Inside the SEC's Inquiry Into AppLovin's Data Practices

Bloomberg reported this month that the Securities and Exchange Commission has opened an inquiry into AppLovin's data collection practices, the clearest sign yet that the allegations a string of short-sellers raised earlier this year have moved from public dispute into regulatory review. As flagged in The Ledger #19 earlier this month, this is a story worth tracking through the rest of the quarter rather than treating as resolved by AppLovin's own public rebuttals. The SEC inquiry into AppLovin's data practices does not, on its own, establish wrongdoing, and AppLovin has consistently and publicly disputed the underlying claims. What it does establish is that a regulator is now asking the same questions a set of research firms spent most of 2025 asking loudly.

How the year's allegations built up to this

The pattern started in February. Fuzzy Panda Research published a short-seller report on February 26 alleging improper data practices at AppLovin, including claims about attribution manipulation and ads reaching minors, and the stock fell sharply on the news. Culper Research published a broadly similar report the same day. AppLovin filed an 8-K two days later, part of its public response disputing the claims. A third short report followed in late March from Muddy Waters, this one focused specifically on e-commerce attribution and data practices, extending the same core line of criticism: that AppLovin's AXON-driven ad targeting relies on data practices the company has not been transparent about.

AppLovin's business results through the year did not read like a company under sustained pressure from any of this. The company reported roughly $1.16 billion in advertising revenue for the first quarter, up around 71% year on year, and followed that with a stronger second quarter: revenue of $1.259 billion, up about 77% year on year, and net income of $820 million, with third-quarter guidance of $1.32 billion to $1.34 billion at an adjusted EBITDA margin near 81%. The company completed its planned exit from the games business in June, selling its Apps portfolio to Tripledot Studios and becoming, in its own framing, a pure advertising technology company. Shareholder suits tied to the short-seller allegations continued through the middle of the year regardless, and the stock's recovery culminated in AppLovin's addition to the S&P 500 on September 22, a milestone that sat uneasily alongside a still-unresolved cloud of litigation and, now, regulatory attention.

What an SEC inquiry actually means at this stage

It is worth being precise about what has and has not happened. An SEC inquiry, as reported, is not a formal enforcement action, and it is not confirmation of the short-sellers' specific claims about attribution manipulation or data misuse. It means the regulator is gathering information, a process that can run for months or longer and that frequently ends without any public finding at all. AppLovin has not, as of this month, disclosed any material change to its guidance or business practices as a result. The company's public position throughout the year has been that the short-seller reports were inaccurate and, in some cases, motivated by short positions taken ahead of publication.

Part of a wider year for regulatory scrutiny of ad tech

AppLovin's situation has not developed in isolation. This has been a year in which ad-tech businesses generally have drawn more sustained regulatory attention than in recent memory. A federal judge ruled in April that Google illegally monopolised the publisher ad server and ad exchange markets, with a remedies phase that has continued through the rest of 2025. European regulators fined Apple and Meta under the Digital Markets Act the same month, over anti-steering practices and a pay-or-consent advertising model respectively. None of those cases is about the same conduct the AppLovin allegations describe, and none of them should be read as evidence for or against the specific claims made about AppLovin's data practices. But taken together, they describe a year in which regulators on both sides of the Atlantic have been considerably more willing to open formal scrutiny of large ad-tech platforms than they were two or three years ago, and an SEC inquiry into AppLovin's data practices fits that broader pattern rather than standing apart from it.

That context matters for how a UA team should weigh this specific story. A single company facing scrutiny in an otherwise quiet regulatory year would be a more unusual, and arguably more significant, signal than the same scrutiny landing inside a year when scrutiny of the sector generally has been rising. This year looks like the latter.

What it means for a UA team this quarter

None of this changes how AppLovin's ad network or AXON bidding performs for a buyer running live campaigns today. That is the point worth separating clearly from the regulatory story: performance and scrutiny are two different tracks, and conflating them tends to produce either complacency or overreaction, neither of which serves a media plan well.

What it does change is how much concentration risk a UA team should be comfortable carrying with a single ad-tech partner, regardless of that partner's current performance numbers. A studio running a large share of spend through one network is exposed to whatever happens to that network's product, pricing or public standing, independent of whether any current allegation is ultimately substantiated. That is a portfolio question, not a judgment about AppLovin specifically, and it is the kind of question worth revisiting this quarter simply because the story is now live with a federal regulator rather than only with research firms publishing reports timed to their own trading positions.

The company's next scheduled earnings report, due in the first week of November, will be the next point at which any material update, or the lack of one, becomes public.

Related archive reading

These articles provide related context and remain subject to their stated review status.

• Mobile Ad Tech Stock Volatility: AppLovin's Rough Quarter
• AppLovin's Short-Seller Allegations, Explained for Buyers