AppLovin reports record growth as advertising business soars 75% in 2024

According to AppLovin Corporation's fourth quarter and full year 2024 financial results released on February 12, 2025, the marketing technology company achieved significant growth in its core advertising business, while announcing plans to divest its mobile gaming division.

The Palo Alto-based company reported total revenue of $4.7 billion for 2024, representing a 43% increase from 2023. The advertising segment, which was renamed from "Software Platform" to better reflect its focus, grew 75% year-over-year to reach $3.2 billion in revenue.

Net income for 2024 reached $1.6 billion, compared to $357 million in 2023, with a net margin expanding to 34% from 11%. According to the company's financial statements, adjusted EBITDA increased 81% to $2.7 billion, achieving a 58% margin.

During an earnings call, CEO Adam Foroughi stated that the fourth quarter marked a significant milestone for the company's advertising technology. "For the first time, we captured meaningful holiday shopping advertising dollars and witnessed the impact of an advertising category beyond solely gaming contributing to our growth," Foroughi said.

The company's strategic shift became apparent with the announcement of a term sheet for the sale of its mobile gaming business. According to regulatory filings, the proposed transaction values the gaming division at $900 million, consisting of $500 million in cash and $400 million in equity of the acquiring private company.

Technical performance metrics showed continued improvement. The company's advertising segment achieved a 78% adjusted EBITDA margin in the fourth quarter, while maintaining efficiency with approximately $3 million in run-rate adjusted EBITDA per employee in the advertising business.

Looking ahead to 2025, AppLovin provided first-quarter guidance for advertising revenue between $1.03 billion and $1.05 billion, with adjusted EBITDA projected between $805 million and $825 million.

Strategic Gaming Division Sale Sets Focus on Advertising Technology

According to regulatory filings on February 12, 2025, AppLovin has entered into a non-binding term sheet to sell its entire mobile gaming business, which includes studios behind popular titles generating $1.5 billion in revenue for 2024. The proposed transaction, valued at $900 million, involves divesting all ten gaming studios that AppLovin acquired and operated over the past seven years. Matt Stumpf, Chief Financial Officer of AppLovin, stated during the earnings call that the transaction is expected to close within the second quarter of 2025, subject to regulatory approval.

The gaming division sale marks a strategic shift from AppLovin's previous business model. According to Adam Foroughi, AppLovin's CEO, the company initially acquired gaming studios to help train its earliest machine learning models, which proved instrumental in developing the AI technology that now underpins their AXON advertising platform. "We have immense respect for the creativity it takes to build games, including from teams in our studios. Today, we're announcing they'll soon be part of a company that specializes in and champions game development," Foroughi explained during the earnings call.

The sale encompasses major mobile gaming studios that collectively reached 1.6 million monthly active paying users in the fourth quarter of 2024, according to the company's financial update. While the name of the acquiring company remains undisclosed in the term sheet, the transaction structure reveals that AppLovin will maintain a connection to the gaming industry through a $400 million minority equity stake in the combined private entity. The deal also includes provisions for up to $250 million in financing from AppLovin if the acquirer cannot secure external funding, according to the Form 8-K filing.

The company outlined several technical initiatives for 2025

• Enhancement of advertising AI models
• Implementation of personalized ad experiences using generative AI
• Development of a self-service dashboard with AI agents
• Expansion into connected TV advertising

Financial Impact

• Free cash flow: $2.1 billion in 2024
• Cash and cash equivalents: $741.4 million as of December 31, 2024
• Share count: 340 million outstanding shares
• Debt position: $3.5 billion in long-term debt

Timeline of Key Events

• February 12, 2025: Q4 2024 earnings release and gaming division sale announcement
• February 10, 2025: Chief Marketing Officer resignation announced
• January 8, 2025: Q4 earnings date announcement
• November 20, 2024: $3.55 billion senior notes offering
• Q4 2024: First significant revenue from e-commerce advertising
• 2024: 75% year-over-year growth in advertising revenue
• 2023: AXON platform upgrade implementation