AppLovin Corp. (NASDAQ:APP)

Return on Assets (ROA)

The return on assets demonstrates a marked improvement over the observed periods. Initially negative from the first recorded quarter (March 31, 2022) with a value of -1.12%, ROA continued to decline reaching its lowest point at -3.3% in March 31, 2023. Following this trough, a consistent upward trend emerges, with ROA turning positive at 0.37% in September 30, 2023 and steadily increasing each quarter thereafter. By June 30, 2025, ROA reached a notably strong level of 40.77%. This suggests significant enhancement in asset utilization efficiency and profitability over time.

Financial Leverage

Financial leverage shows variability with an overall upward trend punctuated by some fluctuations. Starting at 2.3 in June 30, 2021, leverage increased gradually to approximately 3.12 by March 31, 2023. Subsequently, a more pronounced rise is observed, peaking at 6.92 in March 31, 2024. After this peak, leverage decreases somewhat but remains elevated relative to earlier periods, fluctuating between 5.11 and 9.92 in the most recent quarters. The increase in leverage may indicate a greater reliance on debt financing to support growth or operational strategies, which could amplify both returns and risks.

Return on Equity (ROE)

Return on equity exhibits a pattern similar to ROA but with greater volatility and magnitude. Initially negative across several quarters—reaching as low as -10.13% in March 31, 2023—ROE shifts sharply upward starting in late 2023. It progresses through substantial gains, peaking at 333.67% in June 30, 2025. Although a moderate decline follows, ROE remains elevated at 208.17% in the subsequent quarter. The heightened levels of financial leverage combined with improving ROA contribute to these amplified returns on equity, indicating a strong enhancement in shareholder value creation despite inherent risk exposure.

Overall Financial Insights

The data reveals a financial profile characterized by a recovery phase leading to robust profitability and increased leverage. The improvement in ROA and ROE over time suggests successful operational performance and effective use of assets. However, the sharp rise in financial leverage indicates a growing dependence on external financing, which requires monitoring to balance returns against potential financial risk. The interplay between these metrics illustrates a strategic shift towards leveraging capital structure to maximize equity returns while progressively enhancing asset profitability.

The analysis of the financial ratios over the presented periods reveals significant trends and fluctuations in the company's profitability, asset utilization, financial leverage, and shareholder returns.

Net Profit Margin

The net profit margin exhibits an initial period of negative performance, starting with small positive values then turning negative between March 2022 and March 2023, with the lowest margin reaching approximately -6.84%. From mid-2023 onwards, a pronounced improvement is observed, with the margin turning positive and increasing steadily, reaching a high of 48.7% by the end of the latest period. This suggests a substantial increase in profitability relative to revenues over the recent quarters.

Asset Turnover

The asset turnover ratio demonstrates a generally upward trend throughout the timeline. Beginning at around 0.45 in early periods, it gradually increases, with notable accelerations starting in late 2022. By the end of the latest period, it stabilizes around 0.84, indicating enhanced efficiency in generating sales from assets.

Financial Leverage

Financial leverage shows considerable volatility, initially declining from 2.3 to approximately 2.23, then rising sharply to peak at nearly 9.92 by the March 2025 quarter. Fluctuations are evident, especially between 2023 and 2025, suggesting periods of aggressive financing or changes in capital structure. The extreme peaks indicate higher risk but potentially greater return opportunities due to increased utilization of debt or other liabilities.

Return on Equity (ROE)

ROE initially reflects negative performance consistent with net profit margins, dropping as low as -10.13%. However, post-2022, an accelerated recovery and dramatic increase are seen, reaching exceptionally high levels above 300% during early 2025, before slightly retreating to around 208%. These extraordinary spikes coincide with increased financial leverage, implying that the company’s amplified equity returns may be driven predominantly by heightened leverage rather than operational efficiency alone.

In summary, the financial ratios show a company transitioning from a challenging profitability phase with subdued asset utilization and moderate leverage to a phase characterized by increasing profitability, enhanced asset efficiency, and significantly higher financial leverage. The marked increase in ROE alongside leverage suggests riskier financial strategies contributing substantially to shareholder returns. This levered growth emphasizes the importance of monitoring debt levels and operational performance to ensure sustainable financial health.

Tax Burden

The tax burden ratio exhibits variability, with notable values beginning at 0.76 and fluctuating between 0.72 and 1.00 in later periods. This indicates changes in the proportion of earnings retained after taxes, with a general trend towards increased retention in recent quarters.

Interest Burden

The interest burden ratio shows substantial volatility, including negative values early on, reflecting periods of heavy interest expenses potentially exceeding operating earnings. From more recent periods onward, the ratio improves progressively from 0.11 to 0.90, suggesting a reduction in the impact of interest expenses on earnings before taxes.

EBIT Margin

The EBIT margin percent demonstrates a clear upward trend, starting at a low 5.36% and dipping briefly into negative territory around early 2022. Subsequent quarters show steady and strong growth, reaching an impressive 56.84% by the latest period. This indicates substantial improvements in operating profitability over time.

Asset Turnover

Asset turnover ratio reveals a gradual increase from approximately 0.45 to 0.84 throughout the periods. This suggests enhanced efficiency in generating revenues from assets, pointing to improved operational performance and asset utilization.

Financial Leverage

The financial leverage ratio varies considerable with values ranging roughly from 2.23 to peaks near 9.92. Although there are fluctuations, a general upward movement exists followed by some decline towards the latest quarters. The elevated leverage levels imply increased use of debt relative to equity in certain quarters, with potential impact on risk and return profiles.

Return on Equity (ROE)

Return on equity initially shows negative returns, with significant losses in earlier periods. However, a remarkable turnaround is observed, with ROE increasing sharply to very high levels, peaking at 333.67%, before moderating to around 208.17%. This trend reflects significant growth in equity profitability, likely driven by improvements in operating performance, leverage management, and tax burden enhancements.

The analyzed financial indicators demonstrate significant trends over the reported periods, indicating evolving operational efficiency and profitability.

Net Profit Margin (%)

Initially, the net profit margin was absent from early data but appeared slightly positive at 1.27% in March 2022. This was followed by a phase of negative margins, reaching a low of -6.84% in March 2023, indicating challenges impacting profitability during that period. However, starting from June 2023, there is a clear upward trajectory, with margins improving steadily and significantly, reaching nearly 49% by June 2025, which reflects enhanced profitability and possibly better cost management or revenue growth strategies.

Asset Turnover (ratio)

The asset turnover ratio shows a consistent improvement from 0.45 in March 2022 to 0.84 by June 2025. This gradual increase indicates more efficient use of assets to generate revenue over time. The steady rise suggests enhanced operational performance and possibly an expanding asset base being utilized more effectively.

Return on Assets (ROA) (%)

ROA followed a pattern similar to net profit margin, starting with negative returns after initial data points, hitting a nadir of -3.3% in March 2023. Following this low, the ROA improved continuously, turning positive around mid-2023 and progressively rising to over 40% by June 2025. This significant improvement in ROA highlights better profitability generated per unit of asset and suggests more efficient asset management and operational profitability.

Overall, the data shows a turnaround from early negative profitability and less efficient asset usage to a strong position characterized by high net profit margins, robust asset turnover, and substantially increased returns on assets. This trend suggests successful strategic adjustments and improved financial health over the observed timeline.

Tax Burden

The tax burden ratio demonstrates a general upward trend over the reported periods, starting at 0.76 and increasing steadily, reaching a peak near 1.00 towards the last periods. This indicates that the company's effective tax rate as a proportion of pre-tax income has increased, approaching a level where almost the entire pre-tax income is taxed.

Interest Burden

The interest burden ratio shows considerable volatility, particularly in the earlier periods with extreme negative values such as -41.66 and -4.16, suggesting significant interest expenses relative to earnings during that time. However, from later periods onward, this ratio stabilizes and improves consistently, turning positive and increasing gradually from approximately 0.11 to 0.90. This improvement implies a reduction in interest expenses relative to operating income or improved earnings before interest and taxes (EBIT).

EBIT Margin

The EBIT margin reflects a strong and consistent growth trajectory. After a low initial point near 5.36%, it briefly dips close to zero and even shows a negative value (-1.18) at one stage, but then rises sharply over subsequent periods. By the final periods, it reaches very high levels above 50%, indicating substantial operating profitability and effectively higher income generated from each dollar of sales.

Asset Turnover

Asset turnover sees a gradual and steady improvement, moving from roughly 0.45 to 0.84 over the analyzed timeframe. This increase signifies enhanced efficiency in utilizing assets to generate revenue, suggesting better operational management or growth in sales relative to asset base expansion.

Return on Assets (ROA)

The ROA shows initial negative values and fluctuations, indicating early periods of losses or inefficiency in asset utilization. After reaching a low around -3.3%, it transitions to positive territory and demonstrates sustained and accelerating growth, ultimately achieving a strong double-digit return exceeding 40%. This reflects substantial improvement in overall profitability and effective deployment of assets to generate earnings.

The analysis of the quarterly financial ratios reveals several notable trends in profitability and financial health over the periods observed.

Tax Burden

The tax burden ratio, available from early 2022 onwards, shows a generally increasing trend from 0.72 in Q1 2023 to a peak around 1.00 in Q3 2024, followed by a slight decrease to 0.95 in Q2 2025. This suggests an increasing proportion of earnings retained after tax in the mid-periods, stabilizing near full retention toward the latest quarters, indicating possible optimization or changes in tax structure or benefits.

Interest Burden

The interest burden ratio displays significant volatility in 2022, with deeply negative values in the first three quarters, indicating substantial interest expenses or financial costs impacting earnings before taxes during that period. From Q4 2022 onward, the ratio improves dramatically from negative values to positive figures, showing a steady increase from 0.11 in Q1 2023 to 0.90 by Q2 2025. This suggests effective cost management or refinancing initiatives reducing interest burden and improving operational profitability over time.

EBIT Margin

The EBIT margin reflects an impressive growth trajectory. Starting from modest positive values (5.36% in Q1 2022) and a minor dip near zero in mid-2022, the margin expands sharply from Q1 2023 onward. It rises from 5.64% to 56.84% by Q2 2025, indicating robust operational efficiency improvements and higher earnings from core business activities relative to revenue. This upward trajectory signals strong business performance enhancements or scaling effects.

Net Profit Margin

The net profit margin shows corresponding improvement trends but with greater variability early on. Negative margins in most of 2022, reaching as low as -6.84%, indicate net losses during this period. From Q2 2023 forward, there is a marked turnaround with margins improving from 0.70% to 48.70% by Q2 2025. The trend aligns with EBIT margin improvements but reflects additional factors such as tax and interest impacts. The positive trajectory underscores recovery and strong profitability growth over the latter periods.

In summary, the data indicates a significant turnaround and sustained improvement in profitability from 2023 onwards. The initial quarters show operational and financial challenges, evidenced by negative interest burden and net profit margins in 2022. However, subsequent periods manifest enhanced operational efficiency and financial cost control, driving expanding EBIT and net profit margins. The tax burden stabilizing near unity further supports sustained net profitability gains.