Analysis of AppLovin Corporation’s Q2 2026 10-Q
Filing dated 5 August 2026 for the quarter ended 30 June 2026
Where the filing and the story diverge
AppLovin’s Q2 numbers are exceptional: revenue up 53% to $1.92B, a 77.7% operating margin and net income of $1.27B. The 10-Q shows few accounting risks. The questions are narrower: cash conversion fell as cash taxes jumped, share-based pay grew almost three times as fast as revenue and now makes up 69% of R&D, and the company still owes $346.5M on a cloud-computing commitment.
- Three findings: Cash conversion fell as cash taxes jumped sixfold; Share-based pay rose 148%, and is now 69% of R&D; Compute costs are growing slower than revenue, with $346.5M still to pay on a cloud commitment. Each is set out below with the figure, where it sits in the filing and what would close it.
- What it does not show. Nothing here shows a misstatement.
- Q2 revenue
- $1,923.7M, up 53%
- Operating margin
- 77.7%
- Net income
- $1,266.5M
- Adjusted EBITDA
- $1,613.8M, 83.9% margin
- Net debt
- $461.8M
Area by area: what is solid and what is stretched
AppLovin’s margins, revenue growth and balance sheet are strong. The open questions are cash conversion, the pace of share-based pay, and how much guidance now relies on improvements already live.
Three findings, ranked by importance
Each is set out in full below: what the filing shows, the numbers, the evidence and what would close it.
Cash conversion fell as cash taxes jumped sixfold
Six-month operating cash flow was $2,160M against net income of $2,472M. Cash taxes paid rose to $639.8M from $100.6M, and Q2 free cash flow was 53.5% of adjusted EBITDA against 75.4% a year earlier.
Management attributes the shortfall to the timing of international cash taxes and interest, and expects full-year free cash flow to return to about 75% of adjusted EBITDA. Receivables also absorbed $352.6M in the half and accrued liabilities $125.0M. Q2 operating cash flow was 0.69 times Q2 net income (our calculation). The effective tax rate rose to 15.9% from 12.7%, consistent with the higher cash tax bill.
10-Q cash flow statement and supplemental cash flow disclosures; the call for management’s explanation.
Share-based pay rose 148%, and is now 69% of R&D
Total share-based pay rose to $85.8M from $34.6M. R&D share-based pay quadrupled to $68.9M, 69% of R&D expense; excluding it, R&D grew about 15% (our calculation).
At 4.5% of revenue, share-based pay is still low for a software company, so this is a question of direction rather than size. R&D expense rose 127% to $99.9M, almost entirely from equity awards. Buybacks of $1.5B in the half reduced shares outstanding by about 3.0M, so far more than offsetting the dilution from awards.
The 10-Q share-based pay note, broken down by expense line.
Compute costs are growing slower than revenue, with $346.5M still to pay on a cloud commitment
Datacentre costs rose 40% to $181.0M while revenue rose 53%, about 7.8 cents per incremental revenue dollar against management’s guide of about 10 cents. Of a $1.3B amended compute commitment, $953.5M has been paid, leaving $346.5M.
The remaining commitment is about 11% of cash, so it is easily covered. The disclosures come through AppLovin’s own XBRL tags for datacentre costs and purchase-obligation payments, which do not exist in the standard taxonomy. AppLovin also changed its guidance approach on the call: the Q3 guide now includes model improvements already live, where it previously excluded unreleased improvements, which makes guidance comparisons less like-for-like.
10-Q segment cost table and commitments note; the call for the compute guide.
Other findings, checked and set aside
Each item was tested against the filing. None changes the lead findings above.
| Item | What the filing shows, and why it is not a lead finding |
|---|---|
| XBRL: three custom tags carry new numbers | Datacentre costs ($181.0M), purchase-obligation payments ($953.5M) and the amended commitment ($1.3B) sit on AppLovin’s own tags; all match the printed notes. |
| XBRL: three different scales in one filing | Statements are in thousands, the related-party note in millions and insider-plan figures in single shares, which can mislead anyone pulling the data automatically. |
| Adjusted EBITDA reconciliation | Rebuilt from net income: $1,613.8M ties exactly. |
| Apps sale (2025) | $715.6M consideration including Tripledot shares worth $285.0M; a $106.2M pre-tax gain in the first half of 2025. |
| Internal-use software | Software development is expensed, with no material capitalisation, a conservative policy. |
| Not disclosed | Remaining performance obligations, billings, a receivables credit-loss allowance and the foreign cash split are not in the 10-Q. |
7 disclosures moved
10-Q Q2 2026 compared with the 10-K for 31 December 2025.
| Status | Disclosure | Before | Now |
|---|---|---|---|
| Removed | Discontinued operations (Apps business) Q2 2026 vs Q2 2025 · income statement | +$47.7M in Q2 2025 | None |
| New | ASU 2025-06 (internal-use software) Adopted early, 1 January 2026 | Not adopted | Adopted, no material impact |
| Changed | Compute commitment paid Commitments note | Partly paid | $953.5M of $1.3B paid |
| Changed | Net debt Balance sheet (our calculation) | $1,025.9M | $461.8M |
| Changed | Guidance approach Q2 call | Excluded unreleased improvements | Includes live model improvements |
| Removed | SEC inquiry Q2 call | Voluntary request open | Concluded with no recommended action |
| Changed | Insider trading plan (V. Valenzuela) 10-Q Part II | Plan ended 15 May 2026 | New plan adopted 11 June 2026 |
The first quarter with no discontinued operations, a new accounting standard adopted, a closed SEC inquiry and a change in how guidance is set.
5 markers for 4 November
Set before the numbers, so the read can be checked afterwards.
| Marker | Now | Gap widens if | Gap closes if | Result |
|---|---|---|---|---|
| Q3 revenue | Guided at $2,055M to $2,085M | Below $2,055M | Within or above the range | Awaiting |
| Q3 adjusted EBITDA | Guided at $1,710M to $1,740M | Below $1,710M | Within or above the range | Awaiting |
| Free cash flow conversion | 53.5% of adjusted EBITDA in Q2; management expects about 75% for the year | Q3 conversion stays at or below Q2’s 53.5% | It moves back toward 75% | Awaiting |
| Incremental compute cost | About 7.8 cents per extra revenue dollar | Above management’s guide of about 10 cents | At or below about 10 cents | Awaiting |
| Share-based pay | +148% in Q2 against revenue +53% | Again grows faster than revenue | Grows no faster than revenue | Awaiting |
These are monitoring checks set before the numbers, not forecasts of a loss or breach.
6 questions, checked against the call
Raised by the 10-Q. To be tested again at Q3 results on 4 November.
What this does and does not show
Revenue from a company AppLovin part-owns
AppLovin earned $18.0M in Q2 ($42.9M in six months) from Tripledot, in which it took about 22% when it sold its Apps business; about 1% of revenue.
Not tested on a call in this read.
What would resolve this: Pricing and cash settlement terms are disclosed.
Buybacks continue at pace
$1.5B of repurchases in six months, with $1.8B of authorisation remaining; shares outstanding fell by about 3.0M.
Not tested on a call in this read.
What would resolve this: Buybacks stay funded from free cash flow.
Guidance now includes live model improvements
The Q3 guide includes model improvements already in production, a change from the prior approach of excluding them.
Not tested on a call in this read.
What would resolve this: Results land within the guide on the new basis.
Nothing here shows a misstatement.
Margins, growth and the balance sheet are strong, the commitment is well covered, and the cash shortfall is explained as timing.
- Free cash flow conversion returns toward 75%
- Share-based pay slows to revenue growth
- Compute cost stays under the guide
- Results land within the new-basis guide
- Cash conversion stays near 53%
- Share-based pay keeps outgrowing revenue
- Compute cost per revenue dollar rises past 10 cents
- Receivables keep outgrowing revenue
Every figure ties back to the filing
| AppLovin Form 10-Q, quarter ended 30 June 2026 | Open ↗ |
| Q2 2026 results release (Exhibit 99.1), 5 August 2026 | Filed with the SEC |
| Q2 2026 earnings call | Third-party transcripts |
Helmledgers reads the full filing, including the notes, and ties every figure to the statement or note it comes from, with each number re-checked against the source before release. This is an accounting read of public SEC filings, not an audit opinion and not investment advice.
- Severity
- High: material effect on cash, debt or reported results. Medium: worth tracking, smaller or less certain effect.
- On the call
- Direct answer, Partly answered (topic addressed, figure missing), Sidestepped (raised but not answered) or Not asked.
- Since the read
- Confirmed by a later disclosure, Escalated (grown since), Open (untested) or Missed (not flagged by the read).
- Said versus done
- Kept, Slipped (late), Changed (plan or terms changed), Missed or Reversed.
- Markers
- Measurable checks set before results, each with what would widen or close the gap. Scored after the next results.
- Closes if
- The evidence that would resolve a finding.
Helmledgers and its analysts hold no position in AppLovin (APP) securities.
This is an accounting read of public SEC filings. It is not an audit opinion and not investment advice.