This issue occurs when the ApplicationMenu is bound. The button in the ItemTemplate of the ApplicationMenu could be both RadSplitButton and RadDropDownButton. Their DropDownContent should not be displayed downwards, it should be displayed in the RightPane ( the Content of the Applicationmenu)

Declined: When the ApplicationMenu is in DataBound scenario the ItemsControl from which the ApplicationMenu inherits automatically creates ContentPresenters for each item and wraps their content. As the ApplicationMenu knows how to manage RadRibbonDropDown/Split buttons you will need to provide one of these containers as direct child of the  menu. You can achieve that using the following code, to show all items as RadRibbonDropDownButton:

public class CustomApplicationMenu : ApplicationMenu
    {
        protected override bool IsItemItsOwnContainerOverride(object item)
        {
            return false;
        }

        protected override DependencyObject GetContainerForItemOverride()
        {
            return new RadRibbonDropDownButton();
        }
    }