Three months ago, AppLovin $APP ( ▲ 2.34% ) gave investors something they had not seen since it went public: a miss. Revenue came in about $20 million short of expectations, management admitted its AI model improvements had been lighter than usual, and the stock fell 19% in a day. By October 30, it had closed at $228.50, down about 69% from its December peak, and it went into its next report as the worst performer in the S&P 500 this year.

Last Wednesday, AppLovin answered. Third quarter revenue rose 55% to a record $2.18 billion, about $100 million above the top of its own guidance and well ahead of the $2.07 billion analysts expected. Net income jumped 72% to $1.44 billion, adjusted EBITDA margin reached 84%, and free cash flow came in at $1.4 billion. Q4 revenue guidance of $2.365 to $2.395 billion also cleared the roughly $2.25 billion consensus.

The stock rose 31% the next day and closed at $410.00 on Monday, up about 79% from its October low. Even so, it is still down about 39% this year and trades at about 20 times next year's expected earnings. The most important line on the call was not about the past quarter. It was CEO Adam Foroughi saying the new models were only partly rolled out: "The transition is still in front of us." Let's take a deeper dive.