Digital Turbine (APPS) Q2 2026: International ODS Revenue Surges 80%, Reshaping Global Mix
Digital Turbine’s second quarter marked a strategic inflection as international on-device solutions (ODS) revenue soared, now exceeding a quarter of segment mix for the first time. Underlying this momentum, operational leverage and AI-driven platform enhancements fueled both top and bottom line outperformance. The company’s sharpened focus on direct brand relationships, alternative app distribution, and data-centric innovation signals a durable shift in its growth architecture heading into 2026.
Summary
- International ODS Inflection: Overseas revenue now drives more than 25% of ODS, signaling lasting mix shift.
- Brand and Direct Channel Expansion: Nearly half of brand revenue now comes from direct relationships, up sharply from last quarter.
- AI and Data Leverage: Proprietary first-party data and machine learning are becoming core monetization engines.
Performance Analysis
Digital Turbine delivered broad-based acceleration in Q2, with consolidated revenue up 18% year-over-year, driven by robust execution across both ODS and the Application Growth Platform (AGP). The ODS segment, which connects device manufacturers and operators with app developers, generated $96 million, up 17% and now representing roughly 68% of total revenue. Notably, international ODS revenue grew over 80% year-over-year, marking a structural step-change as non-US markets crossed 25% of ODS mix for the first time.
The AGP segment returned to growth, up 20% to $45 million, supported by a 40% sequential jump in brand spend and double-digit growth in the DTX (SSP, supply-side platform, a tool that manages publisher ad inventory) business. Operating leverage was a standout, with adjusted EBITDA up 78% and EBIT margin expanding for the sixth straight quarter, as revenue growth outpaced flat operating expenses. Free cash flow improved by nearly $23 million year-over-year, and non-GAAP gross margin climbed to 47%, reflecting favorable product and segment mix.
- International Device Scale: Global device volumes and revenue per device both grew 10% YoY, with international partners driving the outperformance.
- Brand Demand Flywheel: Direct brands accounted for 47% of total brand revenue, up from 22% last quarter, reflecting rapid channel mix evolution.
- AI and Data Platform Progress: The DTIQ machine learning platform and IgniteGraph data asset are now foundational to targeting, pricing, and user experience improvements.
With debt refinancing completed and $39 million in cash, Digital Turbine enters the second half with greater balance sheet flexibility and improved visibility into sustainable margin expansion.
Executive Commentary
"Our September quarter showcased accelerating business momentum across both our on-device solutions and app growth platform segments. Strong demand for our platform combined with disciplined operational execution, drove top and bottom line results that exceeded expectations."
Bill Stone, CEO
"We accelerated revenue growth, expanded profit margins, and delivered top and bottom line results that exceeded our expectations. We also advanced several key strategic initiatives and strengthened our balance sheet with a new longer term credit facility."
Steve Lasher, CFO
Strategic Positioning
1. International Expansion as a Structural Growth Driver
International ODS revenue growth of 80% year-over-year is not a one-off but a reflection of sustained device adoption and demand in non-US markets. With international now over a quarter of ODS revenues, the company is less dependent on US device cycles and better positioned to capture global mobile app monetization trends.
2. Direct Brand Relationships and Channel Control
Direct-to-brand revenue mix in AGP jumped from 22% to 47% in a single quarter, indicating a step-function increase in channel control and supply path optimization for advertisers. This is particularly pronounced in retail and consumer packaged goods, where brands are increasingly bypassing agencies to engage directly with Digital Turbine’s platform, leveraging its SDK and on-device scale.
3. Proprietary Data and AI as Differentiators
The company’s DTIQ AI platform and IgniteGraph data asset are now central to targeting, pricing, and user experience. With more than a billion devices providing unique app usage and engagement signals, Digital Turbine’s ability to deliver higher return on ad spend and smarter decisioning is emerging as a key moat, especially as advertisers seek alternatives to closed ecosystems.
4. Alternative App Distribution Momentum
Regulatory changes and recent court rulings are accelerating the shift toward alternative app distribution models, where Digital Turbine’s single tap and dual download technologies enable publishers to bypass traditional app stores. SingleTap, which allows seamless app installation, grew 45% sequentially, pointing to growing publisher and user adoption.
5. Operational Discipline and Cost Control
Operating expenses remained flat year-over-year despite double-digit revenue growth, underscoring management’s focus on scalable cost structure and margin expansion as growth returns. This discipline is freeing up resources for targeted investments in AI, data, and international expansion.
Key Considerations
This quarter’s results reflect a business model pivoting toward greater global diversity, deeper data leverage, and direct channel engagement. Investors should weigh these factors as they assess the durability of margin and revenue expansion.
Key Considerations:
- International Mix Shift: Sustained international ODS growth de-risks US cyclicality and opens new monetization channels.
- Brand Direct Engagement: The rapid rise in direct brand revenue signals improved pricing power and supply path efficiency.
- AI Platform Investment: DTIQ and IgniteGraph underpin both operational efficiency and future ad targeting superiority.
- Alternative App Store Enablement: Regulatory tailwinds and publisher demand for direct distribution could unlock new revenue streams.
- Balance Sheet Flexibility: Debt refinancing extends runway for strategic investment without near-term liquidity concerns.
Risks
Digital Turbine faces execution risk as it scales international operations and integrates new data and AI capabilities across a diverse device footprint. Regulatory uncertainty around app distribution, potential platform policy shifts, and competitive responses from entrenched app store incumbents could disrupt growth trajectories. While the competitive landscape has eased in some device segments, the ad tech market remains crowded and subject to rapid change.
Forward Outlook
For the next quarter, Digital Turbine guided to:
- Continued double-digit revenue growth, with international and direct brand channels leading the way
- Margin expansion as operational leverage and mix improvements persist
For full-year 2026, management raised guidance:
- Revenue: $540 million to $550 million (up $12.5 million at midpoint)
- Adjusted EBITDA: $100 million to $105 million (up $9 million at midpoint)
Management cited improved visibility, sustained advertiser demand, and accelerating adoption of its AI and alternative distribution platforms as key drivers for increased confidence in the outlook.
- International ODS and AGP momentum expected to remain strong
- Strategic investments in data and AI to continue driving differentiation
Takeaways
Digital Turbine’s Q2 marks a turning point in the company’s revenue mix, operational resilience, and strategic focus, with international and direct brand channels now powering the next phase of growth.
- International Outperformance: Global device and revenue per device metrics signal a durable shift in growth geography and risk profile.
- AI and Data Moat: Proprietary data assets and machine learning are now embedded in both monetization and user experience, supporting pricing and margin tailwinds.
- Alternative Distribution Upside: Regulatory and market dynamics are aligning to create new channels for app and publisher engagement, with Digital Turbine well-positioned as an enabler.
Conclusion
Digital Turbine’s second quarter demonstrates a business gaining both strategic clarity and operational momentum. As international markets and direct brand relationships take center stage, the company’s investments in data, AI, and alternative distribution are laying the foundation for sustained, profitable growth in a rapidly evolving mobile ecosystem.
Industry Read-Through
Digital Turbine’s results underscore a broader shift in mobile ad tech and app distribution, with international markets and direct-to-brand channels gaining traction as traditional app store models face regulatory and competitive disruption. Ad tech platforms that control proprietary device data and offer alternative distribution pathways are increasingly favored by both publishers and advertisers seeking transparency and performance. Competitors without global scale, first-party data, or AI-driven targeting risk falling behind as the mobile landscape fragments and diversifies.