AppLovin Corp Q1 FY2026 Earnings Call

Welcome to AppLovin's earnings call for the first quarter ended March 31, 2026. I'm David Hsiao, Head of Investor Relations. Joining me today to discuss our results are Adam Foroughi, our Co-Founder and CEO; and Matt Stumpf, our CFO. Please note, our SEC filings to date as well as our financial update and press release discussing our first quarter performance are available at investors.applovin.com. During today's call, we will be making forward-looking statements, including, but not limited to, the future development and reach of our platform, our expected growth opportunities, the expected future financial performance of the company and other future events. These statements are based on our current assumptions and beliefs, and we assume no obligation to update them, except as required by law. Our actual results may differ materially from the results predicted. We encourage you to review the risk factors in our most recently filed Form 10-K for the year ended December 31, 2025. Additional information may also be found in our quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2026, which will be filed today. We will also be discussing non-GAAP financial measures. These non-GAAP measures are not intended to be superior to or a substitute for our GAAP results. Please be sure to review the GAAP results and the reconciliations of our GAAP and non-GAAP financial measures in our earnings release and financial update available on our Investor Relations site. This conference call is being recorded, and a replay and transcript will be available for a period of time on our IR website. Now I'll turn it over to Adam and Matt for some opening remarks, then we'll have the moderator take us through Q&A.

Thanks, everyone, for joining us today. I want to start this call a little bit differently than our last few. No preamble on stock price, no addressing short sellers, no reacting to noise. This quarter, the conversation is about us and our future. And from where we sit, the future has never looked better. We just delivered another quarter where we beat our own guidance. Again, we continue to grow this business very quickly despite the numbers getting much bigger, and we are doing it while margins keep expanding. The rate of top line growth, profitability and free cash flow generation that we are delivering is exceptionally rare in public markets, and our team deserves all the credit for that. What I want to spend my time on today is the opportunity ahead because we are quickly moving through a lot of the goals we set for the business this year, and we are now well on our way to opening up our platform to the public in June. That is a major milestone. For 14 years, we have been a closed platform. Come June, advertisers across the world will be able to sign up for Axon and start running campaigns. That changes the trajectory of this company in a very meaningful way. Let me start with gaming because it remains the foundation of everything we do, and it is performing really well. A couple of weeks ago, we hosted our annual Gaming CEO Summit. We bring in the top executives from the biggest mobile gaming companies in the world, and the energy this year was unlike anything I have seen. These companies have been our closest partners for over a decade in many cases, and the excitement was strong. There is a real sense that we are entering a new phase of growth for the industry and our platform is at the center of it. Here is what is driving that excitement. First, AI technologies are now enabling these studios to do things they cannot do before. Incumbent gaming companies, the ones that already have successful titles, can now use AI tools to improve their current games faster and cheaper. More importantly, it is giving them the confidence to launch new games. The cost of experimentation has come down dramatically, and that is unleashing a wave of new content that is really healthy for our ecosystem. Second, we are seeing a meaningful shift in how these companies think about monetization. Games that historically only made money from purchases are now really focused on testing hybrid models where they also unlock incremental revenue from ads. This is a big deal. For years, a lot of these IAP-only games would not run ads because they did not want to promote competing titles. But as we scale advertisers who are not gaming companies, whether apps or websites, e-commerce or other categories, which we now call our consumer vertical, those concerns go away. A cookware company or a fashion brand is not competition to a puzzle game. So we fully expect to see a lot of IAP-only games start monetizing with ads that will not be deemed competitive. That is going to be a strong tailwind for many quarters. Together, we and our gaming partners can acknowledge that our platform is driving the market's leading scale and return on ad spend and continues to help the industry grow faster than expected. The ad-supported part of the ecosystem continues to grow at really healthy rates, multiples faster than the growth of the more mature in-app purchasing category. As we look forward, we expect to see much more high-quality content come to market that taps into both ads and in-app purchasing monetization, and that plays really well into our strengths. Now that brings me to the consumer vertical, which is growing even faster than gaming. This is still only a 1.5-year-old product. I want people to really internalize that. And it is scaling at a pace that gets us very excited. A couple of weeks ago, we had another material model release that improves scale and return on ad spend significantly for our consumer advertisers. These are the types of compounding improvements we have talked about on prior calls. The team improves the model, advertisers see better returns and they put more budget into our system. It is a virtuous cycle, and it is working. The consumer vertical exited the quarter very strong with March growing roughly 25% more than the numbers we did in January and April reaching a record month in advertiser spend, higher than any peak Q4 month. That kind of acceleration is exactly what you want to see from a product that is still early in its development curve. Advertisers are seeing real success on our platform, and they are ramping aggressively. We are thrilled that this is happening, and we are really excited about what comes next. When we open up our platform in June and start pursuing our mission of helping all the businesses in the world add another material marketing channel to their set of opportunities, that is when this thing just continues to compound. We've always said we want to help the smaller businesses scale. Last quarter, I highlighted an Israeli cookware company that went from $4 million in revenue to $16 million to now projecting $80 million with the majority of their ad spend on our platform. That is the kind of story we want to replicate thousands of times over. As we look forward, one of the things that I'm most excited about is how advertisers will interact with our platform. We are already seeing advertisers use AI agents to manage their marketing spend, and we are building Axon to be natively accessible to those agents. Between self-serve access in June, our AI-powered ad creative tools and agent-compatible infrastructure, we are building a system where an advertiser can onboard, generate high-performing ads and scale campaigns profitably without ever needing to talk to a human. We're also showing up more, with podcasts, sponsorships and a larger voice in the market. That visibility reflects a deeper conviction: Axon-powered growth isn't a niche phenomenon. It's a blueprint for transformation at a scale the world hasn't seen yet. Millions of businesses—that's the opportunity in front of us. Let me close with this. We are a focused company, more excited about our opportunities than at any point in our history. The gaming business is strong, our partners are energized, and we are helping the industry grow. The consumer vertical is scaling fast, and we are just getting started. Our platform opens to the world next month. We will continue to ignore noise, execute on our path forward, perform well and drive value to our customers. We know that, in turn, that will set us up for a much bigger future than where we are today. With that, I will turn the call over to Matt to walk us through the financials.

Thanks, Adam, and thanks to everyone for joining us today. Q1 was another exceptional quarter. We exceeded the high end of our guidance on revenue and adjusted EBITDA, expanded margins to a new high and continued our disciplined return of meaningful capital to shareholders. Revenue in the first quarter was $1.84 billion, up 59% year-over-year and 11% sequentially, driven by continued technology advancements across our core gaming business and our expanding consumer vertical. Adjusted EBITDA was $1.56 billion, up 66% year-over-year, representing an 85% margin. Margins expanded approximately 400 basis points from the same period last year. Quarter-over-quarter flow-through to adjusted EBITDA was 86%, again, reflecting the operating leverage of our model. Free cash flow for the quarter was $1.29 billion, slightly elevated due to interest and tax payment timing. As cash tax payments are weighted toward the second and third quarters, free cash flow conversion is naturally lower in those periods and will normalize over the course of the year to approximately 75% of EBITDA for 2026. We ended the quarter with $2.76 billion in cash and cash equivalents, providing significant flexibility to continue funding both organic investment and capital returns. During the first quarter, we repurchased and withheld 2.23 million shares for $1 billion, ending the quarter with 336 million shares outstanding and approximately $2.3 billion remaining under our share repurchase authorization, a program that continues to reflect our conviction in the value and durability of our business. Turning to our outlook for the second quarter of 2026. We expect revenue between $1.915 billion and $1.945 billion, representing 52% to 55% year-over-year growth or 4% to 6% sequentially. Adjusted EBITDA is expected to be between $1.615 billion and $1.645 billion with an adjusted EBITDA margin of approximately 84% to 85%. To close, Q1 was a beat across every metric with margins at a new high and significant cash returned to shareholders. Our capital allocation priorities for the balance of the year are unchanged: fund organic investment and return capital through buybacks, reflecting our continued commitment to driving shareholder value through disciplined capital deployment. With that, let's move to Q&A.

Operator Instructions. Our first question will come from Matthew Cost with Morgan Stanley.

I guess on the product roadmap, Adam, you talked about a significant product breakthrough just a couple of weeks ago. Could you give us a little bit more detail about what that entailed? Was it a new type of model targeting a different use case, or was it an improvement to an existing one? And when we think about the roadmap forward from a product perspective, what should we be watching for signs of you continuing to expand that opportunity in what you're calling consumer now? Is it about launching new models? What are the milestones that we should be watching for success?

Yes. So if you recall, when we first launched Axon 2.0, we've had a lot of fast growth quarters since. I think it's been 12 straight. Almost all of that has been attributed to two things. One is releasing new products. As we've gotten deeper into gaming, we have come out with longer-dated periods of models. And the second and more important is improving the underlying model. An analogy is with large language models: they can continuously uptick their model and release new models that perform better. In e-commerce and now what we're calling consumer, this product is really early. Think of it like Axon 2.0 from 10 quarters ago. We're going through the phase of not only rolling out a model and understanding what the consumers need but also getting more data into the system. As we add more advertisers, we get more data, then we can build a more sophisticated model that can process it and create better output. So we've been continuously doing that. Last quarter I mentioned we had one new model that created an uplift. The one we released a couple of weeks ago was quite substantial. That's why I highlighted that we saw a big acceleration exiting the quarter. And then April was bigger than any month we had in Q4, which, as you know, most advertising businesses would not expect. When you're in e-commerce, normally the first half of the year is a huge drop versus Q4. So already being ahead of where we were in Q4 prior to opening up the platform gets us really excited.

Got it. Great. And then you mentioned the GenAI creative tool. You've been talking about that for a couple of quarters, but I think you're in the process of rolling it out more broadly. How is uptake there? And more importantly, for the advertisers that are using it, what sort of impacts are you observing from that?

So we've talked about in past quarters that our creative placement on the platform is much different than anywhere else. I'd argue it's the best ad there is: you get over 30 seconds of viewer time and the user can't do anything else. They watch the ad, the brand can deliver a thoughtful message, and then go to other steps that can drive transaction. Because it is so different and unique, advertisers have a problem coming to the platform and investing in the creative resources necessary to make our platform scale. On the other hand, in gaming, we're the largest out there for mobile gaming user acquisition, so many creative resources are already dedicated to our platform. The importance of building on top of the popular image and video generation models is that we can hand advertisers the capacity to create ads out of the box that work for our platform. We rolled out something called our interactive page generator earlier in the quarter. That's out to all customers and has widespread adoption. More important is the video side, which is still in testing. We're going to roll it out to all accounts shortly. That's important before general release because many advertisers don't even have video for a platform like ours. We'll hand it to them with these tools.

Your next question will come from Omar Dessouky with BofA.

Can you hear me now? I wanted to focus on the gaming business for a second, because it kept on getting bigger and bigger. Over the past several quarters, your quarterly run rate derived from mobile game advertisers has increased every quarter, and more specifically, the amount by which it steps up has also increased in the last several quarters. Did you see that trend continue in the first quarter? Do you expect it to continue the rest of the year? And how does your capacity to fund GPU capacity separate you from some of your competitors who are also adding a lot quarter-on-quarter? Obviously, you're the biggest, but it seems like there's a number of firms growing here. So a couple of questions: did you see the trend continue, do you expect the step-ups to keep getting bigger, and how does your GPU capacity separate you from competitors, if at all?

Yes, Omar. A large part of our growth comes from the gaming vertical. To have that much growth in the quarter—Q-over-Q against Q4—is quite substantial, particularly with two fewer days in the quarter and coming off the holidays. Since we launched Axon 2.0, we have yet to see a slowdown. I highlighted a few drivers earlier: IAP game companies are now able to create more games at a lower cost, and many of those new games will be ad-supported as well as IAP-supported. This hybrid category is explosive growth on our platform. As you think about that, we're entering a period with more games from the highest-quality developers targeted at ads and IAP combined. Thus far, we haven't seen any slowdown. We've talked about 20% to 30% long-term growth in games, which was mentioned several quarters ago. We've consistently outperformed those estimates. On GPU capacity, as models get more complex and we add customers, we'll need more GPUs. We work with Google Cloud and can go to any cloud, and we have the GPUs we need today. We'll likely continue to buy GPUs. However, in our market, raw GPU count is not the direct indicator of success. If you compare us to mobile gaming ad platforms, we probably have one of the largest infrastructures. Compared to Google and Meta, we don't come close. The critical differentiator is that we have the best models and products for advertisers, the technology lead plus data expansion and budgets on our platform that drive scale, growth and success.

Okay. It was really a question about the quarterly run rate and how much it has stepped up, but I appreciate the answer. Maybe we can talk after the call about it.

Your next question will come from Jason Bazinet with Citi.

Adam, I've listened to you long enough to know when you say something a couple of times, it's probably true. You've mentioned this migration of in-app purchase games moving to hybrid monetization for a couple of quarters now. Could you give us your sense of the mix today in terms of IAP-only versus hybrid? And pick a number: if 5% of the games go over to this hybrid model, what would that mean for your top line? How should we dimensionalize what it could mean for AppLovin?

It's difficult to do that math on the fly, but here are some qualitative points. The IAP market is mature—around a $100 billion market. Most of the largest IAP games are some of our big advertisers. Almost all new games and many older games are considering hybrid strategies because that category's growth has been phenomenal. For example, a company out of Turkey this past quarter sold for nearly $1 billion about six months after launch. The vast majority of their user acquisition was on our platform; it was a hybrid game and the growth was phenomenal—getting up to a nine-figure business literally in half a year. Why is that? The people who are likely to pay in a mobile game are probably all people on our platform given we serve adults. At any given time inside a mobile game, sub-10% of the population will pay in a short window, and we optimize a 28-day window. If a developer is buying only 10% of their audience from a strong marketing platform like Axon, they can layer on hybrid monetization and expand the market opportunity materially. So these developers are starting to recognize the massive growth opportunity. The ad-supported market is smaller today but growing much faster than IAP alone. Over the next five years, I expect convergence and a much stronger market opportunity for us and the ecosystem. Pair that with extra demand we're bringing in and model improvements, and that's what catalyzes the growth you've seen from us.

Your next question will come from James Heaney with Jefferies.

Just one for Adam and one for Matt. For Adam: last quarter you talked about breakage in the new customer onboarding flow. Could you give us a progress update on that and how far below your target breakage rate you currently are? And then I have a follow-up for Matt.

James, we don't have an explicit public breakage target, but in any platform you'll have some breakage. Our job is to provide the best tools and understand the breakpoints. The main thing we've been resolving is delivering video out of the box. That's not trivial, but we initially rolled it out a few weeks ago with customers and published a blog on our website showing AI-generated ads. Frankly, the AI-generated ads are really hard to distinguish from human-made ads, and the cost is exceptionally low relative to human-generated video. We think we're close to having that ready for anyone to plug in and get video out of the box. With the platform opening in June, in a matter of weeks we'll be rolling this out to a broader base of new customers and getting started.

Great. And then one for Matt: just on marketing expense for the second half of the year. Since Axon is launching broadly in June, are you planning to bump up marketing expense in the second half? How should we think about that investment?

We've communicated this in the past: we spend performance marketing the same way our customers do. We're looking at the return from that spend and only investing where it's efficient and profitable. You might see some increase in sales and marketing costs associated with the general audience launch and our ongoing brand-awareness activities, like podcasts and sponsorships that Adam mentioned. So there could be a temporary increase in sales and marketing costs. Over time, if we ramp up spend, it should be a positive signal that we're seeing profitable returns from that spend and should be received positively by investors.

A couple of other stats: we're still running under 30-day breakeven on the dollars we're spending. We're doing a mix of paid marketing and sponsorships—podcasts, social ads, search—and we'll keep doing that with discipline. We're not in a rush to sprint because we need time to keep improving our models and products. Every time we do that, everything lifts. Right before the call I looked at the value of a new customer. Our business benefits as customers retain over time materially. We almost never churn customers once they get through the first 30 days on our platform. Right now, we're projecting well over $70,000 a year from every new customer. If we open up the platform and sign 100,000 customers in the next year, first-year revenue from them in advertising spend would be roughly $7 billion. Then you stack the cohorts. The market opportunity now that we've seen the ticket size is material, and we just have to execute.

Your next question will come from Stephen Ju with UBS.

Adam, you've started to talk about the broader consumer segment instead of just the narrower e-commerce definition. The retail opportunity is large, of course. As you think about the rest of the ad market that could spend with AppLovin, how easily transportable are your current efforts to other verticals? Also, versus the amount of inventory out there, how much incremental inventory can be realized with some of the IAP-only publishers as you bring advertisers that do not necessarily compete with them? And should we think about the sales cycles to these publishers as not difficult because you'll be showing up with lots of cash?

Great question. On the inventory expansion: it's important but not necessary right now. We have over 1 billion daily active users and we undermonetize what we show today. Our conversion rate on 1,000 impressions is relatively low for a revenue-generating event for us, and that's only going to improve as models and advertiser density improve. Logical places to get inventory include IAP games: if you start with a $100 billion market and assume, for example, about 15% ad revenue to the publisher for some larger publishers, many of those apps today don't run ads. Even if half of them do, you're looking at a multi-billion-dollar publisher opportunity. We're going after that in short order. As we get more publishers to view us as an advertising monetization platform, we're not competitive with most of the market. Any publisher outside of the big walled gardens would want monetization support. It's not particularly easy to place a game ad on a social network or streaming service, but you can imagine e-commerce, lead generation and fintech placing well. As we go after these categories, build models for them and bring demand, we'll also expand supply, on mobile and potentially connected TV as well. These are on our roadmap and things we are working on; I wouldn't expect material financial impact in 2026 from these efforts, but they matter for the coming years. On advertiser demand expansion, we are performance-focused: everything should drive incremental revenue. We're currently missing a huge category—leads. Many big advertisers on social are lead-based businesses: auto insurance, health insurance, fintech, food delivery. We're testing a model around leads now and will invest to service those advertisers. The 1 billion-plus daily active users are not just gamers and shoppers; they can be served financial services, insurance and other offers. That is a big part of our strategy.

Your next question will come from Benjamin Black with Deutsche Bank.

On web-based consumer advertisers across your existing customers, can you talk about the difference you're seeing between those who are having success and those who are not yet having success on Axon? And what are you doing to eliminate points of friction before you open self-serve in June? Also, we're hearing more developers bypass app store fees, which improves their margin. As their profitability increases, have you seen a noticeable tailwind on the gaming side?

On bypassing app store fees, we don't notice a material effect yet. Benefits will flow into the ecosystem, but game developers tend to be fragmented and risk-averse, so massive uniform changes in economics haven't emerged. On success versus not: ad creative matters a lot. When we first launched this product, it was easy to tell advertisers to port social media ads to our platform, but that was a trap: a 10-second ad meant to hook a user in 3 seconds is not suited to a 30-second video spot. Over the last 18 months we've been instructing advertisers to invest in creative specific to our placements. Also, demand density doesn't exist yet on our platform like it does on social; on social it's rare to see the same advertiser five times in a row, but on our platform currently it's possible. If an advertiser appears five times in a row, they better have five times the video creative. Over time, as advertiser density increases, we'll serve different ads in those slots and conversion rates will increase. So the customers who invest in platform-specific creative succeed; those who port over existing creatives without adapting see less success. Long term, conversion rates will increase as density and competition rise.

Your next question will come from Alec Brondolo with Wells Fargo.

We track the number of apps and games being added to the app stores every month. March was up something like 170% year-over-year, which is a meaningful inflection. These apps will probably be different than prior apps—many are Vibe coded and created by prosumers. Does the way you distribute the mediation solution need to change to reach this new long tail of games and apps? Second, there's been speculation about AppLovin creating a social media platform. You mentioned it on a recent podcast. Could you clarify: is there interest in building or acquiring a social media network, and what's the thought process there?

On the Vibe-coded flood, much of today's output is low quality, but tools will let the best developers create more quality content and the need for discovery will rise, which plays to our strengths. Integration with our mediation solution is trivial for popular Vibe-coding tools today. It's not our job to monetize $0.10-a-day apps; the long tail has limited value. What excites us is the impact of Vibe coding tools on the best developers. On a social media product: we can Vibe-code products ourselves. We once bid on TikTok, so it's clear we have interest in monetizing social better. We believe we're strong in recommendation engines and advertising technology, and the possibility of working on an engagement algorithm with a social app is enticing. Building new products costs relatively little now, and doing so helps us attract top recommendation-system talent. A social app could attract engineers and allow rapid testing and iteration on product. We're interested, but we'll only talk more when something is tangible.

Your next question will come from Clark Lampen with BTIG.

Adam, I wanted to go back to the hybrid conversion comments. You mentioned that developers were seeing 10x improvements in monetization in some cases. Can you give a relative comparison of monetization post those changes or how bidding dynamics compare between gaming advertisers and non-gaming advertisers? There's concern that as density builds for non-gaming advertisers, they could bid against higher transaction-value advertisers and unfavorably shift bidding dynamics for gaming marketers. Is that happening, or are you seeing signs of that occurring?

Originally, when we expanded into consumer we thought there might be cannibalization. Instead, the platform personalizes and drives incremental transactions without cannibalizing gaming. The business continues to grow and is now much larger than before. We put up a huge growth quarter where most growth was driven by gaming, and we have yet to see cannibalization. There are offsets: we had many wasted impressions that we can now use for better-targeted product ads, and as we add consumer brands we get more data into the system. More data benefits both types of advertisers. Also, game developers are increasingly launching hybrid titles, which increases inventory and monetization, so we see more upside than downside.

Okay. That's helpful. Going back to conversion rates, you referenced around 1.3% intra-quarter. It feels like we're seeing a faster pace of directed model improvements lately. Is that right? And if so, have you figured out something about the underlying models that leads to a faster pace of improvement? Could the next 1.3% come faster?

Yes, we've seen faster improvements. Our team is getting smarter about the tests they're running and how to improve models. The AI research space as a whole is moving quickly, and many of those trends apply here. Our researchers are more sophisticated in their techniques; success rates of tests are higher, which lets us push technology faster and drive better return on ad spend. That increases same-store growth for current customers, and paired with opening the platform and new advertisers, we're excited about where this leads.

Your next question will come from Rob Sanderson with Loop Capital.

I wanted to go back to the video creation tool you're testing. Is it mostly technology readiness that you're testing, and is it too early to see learnings on how it changes spending patterns? Also, I know you source multiple models: any hiccup with OpenAI dropping Sora? And is SeeDance 2.0 something you're interested in leveraging? As the product scales to thousands of customers, what are the implications for compute costs? Do you expect it to be a drag on margin, or do you think the revenue stimulus will offset it? Might there be a consumption fee, or can the business absorb the costs?

On the video creation tool: adoption is currently low in terms of total platform volume. Right now the job is to ensure a customer can access the tool, request a video ad and get an output they're satisfied with. Once we clear that hurdle, we'll roll it out more broadly. We're days away from rolling it out. More creatives tailored to our platform drive up spend—this is especially beneficial for smaller customers who lack creative production capabilities. Large gaming customers already produce many ads tailored to our platform; some have 50,000 ads live at any time, so this tool is aimed at the long tail. On cost: we'll roll it out with broad access, but if customers overdeliver creatives, it's a revenue opportunity. We could charge, cap credits, or otherwise monetize heavy usage. The cost to produce AI creatives is low compared to human-generated video, so if adoption scales it's a positive sign. Also, this uses third-party services; it's not our own compute, so it's more of a tax we pay to third-party providers. I wouldn't expect margin compression driven by this. Regarding model sourcing, we deploy a variety of models—open source and closed source, text, image and video—and choose the best for our purposes. Sora 2 being deprecated didn't impact us. We can and do utilize multiple providers and models, including ones from China and elsewhere.

Any learnings from audience segmentation and targeting—prospecting versus discovery campaigns? Any generalization on how this unlocks budget for existing customers?

It helps. We allow advertisers to target complete top-of-funnel (discovery), prospecting (near top of funnel), and universal campaigns (a mix of retargeting and prospecting). Discovery sends brand-new visitors and attempts to convert them; prospecting drives new customers who may have visited before; universal mixes retargeting and new acquisition. By giving advertisers these targeting options, we unlock greater aggregate budgets. Customers with recurring, high-loyalty businesses usually use a mix of all three, which gives them more tools to map budgets to goals. Since rolling out these targeting types, we've seen success.

Your next question will come from Vasily Karasyov with Cannonball.

Adam, following up on Connected TV: I remember you listed connected TV as a top priority for 2025. Can you explain your vision there? You say you will never do pure brand buys and you have Wurl. Roku mentions Wurl sometimes in their letters. How do you see this evolving?

Last year we prioritized the consumer product because the opportunity was too large to ignore. That shifted focus from some other initiatives. That doesn't change our belief that television is massively undermonetized. The holy grail for us is enabling small and medium-sized businesses to access the big screen and prove they drive incremental revenue. If we can let advertisers buy the big screen and demonstrate it drove more revenue than the cost, that's a massively scalable business and highly enticing because it's underused for performance marketing. Our plan is to give our advertisers a click to go to television, using creative we've generated for them and measuring incremental returns. This is still early in development; when it's tangible and extrapolatable to big numbers, we'll discuss it more. But we view connected TV as a meaningful long-term opportunity.

Your next question will come from Jim Callahan with Piper Sandler.

To scale, how should we think about balancing the user acquisition needs between consumer and gaming verticals?

I think we missed the first part of your question, Jim. Could you repeat it?

Sorry. As e-commerce scales, how should we think about balancing the needs between the consumer and gaming verticals on the user acquisition side to make sure they're both satisfied?

We don't really think about balancing them because we haven't seen cannibalization. It's our job to invest in both verticals. The platform is a single auction; we need to deliver demand diversity so the model can decide placement. We continue to invest on both gaming and consumer sides and in improving underlying technology. Gaming is much larger today, but consumer is growing faster. Because we haven't seen cannibalization, we don't need to favor one over the other; we push both forward.

Okay. That's great. One more on e-commerce: you talked about the step-up in April and several new product rollouts. What would you call out as the biggest driver of improvement there?

Product rollouts help advertisers build campaigns and launch ads—basics of campaign management—which will be automated in the future with agents. The most important driver, especially early in the product, is the engineering improvements to the model that drive better return on ad spend at higher scale. When we see a material uplift across the board, it's almost certainly an improvement in a new release of the model.

Your next question will come from Robert Coolbrith with Evercore.

Adam, on direct billing or web shops: beyond cost savings, developers talk about new surfaces for data capture and remarketing. Do you think that's a meaningful opportunity for the sector? Is that something AppLovin could develop around? Second, on generative creative tools like playables generation and iteration/versioning, is that something that fits alongside Creative Clustering on the platform?

Web shops are not a space we'll enter directly, but we benefit. If developers get more user data and can remarket, that's something we can play a role in without owning billing. On generative creative tools, we won't stop at video and interactive pages; eventually we'll have playables and other templates. There's no reason our ad formats can't expand. Game developers already use many tools to create more content for our system—nobody creates 50,000-plus ads by hand. These tools already benefit us and will continue to grow in importance as we expand capabilities.

Your next question will come from Martin Yang with OpCo.

On the consumer side, the strength you saw in April—if you break it down, is that from newer cohorts that onboarded since Q4 last year or from more mature cohorts?

It's both, but materially it's coming from existing cohorts. New cohorts don't ramp immediately. If you're seeing material growth, it's almost certainly from current customers as the product improves. Growth from current cohorts is the most important KPI for us, and that's exactly what we're seeing as we improve the models.

Second question: regarding new features and tools for consumer customers, are gaming customers getting as many new features and updates as the consumer side?

On the underlying model, the gaming models are evolving as quickly as consumer. That's why gaming keeps growing rapidly. On the ad creative side, gaming customers are already sophisticated and don't need the same level of tooling as the consumer advertisers. We'll continue to build tools for both, including playable generators eventually, but given the early stage of the tools, consumer was the lowest-hanging fruit.

Your next question will come from Ralph Schackart with William Blair.

It doesn't look like the macro impacted you in the quarter, but anything you're hearing out there, particularly from e-comm customers or advertisers, given where oil prices are? Also, ad buyers have been saying retention rates were much higher on the self-serve product—are you observing that broadly on your platform?

We don't tend to see much macro impact because we're selling revenue and profit to advertisers. If they're buying profit, they're unlikely to cut the channel that's delivering the best ROI. Most of our customers are Western and we haven't yet launched broadly around the world, so we don't have visibility that would suggest a macro impact. Regarding self-service retention, yes—we see strong retention from self-serve customers. If they get to 30 days of spend, customers almost never churn on our platform. Our job is to get them live; once they see good return on ad spend out of the box, they continue to invest. Having under 30-day breakeven is exciting, and we expect strong long-term retention and net dollar retention from cohorts that crack that initial period.

We will move to Jonathan Kees with Daiwa.

Glad to make it. A strategy question: you're now talking about consumer with many verticals. In the past you focused on mobile games and dominated that vertical. Now you're taking expertise to e-commerce and other consumer verticals, and that requires separate models and resources. Is there a risk of doing too much when you expand across so many verticals while still scaling video and TV efforts?

That's a fair question. We have a strong team that thrives on hard problems, and we haven't reached a point of overextension. These incremental products are focused on better monetizing the audience we already have, so many efforts overlap. Launching a cost-per-lead model or connected TV doesn't require fundamentally different core capabilities than what we're building. Many tasks will become automated—agents, creative generation, onboarding—which reduces the incremental lift. Our engineers and growth teams align on these priorities. Importantly, we're not counting on new initiatives to materially move 2026 results; the core business is already growing quickly. These efforts are centered on setting up durable growth and profitability expansion over the coming years.

That concludes the question-and-answer session for this quarter. We thank you all for joining us today. Have a good afternoon.

Thank you.