AppLovin shares fall after court denies request against Unity

Investing.com -- AppLovin (NASDAQ) shares fell more than 5% in premarket trading Friday after a San Francisco court denied the company’s request for a temporary restraining order against Unity’s Ad Quality SDK.

Wedbush analyst Alicia Reese said the ruling highlights a "conspicuous" competitive shift as Unity’s advertising business gains traction, while potentially making it harder for AppLovin to protect data generated through its MAX platform.

AppLovin alleges Unity’s Ad Quality SDK collects data on ads served through MAX and may have used that information in its models. Unity disputes the claims, arguing that Ad Quality is a publisher-authorized tool and falls outside the companies’ bidding agreement.

Reese noted that the court’s decision was on interim relief rather than the merits of the underlying dispute, which is now in private arbitration.

Still, the analyst pointed to Unity’s rapid growth. Vector revenue rose 23% sequentially in the second quarter, roughly twice the company’s guidance, and reached a $1 billion annualized run rate two quarters ahead of schedule. Strategic Grow revenue increased 63% year over year, while Unity expects another 19% to 21% sequential increase in Vector revenue in the third quarter.

"We don’t see the dispute affecting AXON’s underlying performance," Reese wrote, but stronger Unity bidding within MAX auctions could create a headwind for AppLovin’s take rate.

Reese said AppLovin is unlikely to restrict Unity’s access to MAX because doing so could hurt publisher yields and potentially give Unity an antitrust argument.

The analyst said investors should watch for the court’s written order, an Oct. 23 hearing on sealing, Unity’s handling of Ad Quality data collection on MAX and any request by AppLovin for interim relief through arbitration.

Original Article

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