Overview
Piper Sandler downgraded AppLovin Corp (ticker APP) to Neutral following the company’s second‑quarter 2026 results, marking the first time since the firm’s IPO that it missed the midpoint of both its revenue and EBITDA guidance.
Guidance Miss Details
The revenue outlook was missed by 30 basis points, while EBITDA fell short by 100 basis points relative to the midpoint of the company’s own guidance. Management attributed the shortfall to the timing of directed model improvements, indicating that the impact should reverse in the third quarter.
Analyst Commentary
Analyst James Callahan noted that the quarter raised questions about AppLovin’s ability to deliver model enhancements that meet Street expectations, suggesting that future improvements may require larger compute investments or more substantive architectural changes. He also highlighted mixed e‑commerce messaging as a potential headwind for attracting new investors.
Revised Estimates and Valuation
Piper Sandler reduced its fiscal‑2027 revenue estimate by 2% and its EBITDA estimate by 3%. The brokerage also cut its price target from $665 to $385, which values the stock at roughly 20 times the projected 2027 GAAP earnings per share of $19.29.
Outlook
The firm indicated that the frequency or magnitude of directed model improvements may need to increase to align with analyst expectations, and that higher compute costs incurred during the quarter reflect investments in new model architectures.