AppLovin Corp. shares soared in the extended session Wednesday after the app-monetization company provided a strong forecast in a mobile-ad market that is widely regarded as weakening.
AppLovin said it expects revenue of $685 million to $705 million in the first quarter, above the $681.5 million forecast by analysts surveyed by FactSet, and shares soared more than 35% after hours, following a 1.3% decline to close the regular session at $12.68.
“For the first quarter of 2023, we see the mobile ad market remaining relatively stable,” the company said in a letter to shareholders. “Developers continue to closely monitor their overall profitability and advertisers appear to be maintaining overall ad budgets and return on ad spend goals, informing our outlook for the quarter.”
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Both Palo Alto, Calif.-based AppLovin and San Francisco-based Unity Software Inc. received downgrades back in December from BTIG because of mobile weakness going forward. Unity shares climbed more than 8% after-hours Wednesday.
While both companies offer software that help app developers grow their businesses, AppLovin has an apps business that it is treating as a standalone concern and may sell, while Unity produces videogame-engine software that competes with Epic Games Inc.’s Unreal Engine.
AppLovin topped Wall Street estimates in both areas in the fourth quarter. The company said that software revenue rose 24% to $306 million, while apps revenue fell 28% to $396 million. Analysts had expected $303.1 million in software revenue, and $313 million app revenue.
AppLovin reported a fourth-quarter loss of $79.5 million, or 21 cents a share, versus net income of $31.1 million, or 8 cents a share, in the year-ago period. The company did not list adjusted earnings per share figures.
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Revenue fell to $702.3 million from $793.5 million in the year-ago quarter. Analysts had forecast earnings of 5 cents a share on revenue of $690.4 million.
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In Take-Two Interactive Software Inc.’s earnings, the company admitted to overestimating the contribution it would get from mobile games, following its recently closed acquisition of Zynga, while estimates for mobile handset shipments are expected to drop for a second year in a row.