AppLovin Corp. (NASDAQ:APP)

Gross Profit Margin

The gross profit margin demonstrates an overall upward trend from 64.62% in 2021 to 75.22% in 2024. A decline is observed in 2022 to 55.41%, followed by a significant recovery and continuous improvement over the subsequent years. This suggests enhanced efficiency in production or sales cost management over time.

Operating Profit Margin

The operating profit margin shows considerable volatility. It fell to a negative figure of -1.7% in 2022 from a positive 5.37% in 2021, indicating a possible increase in operating expenses or reduced operating income during that year. However, a strong turnaround is visible in 2023 and 2024, with margins increasing to 19.74% and further to 39.78%, reflecting improved operational control and profitability.

Net Profit Margin

The net profit margin mirrors the operating margin trend with a dip into negative territory in 2022 (-6.84%), signifying the company faced net losses during that period. The margin subsequently improves to 10.87% in 2023 and further to 33.55% in 2024, indicating strong recovery and significant growth in bottom-line profitability.

Return on Equity (ROE)

ROE experienced a drastic decline from 1.66% in 2021 to -10.13% in 2022, suggesting the company’s shareholders experienced a negative return that year. Starting from 2023, ROE sharply increases to 28.39% and dramatically surges to 144.96% in 2024. Such strong growth signals exceptional value creation for shareholders and significant improvements in the company’s financial leverage or profitability.

Return on Assets (ROA)

The return on assets also followed a similar pattern, declining from 0.58% in 2021 to -3.3% in 2022, indicating inefficiency in asset utilization during that period. Thereafter, the ROA recovers to 6.66% in 2023 and rises significantly to 26.92% in 2024, reflecting better asset management and increased profitability from asset investments.

Revenue

The revenue exhibited a gradual increase from 2021 to 2022, with a marginal rise from approximately 2.79 billion USD to 2.82 billion USD. This was followed by a more significant growth of approximately 16.5% in 2023, reaching around 3.28 billion USD, and an even larger increase of about 43.5% in 2024, reaching approximately 4.71 billion USD. Overall, the revenue trend indicates accelerating growth over the four-year period.

Gross Profit

Gross profit showed a declining trend between 2021 and 2022, decreasing from approximately 1.81 billion USD to 1.56 billion USD. This downturn reversed in 2023, with gross profit increasing substantially to about 2.22 billion USD, representing a growth of roughly 42% from the previous year. The upward trend continued strongly in 2024, with gross profit rising to approximately 3.54 billion USD, a notable increase of nearly 60%. The data indicates a recovery and then strong improvement in gross profit after a dip in 2022.

Gross Profit Margin

The gross profit margin declined noticeably from 64.62% in 2021 to 55.41% in 2022. This reduction suggests either increased cost pressures or a shift in revenue mix in that year. However, the margin improved significantly in 2023 to 67.74%, surpassing the level seen in 2021. The upward momentum continued in 2024, with the margin reaching 75.22%, indicating enhanced efficiency or a more profitable revenue structure. This positive trend in gross profit margin highlights improving operating performance and cost management over time.

The operating profit margin exhibited significant fluctuations over the observed period. Initially positive, it experienced a substantial decline before recovering strongly and continuing to improve.

Operating Profit Margin Trend

In 2021, the operating profit margin stood at 5.37%. This represents a moderate level of profitability from core operations relative to revenue.

2022 saw a dramatic shift, with the operating profit margin falling to -1.70%. This indicates a loss from operations, exceeding revenue costs, and a significant deterioration in operational profitability.

A substantial recovery occurred in 2023, as the operating profit margin rose to 19.74%. This suggests successful implementation of cost control measures, revenue growth, or a combination of both, returning the company to a strong operational profit position.

The upward trend continued into 2024, with the operating profit margin reaching 39.78%. This represents a considerable increase in profitability, indicating a highly efficient operational performance and a strong ability to convert revenue into operating profit.

The progression from a positive margin to a loss, followed by a robust recovery and subsequent growth, suggests a period of operational challenges followed by successful strategic adjustments. The magnitude of the improvement in recent years is particularly noteworthy.

Relationship to Revenue

Revenue increased steadily from 2021 to 2024. However, the operating profit margin’s trajectory was not directly correlated with revenue alone. The substantial margin improvement in 2023 and 2024 occurred alongside revenue growth, indicating that operational efficiencies played a crucial role in the enhanced profitability.

The observed trend in operating profit margin suggests a strengthening of the company’s core business performance and its ability to generate profits from its primary activities.

The net profit margin exhibited significant fluctuations over the four-year period. A substantial shift from positive to negative, and then to increasingly positive values, is observed. This analysis details the observed trends and potential implications.

Net Profit Margin - Overall Trend

The net profit margin began at 1.27% in 2021. It experienced a dramatic decline in 2022, resulting in a negative margin of -6.84%. A strong recovery occurred in 2023, with the margin increasing to 10.87%. This positive trend continued into 2024, with the net profit margin reaching 33.55%.

Net Profit Margin - 2021 to 2022

The decrease from 2021 to 2022 indicates a substantial reduction in profitability relative to revenue. This suggests either a significant increase in costs and expenses, a decrease in revenue, or a combination of both. The negative margin in 2022 signifies that the company incurred a net loss during that period.

Net Profit Margin - 2022 to 2024

The period from 2022 to 2024 demonstrates a considerable improvement in profitability. The margin moved from negative territory to a substantial positive value. This suggests successful cost management, increased revenue, or a favorable shift in the company’s revenue mix. The increase from 10.87% in 2023 to 33.55% in 2024 is particularly noteworthy, indicating a significant enhancement in the company’s ability to convert revenue into profit.

Relationship to Revenue

Revenue increased steadily over the period, from US$2,793,104 thousand in 2021 to US$4,709,248 thousand in 2024. However, the net profit margin’s trajectory was not directly proportional to revenue growth. The substantial margin improvement in 2023 and 2024 suggests that the company effectively leveraged revenue growth to improve profitability, or that cost controls were particularly effective during those years.

The return on equity (ROE) exhibited significant fluctuations over the observed period. A substantial increase in ROE is evident from 2022 to 2024, following a period of negative ROE in 2022. This analysis details the observed trends and potential contributing factors.

ROE Trend

In 2021, the ROE stood at 1.66%. A marked decline occurred in 2022, resulting in a negative ROE of -10.13%. This was followed by a considerable recovery in 2023, with ROE rising to 28.39%. The most significant increase was observed in 2024, where ROE reached 144.96%.

Net Income Impact

The substantial increase in ROE from 2022 to 2024 correlates strongly with the changes in net income. Net income transitioned from a positive value of US$35,446 thousand in 2021 to a significant loss of US$-192,746 thousand in 2022. Subsequently, net income rebounded to US$356,711 thousand in 2023 and further increased dramatically to US$1,579,776 thousand in 2024. This suggests that profitability is a primary driver of the observed ROE fluctuations.

Stockholders’ Equity Impact

Stockholders’ equity experienced a decreasing trend throughout the period. It declined from US$2,138,090 thousand in 2021 to US$1,089,818 thousand in 2024. Despite this consistent decrease in equity, the substantial growth in net income in 2023 and 2024 outweighed the impact of the declining equity base, leading to the observed increases in ROE. The decrease in equity may warrant further investigation to understand its underlying causes.

The dramatic increase in ROE in 2024, coupled with the concurrent increase in net income and decrease in stockholders’ equity, indicates a significant improvement in the company’s ability to generate profits from shareholder investments. However, the consistent decline in stockholders’ equity should be monitored for potential implications.

The Return on Assets (ROA) exhibited significant fluctuations over the observed period. A substantial improvement in profitability relative to assets is evident between 2022 and 2024, following a period of negative ROA.

ROA Trend

In 2021, the ROA stood at 0.58%. This decreased considerably in 2022, resulting in a negative ROA of -3.30%. A positive turnaround occurred in 2023, with the ROA increasing to 6.66%. The most significant change was observed between 2023 and 2024, where the ROA rose dramatically to 26.92%.

Net Income Impact

The substantial increase in ROA from 2022 to 2023 and 2024 correlates directly with the movement of net income. A large net loss in 2022 contributed to the negative ROA, while positive net income in 2023 and a significantly higher net income in 2024 drove the ROA upwards.

Asset Base Consideration

Total assets decreased from 2021 to 2023, moving from US$6,163,579 thousand to US$5,359,187 thousand. However, assets increased to US$5,869,259 thousand in 2024. The increase in ROA in 2024 occurred alongside this asset increase, indicating that the growth in net income outpaced the growth in the asset base.

The observed trend suggests a strengthening relationship between profitability and asset utilization, particularly in the most recent year. The company demonstrated an improved ability to generate earnings from its assets in 2024 compared to prior periods.