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Back of Napkin

AppLovin Corporation APP

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AppLovin grew revenue 52.8% last quarter at an 83.9% adjusted margin, and the shares sit at $298.59 against a 52-week high of $745.61.

A business compounding at that rate with those economics has lost 60% of its value, which usually means the market disputes the numbers rather than the growth.

APP · price with moving averages

Daily · 6MWeekly · 3Y
$-29$173$374$576$777 Sep '23Apr '24Nov '24Jun '25Jan '26Aug '26 BID
EMAs82140

Source: market data.

The business

AppLovin sells advertising software. Its Axon system decides which advertisement to show inside which mobile application, and it charges advertisers for the placements it wins. Until June 2025 the company also made its own mobile games, which gave it a captive testing ground and muddied the story. It sold that business to Tripledot Studios and is now purely a platform.

The economics after the sale are unusual: essentially no capital spending, minimal cost of revenue, and adjusted earnings margins in the mid-eighties. Capital expenditure last year was under half a million dollars against $3.97B of operating cash flow, which is close to the theoretical limit of an asset-light business.

Inside the complete Back of Napkin

  1. 01The business
  2. 02The numbers
  3. 03Management
  4. 04How it fails or surprises you
  5. 05The shape of the payoff
  6. 06Closing thoughts
  7. 07Methodology

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