Applovin tanked on earnings. Justified or not?

Tanked yesterday after Q2 earnings. The CEO said the miss was temporary, caused by a lack of model improvement during the quarter, and claimed they already have a better model that is working in Q3. **Pros:** Sales growth, margins (around 80 percent), and free cash flow are all strong. This is a very profitable business. They dominate the mobile gaming ad niche. Their push into ecommerce is new so its got room to grow. AI-native to a degree. They train their own models for matching ads to users, and they are building an AI video tool for advertisers. Honestly AI video is one of the coolest parts of AI so far. **Cons:** Sales growth is actually decelerating over the past 4 quarters, once you strip out the gaming business they sold from the older numbers. They are expanding from gaming into ecommerce, but there is no clear second niche. Ecommerce is so broad that it is not really a niche the way gaming was. The whole thing lives and dies by Apple and Google. Their app stores control distribution. Anecdotally, some former employees have not had great things to say (just a Reddit thread). AI video is genuinely hard and expensive to pull off. Even if they can make a working model, compute cost could hurt margins. **Summary**: I think it has upside as an ‘ai-native’ play, and obviously if growth reaccelerates. But if growth continues to decelerate it might be a bad deal.