AppLovin CorpAPP
AppLovin Corp Income Taxes Disclosure
Income Taxes
Income before income taxes for the years ended December 31, 2025, 2024, and 2023, included the following components (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
U.S. | $ | 2,210,613 | $ | 88,111 | $ | 26,138 | |||||||||||
Foreign | 1,742,297 | 1,523,832 | 475,464 | ||||||||||||||
Income before income taxes | $ | 3,952,910 | $ | 1,611,943 | $ | 501,602 | |||||||||||
Provision for income taxes for the years ended December 31, 2025, 2024, and 2023 consisted of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Current: | |||||||||||||||||
| Federal | $ | 239,094 | $ | 21,659 | $ | 34,871 | |||||||||||
State | 27,187 | 9,812 | 9,937 | ||||||||||||||
Foreign | 259,750 | 156,891 | 52,804 | ||||||||||||||
Total current | 526,031 | 188,362 | 97,612 | ||||||||||||||
Deferred: | |||||||||||||||||
| Federal | (13,565) | (134,189) | (43,193) | ||||||||||||||
State | 407 | (8,881) | (4,553) | ||||||||||||||
Foreign | 6,842 | (22,873) | (6,090) | ||||||||||||||
Total deferred | (6,316) | (165,943) | (53,836) | ||||||||||||||
Total provision for income taxes | $ | 519,715 | $ | 22,419 | $ | 43,776 | |||||||||||
The reconciliation of federal statutory income tax rate to the effective income tax rate after the adoption of ASU 2023-09 is as follows (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
Tax provision at U.S. federal statutory rate | $ | 830,036 | 21.0 | % | |||||||
State income tax, net of federal benefit1 | 18,017 | 0.5 | % | ||||||||
| Foreign tax effects | |||||||||||
| Singapore | |||||||||||
| Statutory tax rate difference between Singapore and U.S. | (66,298) | (1.7) | % | ||||||||
Local taxes at a rate different than the statutory tax rate2 | (33,280) | (0.8) | % | ||||||||
| Withholding taxes | 65,733 | 1.7 | % | ||||||||
| Other foreign jurisdictions | (592) | — | % | ||||||||
| Effect of cross-border tax laws | |||||||||||
| Global intangible low-taxed income | 43,051 | 1.1 | % | ||||||||
| Foreign-derived intangible income | (113,539) | (2.9) | % | ||||||||
Foreign tax credits | (84,591) | (2.1) | % | ||||||||
Other | 10,513 | 0.3 | % | ||||||||
Tax credits | |||||||||||
Research and development credit | (16,122) | (0.4) | % | ||||||||
Changes in valuation allowances | 4,833 | 0.1 | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
Stock-based compensation | (132,975) | (3.4) | % | ||||||||
Other | 25,024 | 0.6 | % | ||||||||
| Changes in unrecognized tax benefits. | (7,515) | (0.2) | % | ||||||||
Other | (22,580) | (0.6) | % | ||||||||
Total provision for income taxes | $ | 519,715 | 13.1 | % | |||||||
1The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include New York state and city and New Jersey.
2The tax benefit related to the negotiated tax rate in Singapore was reduced by $82.7 million of the global minimum tax under Pillar 2.
The reconciliation of taxes at the federal statutory rate to our provision for income taxes for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows (in thousands):
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Tax provision at U.S. federal statutory rate | $ | 338,515 | $ | 105,336 | |||||||
| State income taxes, net of federal benefit | (26,412) | (5,334) | |||||||||
| Foreign income taxed at different rates | (167,957) | (50,452) | |||||||||
| Global intangible low-taxed income | 52,378 | 25,625 | |||||||||
| Stock-based compensation | (146,183) | (3,039) | |||||||||
| Foreign-derived intangible income | (10,231) | (18,104) | |||||||||
| Research and development credits | (49,862) | (21,778) | |||||||||
| Foreign income inclusion | (859) | (4,042) | |||||||||
| Change in valuation allowance | 27,589 | 11,470 | |||||||||
| Return to Provision | 2,211 | 3,223 | |||||||||
| Other | 3,230 | 871 | |||||||||
Total provision for income taxes | $ | 22,419 | $ | 43,776 | |||||||
Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows (in thousands):
| Year Ended December 31, | |||||
| 2025 | |||||
| Federal | $ | — | |||
| State | 13,395 | ||||
| Foreign | |||||
Singapore | 177,972 | ||||
Other | 3,476 | ||||
Total cash paid for income taxes, net of refunds received | $ | 194,843 | |||
The Company operates in jurisdictions outside of the US, such as Singapore, where it has tax incentive arrangements. The Company's qualifying income earned in Singapore is taxed at reduced rates, subject to its compliance with the conditions specified in these incentives and legislative developments. These Singapore tax incentives are expected to expire in June 2028 which the Company can affirmatively elect to renew. Before taking into consideration the effects of the U.S. Tax Cuts and Jobs Act ("TCJA") and other indirect tax impacts, the effect of these tax incentives decreased the provision for income taxes by approximately $272.1 million ($0.80 per diluted share) and $135.4 million ($0.39 per diluted share) for the years ended December 31, 2025 and 2024, respectively.
The following summarizes the current and deferred tax assets and liabilities (in thousands):
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Accrued expenses and reserves | $ | 20,525 | $ | 11,975 | |||||||
| Stock-based compensation | 26,849 | 10,063 | |||||||||
| Tax credit carryforwards | 103,416 | 99,314 | |||||||||
| Net operating loss | 25,735 | 38,354 | |||||||||
| Depreciation and amortization | 5,350 | 2,382 | |||||||||
| Operating lease liability | 4,967 | 10,437 | |||||||||
| Foreign tax deduction | 3,904 | 1,900 | |||||||||
| Capital loss | 222,425 | 18,075 | |||||||||
| Capitalized R&D expenses | 250,493 | 260,308 | |||||||||
| Valuation allowance | (291,382) | (75,690) | |||||||||
| Total deferred tax assets | 372,282 | 377,118 | |||||||||
Deferred tax liabilities: | |||||||||||
| Identified intangibles | (105,314) | (98,933) | |||||||||
Other comprehensive income (loss) | (6,888) | 37,811 | |||||||||
| Operating lease right-of-use assets | (4,362) | (8,144) | |||||||||
| Other | (3,371) | (5,025) | |||||||||
| Total deferred tax liabilities | (119,935) | (74,291) | |||||||||
| Net deferred tax assets | $ | 252,347 | $ | 302,827 | |||||||
As of December 31, 2025, the Company's federal tax credit carryforwards of $49.2 million will begin to expire in 2036. The Company's federal capital loss carryforward of $948.9 million will begin to expire in 2027. The Company's California tax credit carryforwards of $71.4 million are not subject to expiration. The Company's foreign net operating loss carryforwards of $143.7 million are not subject to expiration.
The valuation allowance on the Company's net deferred tax assets increased by $215.7 million, $42.6 million, and $15.2 million during the years ended December 31, 2025, 2024, and 2023, respectively.
As of December 31, 2025, the Company maintained a valuation allowance with respect to certain of its deferred tax assets relating primarily to certain state tax credits, U.S. capital losses and operating losses in certain non-U.S. jurisdictions that the Company believes are not likely to be realized. In assessing the realizability of the Company’s deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized due, in part, to projections of future taxable income, including capital gains. To the extent realization of the deferred tax assets becomes more-likely-than-not, the Company would recognize such deferred tax assets as income tax benefits during the period.
The Company has not provided U.S. income or foreign withholding taxes on the undistributed earnings of its foreign subsidiaries as of December 31, 2025, because it intends to permanently reinvest such earnings outside of the U.S., except for Singapore. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability will be immaterial, due to the participation exemption put in place in the TCJA.
Uncertain Tax Positions
The following table summarizes the activity related to the gross unrecognized tax benefits (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Balance at beginning of year | $ | 60,905 | $ | 35,880 | $ | 19,052 | |||||||||||
Increases related to prior year positions | 426 | 4,393 | 3,522 | ||||||||||||||
| Decreases related to prior year positions | (3,617) | (2,183) | — | ||||||||||||||
Increases related to current year positions | 11,493 | 25,921 | 13,548 | ||||||||||||||
Decreases related to lapse of statutes | (3,401) | (2,797) | (242) | ||||||||||||||
Decreases related to settlements | (1,601) | (309) | — | ||||||||||||||
Balance at end of year | $ | 64,205 | $ | 60,905 | $ | 35,880 | |||||||||||
As of December 31, 2025, $50.7 million represents the amount that if recognized, would favorably affect the effective income tax rate in 2025. The Company does not expect a significant change to its unrecognized tax benefits or recorded liabilities over the next twelve months. The unrecognized tax benefits may increase or change during the next year for items that arise in the ordinary course of business.
The Company records interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2025, 2024, and 2023, the Company had approximately $8.4 million, $8.3 million, and $4.0 million of interest and penalties, respectively.
The tax returns for years 2022 through 2024 remain open to examination for federal jurisdiction and for years 2018 through 2024 for other various state and foreign jurisdictions.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Mar 11, 2022 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.