A：For the second quarter ended June 30, 2026, Avlo reported almost $2 billion in revenue, which was just below the midpoint of their guidance range. Their adjusted EBITDA was just below the range provided during the call. The company had aimed to outperform their own expectations but fell short this quarter.

A：The main factors impacting Avlo's Q2 performance were the timing of model improvement and the subsequent timing of increased advertising spend by advertisers. The pace of meaningful model improvement was lighter than normal during the quarter and the next step up in model performance occurred just after the quarter end. Despite this, max publisher earnings grew double digits quarter over quarter and their share of publisher waterfalls remained consistent.

A：The consumer vertical for Avlo had an outstanding quarter, with advertiser spend setting a new record, finishing 28% above Q4 2025 levels. This growth indicates a steep curve of improvement, showing that despite the challenges faced, the consumer business is scaling and is expected to become more significant in the future as the company continues to ramp up consumer operations.

A：Avlo's outlook suggests that the business is reaccelerating as it enters a seasonally stronger part of the year. The company believes that with the ongoing improvements in gaming and the scaling of the consumer vertical, they can achieve roughly a 30% annual growth rate. Adjusted EBITDA grew to a bit over $1.6 billion, up more than 50% year over year.

A：The adjusted EBITDA grew significantly, up more than 50% year over year, primarily due to higher compute associated with training existing models and developing new ones. This growth reflects the company's investment in architectural changes that enable more complex model building, which benefits substantially from additional training compute. The company manages expenses with the goal of increasing revenue, deploying capital when it can generate more revenue.

A：The impact of model improvements and increased compute costs was reflected in Avlo's financials as they experienced higher training and inference costs, which were built into their guidance for the next quarter. The company anticipates that these investments in compute will substantially increase revenue through better model performance.

A：To drive future growth, Avlo is focusing on four main areas: improving core models, advancing architectural work for better scaling compute benefits, enhancing creative tools and ad formats, and bringing high-quality advertisers onto the platform through strategic partnerships.

A：Avlo's Q2 revenue of $1.92 billion grew 53% year over year and 4% sequentially, driven by the core gaming business and continued scaling in the consumer vertical. The adjusted EBITDA was $1.61 billion, up 58% year over year, with margins expanding approximately 300 basis points from the same period last year.

A：Avlo's balance sheet showed strong financial health with a quarterly free cash flow of $863 million. The company ended the quarter with $3.05 billion of cash against $3.7 billion of total debt, resulting in net leverage at approximately 0.1 times trailing 12 month adjusted EBITDA, well within the desired range of approximately one times.

A：The effect of share repurchases on Avlo's financials was moderated in the second quarter due to the pace being adjusted relative to the roughly $1 billion deployed in the first quarter. This adjustment was made in consideration of the company's lower free cash flow during the quarter and does not change their intent to continue using the share repurchase authorization effectively.

A：The outcome of the SEC inquiry was that it concluded with no recommended action, which was a positive result for Avlo. The company views the inquiry as a voluntary request that was not deemed material and is pleased that it has been resolved.

A：For the third quarter of 2026, Avlo expects revenue between $2.055 billion and $2.085 billion, representing 46% to 48% year-over-year growth or 7% to 8% sequential growth. They expect adjusted EBITDA between $1.71 billion and $1.74 billion, with year-over-year growth of 48% to 50%, maintaining an adjusted EBITDA margin of approximately 83%. The outlook reflects ongoing model improvements, continued consumer vertical scaling, and normal seasonality along with the higher training and compute costs.

A：The company's revenue growth over the last 12 quarters has been attributed to constant model improvements by their team, which has led to significant ups in growth rates each quarter.

A：The recent revenue growth was mainly driven by the success of existing customers on the platform. New advertisers are beneficial but do not drive significant impacts to the growth rate as the existing customer base has already proven to be substantial.

A：The continued robust spending by advertisers suggests they are not close to reaching a plateau in returns, indicating satisfaction with the platform and an expectation for further growth. As new platforms, their budgets are managed cautiously, and it takes time to graduate up from test budgets to more substantial allocations. Over time, advertisers are expected to increase their spending and achieve faster growth rates.

A：The model did not show a significant uplift in the latest quarter as expected, with the impact being smaller in Q2, followed by a material uplift in Q3. However, the team continuously works on model improvements, resulting in multiple small lifts that compound over time. Despite increased compute costs, the business margins are guided to be inclusive of model improvements and the cost increases, maintaining a cautious spending approach and focusing on incremental revenue. Over time, short-term fluctuations are seen as positive indicators of future improvements, and the long-term margin profile remains confident, with a projected margin within the low 80s.

A：The onboarding process for new advertisers has been managed as expected, without a big marketing push behind the launch. The focus has been on building relationships with mid-market brands and executing for larger customers first. The goal is to target mid-market brands that contribute more to the platform's success, with the expectation that as the model becomes more sophisticated and data coverage increases, it will attract a wider range of advertisers. The number of advertisers is expected to grow gradually, rather than in a large influx like some of the wider, more established platforms.

A：The quick growth of customers on the platform is attributed to the existing customers seeing a lot of success, which in turn leads to them spending more on the platform, despite not reaching their spending ceiling given their results.

A：Ad templates and the model are expected to improve over time with every incremental mid-market customer, enhancing the data in the system and allowing for broader application in the future, although the exact timeline is not predictable.

A：The main focuses for the technological development of the platform include getting more customers, increasing data collection, ranking more sophisticated models, improving ad templates, and achieving lifts for current customers. The success stories and performance on the platform drive compounding growth.

A：While the issue of creative continues to be the biggest hurdle in the system, some improvements have been made. The platform can now auto-generate an interactive end card efficiently, but it is still work in progress to produce high-quality videos for advertisers out of the box. The goal is to provide a one-click campaign creation for advertisers, which will resolve any conversion rate issues.

A：There is a concern that the current templates may not match the creative needs of small and medium-sized businesses (SMBs), particularly as the platform looks to expand into the long-tail market. The issue is resolving the need for better creative to match the requirements of these smaller businesses.

A：The trend in mobile game app downloads has been a movement towards casual and deeper games with higher CPIs and LTVs. Despite a potential decrease in overall downloads, the value of each install increases, which benefits the ad-supported market as it grows really quickly.

A：The company is positioned as the biggest player in mobile gaming user acquisition, driving a significant amount of growth in the category. They are the primary catalyst for improvements in user acquisition performance and continue to be essential as the cost of CPIs rise.

A：While brand awareness for appLovin among consumers is not yet high, especially in the long-tail, the company is recognized among those who use the platform. Brand recognition is a priority, and as long as performance improves and the technology advances, brand awareness is expected to grow over time. The brand loyalty is earned through performance, and as more success stories emerge, the platform's visibility and recognition are anticipated to increase.

A：Advertisers have reported spending a bit more on Android than they had expected, influenced by various factors such as dynamics within the play ecosystem affecting their share of voice or share of wallet with app love.

A：The World Cup led to spikes in spend from World Cup specific advertisers during games, but overall, it's not a material impact when considering the grand scheme of the quarter and does not significantly affect in-app purchasing or ad support game customer spending.

A：The Google Play platform is very competitive, with the large company owning it providing many installations and spends for customers. The Android platform is particularly competitive due to this large competitor doing well there.

A：In the latest quarter, the company experienced revenue acceleration, while international revenue was nearly flat compared to the previous quarter. This is attributed to a strengthening of international revenue over the past few quarters, which has since slowed down.

A：The company has mentioned that verticals like short dramas or prediction markets are leaning into spend in the mobile gaming category, but they are not yet a focus for the company. The company is primarily focused on the web consumer business and will focus on non-gaming apps later as it is not yet a focus area in their model.

A：Advantages of increasing the level of iterations in the testing process include more sophisticated use of AI technologies to aid testing and accelerate the rate of tests. The company aims to hire very smart people and enable them to conduct more AB tests powered by large language models to aid with coding.

A：The lead generation business is still a work in progress and the company is still testing with customers. New customers have the potential to provide the company with access to more user transactional behavior data, which will improve the model over time. The goal is to get more mid-market customers onto the platform to increase the model's complexity and output.

A：Investors should not expect any departure from the higher level guidance provided in the past, which is spending about 10 cents on compute for every dollar of revenue. The company is tracking within this guidance and does not expect any difference, though there may be variability over the long term. Any increase in compute costs will be communicated with the reasons behind it.

A：The benchmark of $70,000 for gross spend in the first year for new customers may increase as a result of partnership deals and targeting mid-market customers. The figure is influenced by whether customers are signing up through strategic partnerships (which tend to have higher value) or by marketing push on the website (which attracts more small businesses).

A：Partnerships benefit customers by providing them with additional credit and better data integration. The strategy is to work through the optimal way to implement these partnerships, which will provide value to all parties involved. The company is actively iterating on this, including with triple win examples, to make their platform beneficial for partners and their clients.

A：Mobile ads are associated with more quality control issues because there is no user-generated content (UGC) as the apps are approved by the App Store, which creates a controlled framework. This controlled environment within mobile gaming, such as in Candy Crush, is safer for ads and the attention given to ads in mobile gaming is more than other platforms, including television.

A：The speaker is focused on the middle of the market due to the presence of hungrier companies with leaner marketing teams and the absence of big holding companies, which allows for quicker progression. Building a solid reputation in the middle market can lead to moving to the head of the market, as it requires actual people selling and a reputation that the middle market can support.

A：The new set of signals, as understood by the speaker, are not native to the existing system and could potentially make runtime data integration with Unity complementary to other advertising platforms. This could mean that as these new signals enter the market, it could lead to industry growth and an increase in overall spend, since each entity's data and model are different.

A：The company believes that the zero-sum sector narrative is no longer applicable, as the industry has proven to be not zero-sum over the last five years. As marketing companies improve, user acquisition scales, growth increases, and the profitability of gaming customers improves, they can reinvest more dollars into marketing platforms. The company's market share is growing significantly, demonstrating that the space is not zero-sum and that these models, when trained with differentiated data, create a higher ceiling for the gaming customer.

A：The consumer business is still budgetary and constrained and is still in the early stages of the category. While the expansion of supply is more natural in gaming apps and open web placements, the consumer vertical allows for actual supply expansion. The first path to expansion is expected to be on devices, followed by connected TV, which is an area of interest due to the potential for effective mobile ads to transfer to television and drive shopper behavior.

A：The consumer business is currently budgetary and constrained and is focused on performance-based advertising. Consumer advertisers are seeing good returns on investment but are not yet spending at their ceilings. The company has not launched CTV ads because doing so would weaken their position in mobile without expanding their revenue to justify new supply. The future plans involve expanding into non-gaming apps, gaming apps that don't currently run ads, and the open web before venturing into connected TV, as these are the obvious levers of growth to pull once they have the budget to execute.