Digital Turbine Plunges 23% Despite Revenue Beat as Margins Shrink and Profit Outlook Stays Put; Unity Slides 2%, AppLovin Dips
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
A revenue beat and a higher sales forecast weren’t enough to protect Digital Turbine (NASDAQ:APPS), because the extra revenue isn’t reaching the company’s profit outlook. Digital Turbine stock is at $8.73, down 23% in morning trading. The drop cuts a big run, and Digital Turbine stock remains up 75% year to date.
Company figures point to three pressure points: an flat forecast for adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), a lower gross margin and a revision tied to understated costs. Wall Street appears to be weighing those issues more heavily than Digital Turbine’s top-line strength.
Digital Turbine Raised Its Revenue Outlook and Held Its Profit Forecast
Digital Turbine reported Q2 FY2027 results on November 9 after the market closed. The company’s revenue reached $178.7 million, up 27% year over year and ahead of the $166.75 million consensus estimate. On a per-share basis, adjusted earnings came in at $0.18, beating the $0.17 estimate.
Both of Digital Turbine’s segments grew. Sales in the App Growth Platform segment climbed 42% to $63.5 million, while On Device Solutions revenue rose 20% to $115.6 million. Each segment’s gains helped lift the company’s adjusted EBITDA 46% to $39.8 million.
Management at Digital Turbine raised its fiscal 2027 revenue forecast to $670 million to $690 million from $650 million to $670 million, putting the new range above the $665.29 million consensus. Guidance for adjusted EBITDA stayed at $145 million to $155 million, even with the higher sales target. Chief executive Bill Stone said on the call that it was important to be “prudent in our approach on the bottom line while we’re scaling the top line right now,” as the company invests in data and AI.
Shrinking Margins and a Cost Revision Weigh on Digital Turbine
Profitability per dollar of sales moved the wrong way for Digital Turbine. The company’s adjusted gross margin fell to 43% from 47% a year earlier as revenue share, its largest cost, rose to 49% of net revenue from 45%. Interim finance chief Josh Kinsell tied part of the pressure to “higher revenue share from product mix.”
A second issue sits in the release itself. Digital Turbine disclosed a revision of prior statements for $3.5 million of understated revenue share expense in the June 2026 quarter, and the company also listed a material weakness in internal control over financial reporting among its risks.
What the Peer Group Says About Digital Turbine
Digital Turbine’s mobile ad rivals are lower, though by far smaller amounts. Among them, Unity Software (NYSE:U | U Price Prediction) combines a game engine with a mobile ad network. Unity stock is at $50.59, down 2%. Margin expansion set Unity’s Q3 2026 report apart on November 5, when its adjusted EBITDA margin reached 41% versus 23% a year earlier.
At the other end of the profitability scale sits AppLovin (NASDAQ:APP), the leading mobile ad platform. In Q3 2026 results released November 4, the company posted an 84% adjusted EBITDA margin. AppLovin stock is at $404.91, down 1%.
Both of those peer-stock drops are a fraction of Digital Turbine’s slide. Ad-tech stocks are split, with The Trade Desk (NASDAQ:TTD) rallying on its own results.
How Digital Turbine’s Business Stands Apart From Its Ad-Tech Rivals
Digital Turbine partners with wireless carriers and device makers to place apps and content directly on smartphones, with revenue concentrated among a limited number of carriers. The company’s Ignite platform collects first-party data signals for its ad tools and now delivers other products to device screens. Stone said, “We’re doing this today in the U.S. with an AI-first partner distributing AI agents to devices.”
That data edge matters because, according to Stone, brands are moving “their spend away from the open web to other channels like apps” as AI reduces open-web traffic. Unity pairs its ad network with game-development tools that studios license by subscription. AppLovin runs a pure advertising platform with far higher margins, while Digital Turbine shares a large portion of its revenue with carrier partners in exchange for distribution.
Can Digital Turbine Turn Faster Growth Into Bigger Profits?
Digital Turbine’s next test is whether its added AI and data spending turns faster revenue growth into a higher adjusted EBITDA forecast. The bulls can point to growth in both segments, a raised revenue range and new European carrier launches that management expects to drive growth next fiscal year.
The bears focus on the lower gross margin, significant indebtedness, the revenue share revision and the material weakness in internal controls. Another marker to watch for is whether Digital Turbine’s gross margin steadies as product mix shifts. Traders may prefer to keep their exposure smaller until Digital Turbine’s margin outlook resolves.
Contact [email protected] for any questions or corrections.
David Moadel is financial writer specializing in stocks, ETFs, options, precious metals, and Bitcoin. David has written well over 1,000 articles for leading online publications, helping investors understand markets, income strategies, and risk.His work has appeared in The Motley Fool, InvestorPlace, U.S. News & World Report, TipRanks, ValueWalk, Benzinga, Market Realist, TalkMarkets, Finmasters, 24/7 Wall St., and others.With a master’s degree in education, David has taught at the elementary, high school, and college levels. That teaching background shapes his writing style: clear, educational, and practical. David has also built a loyal social-media audience by providing trustworthy financial content on YouTube, X/Twitter, and StockTwits.
