07:35 AM EDT, 08/06/2026 (MT Newswires) -- AppLovin ( APP ) shares tanked early Thursday after the mobile technology company's second-quarter revenue fell short of market estimates amid lighter-than-normal model improvements.

Revenue came in at $1.92 billion for the quarter ended June, up from $1.26 billion the year before, the company said late Wednesday. The consensus on FactSet was for $1.94 billion. Net income jumped to $3.76 a share from $2.39, in line with Wall Street's view.

The stock dropped 16% in the most recent premarket activity.

"We've always managed this business with the goal of outperforming our own expectations, and this quarter we fell short of that standard," Chief Executive Adam Foroughi said during an earnings call, according to a FactSet transcript. "What matters is that we know what happened and it's already been addressed."

Gaming remains AppLovin's ( APP ) largest revenue source and its growth depends primarily on improvements to the company's models, Foroughi said on the call. When model performance improves, advertisers can profitably deploy more spending while meeting their target return on ad spend, causing budgets to increase, he said.

"Our pace of meaningful model improvement was lighter than normal during the quarter, and the next step up in model performance landed just after quarter end," Foroughi added. "Nothing we saw suggested weakening advertiser demand or a change in the competitive environment."

For the third quarter, AppLovin ( APP ) anticipates revenue to come in between $2.06 billion and $2.09 billion. The Street is looking for $2.07 billion. The guidance reflects annual growth of 46% to 48%, Chief Financial Officer Matt Stumpf told analysts on the call.

Adjusted Earnings before interest, taxes, depreciation and amortization are pegged at $1.71 billion to $1.74 billion for the third quarter, compared with the $1.61 billion recorded in the second quarter.

AppLovin ( APP ) shares may remain "sidelined" for at least another quarter amid a slower pace of onboarding and the company's measured pace of building out its advertising models, Wedbush Securities said in a note. The brokerage, however, expects the stock to eventually recover.

"AppLovin ( APP ) has built a deep moat around its AI flywheel, limiting competition," Wedbush said.