the company generated $4.7 billion in total revenue for 2024, with advertising making up the lion’s share at $3.2 billion. This figure translated to 68% of overall revenue, marking a 75% year-over-year increase. Meanwhile, the apps segment, which has long been part of AppLovin's identity, hasn't fared as well, bringing in just $1.5 billion, representing only 32% of total revenue and reflecting only a 3% growth.
Given these figures, the CEO of AppLovin, Adam Foroughi, announced plans to sell the company’s apps business for approximately $900 million. The decision signals a definitive pivot toward advertising as the core focus of the company’s future operations. The negotiation process for the sale is reportedly already underway, with the potential buyer remaining undisclosed.
"We’ve never been a game developer at heart," Foroughi stated, reflecting on the company's fundamental shift. The move to divest the apps business aligns with the executive's strategy to redefine AppLovin as primarily an advertising platform rather than being hampered by its previous gaming-centric identity. This transition appears not only timely but also strategic, as the company can capitalize on its successful advertising operations.
Notably, within the last quarter of 2024 alone, AppLovin’s advertising revenue totaled $999.5 million, significantly eclipsing app revenue, which stood at merely $373.3 million. The adjusted EBITDA for the advertising business also far outstripped the apps side, with figures at $2.4 billion versus $277 million respectively.
Foroughi elaborated, saying, "Historically, most of our ads focused on advertising for other games, but now we’re attracting a broader set of advertisers." The CEO expressed excitement about the validated success of their platform, which is set to accommodate various business sectors beyond gaming, indicating expansive future prospects.
To sustain its momentum, AppLovin is also intensifying its focus on artificial intelligence (AI) capabilities. Senior executives highlighted their “self-learning” AI, known as AXON, which is built on extensive first-party data collected from the company's gaming titles. The strategic utilization of AI underlines AppLovin's ambition to innovate and improve its advertising services, targeting both app developers and brands seeking to broaden their customer reach.
For the fourth quarter collectively, the company showcased consistent operational profitability, reporting $701 million from operating activities, and $695 million as free cash flow. The year culminated with significant stock buybacks, demonstrating the company's confidence and financial stability, as it retired over 25 million shares at nearly $2.1 billion.
CFO Matt Stumpf commented on the company’s future, stating, "We’re excited to announce we’ve signed a terms sheet to divest our apps business. Total estimated consideration is $900 million, including $500 million in cash with the remainder representing a minority equity stake in the combined private company.” With expectations to close the transaction within the first quarter of 2025, the transition appears smooth yet pivotal.
Overall, AppLovin's financial performance speaks volumes about its strategic transformation and future plans. By choosing to become "a pure advertising platform,” the company is not only positioning itself for substantial growth but also tapping more broadly defined markets beyond its gaming roots. The leadership’s focus on diversity within its advertising sector reveals optimistic projections as the company expertly navigates through the rapidly changing digital advertising economy.