AppLovin’s (APP) run over the past year has been nothing short of explosive, surging almost 420% YoY as bulls show no signs of slowing down. Powered by its AI-driven marketing and ad tech platform, the company is squarely positioned at the center of the digital advertising boom. Investors are paying steep premiums, but with revenue soaring and EPS poised to accelerate, the market continues to bet the rally has more legs.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
On the bright side, APP can boast a 77% year-over-year revenue increase with adjusted EBITDA nearly doubling to $1 billion. Meanwhile, the tech company recently completed the sale of the Apps business to Tripledot Studios. However, operational risks remain in the form of limited e-commerce onboarding and persistent user acquisition challenges in the aftermath of the Apple-Epic lawsuit. With all things considered, I remain cautiously Bullish on AppLovin stock.
What Fueled Q2’s Explosion
AppLovin’s Q2 results were a wake-up call for anyone still on the sidelines. Revenue surged 77% YoY to $1.26 billion—its strongest quarter in more than four years and the fourth straight quarter of sequential acceleration. Management credited the momentum to surging demand in mobile gaming ads, double-digit growth in supply on its MAX mediation platform, and the quiet yet impactful rollout of its self-serve AXON ads manager.
While e-commerce advertisers were onboarded gradually ahead of October’s global launch, gaming drove the quarter. Advertisers poured money into the platform, attracted by sharper targeting, automated campaign tools, and early AI-powered creative features. According to CEO Adam Foroughi, ROI was so strong that budgets kept expanding despite onboarding limits—a key driver of the acceleration.
The most striking part is the breadth of growth. MAX isn’t just taking share—it’s helping expand the overall ad pie. With every additional impression flowing through its ecosystem, AppLovin captures a bigger slice of the upside.
Margins, AI, and a Profitable Machine
Revenue growth has been eye-catching, but the real story is the improvement in margins. In Q2, adjusted EBITDA margins hit 81%, while net income soared 164% to $820 million. Free cash flow reached $768 million despite heavy tax and interest outflows.
AI is central to this margin strength. From automated targeting to dynamic product ads—and soon, generative AI for ad creatives—AppLovin continues to cut costs while driving stronger advertiser ROI. Management even hinted at future agent-like capabilities within AXON, where campaigns could eventually run with minimal human input.
That tech advantage explains why advertisers accept AppLovin’s high take rates. The platform consistently delivers: more conversions per dollar spent lead to bigger budgets, allowing margins to stay robust even as volumes scale.
Looking to Q3 and Beyond
Looking ahead, management guided Q3 revenue to $1.32–$1.34 billion and EBITDA to $1.07–$1.09 billion, with margins steady at 81%. The bigger story, however, is October’s global launch of AXON, which will open the platform to advertisers beyond gaming and U.S. markets for the first time. Management expects a holiday-season surge as existing clients boost budgets and new advertisers join in.
With international markets and small businesses finally gaining access, AXON could be the catalyst for another growth wave into 2026. If early adoption proves strong, revenue estimates may climb again—before factoring in AppLovin’s 2026 plan to market its own platform using the same AI technology that powers client campaigns.
The Valuation Tightrope
The challenge lies in valuation. At 49x earnings and 27x sales, APP trades at sky-high multiples that assume years of rapid growth and exceptional margins. If revenue continues compounding above 70% with EBITDA margins north of 80%, today’s price could ultimately appear undervalued.
But there’s no room for error. A slowdown in ad spend, tougher competition from giants like Meta (META), or weaker-than-expected adoption of AXON could quickly dent growth. With so much future success already priced in, even a slight miss could significantly impact the stock.
Is AppLovin Stock a Buy, Sell, or Hold?
Wall Street remains very bullish on AppLovin, despite its steep valuation multiples today. The stock is now carrying a Strong Buy consensus rating based on 16 Buy and three Hold ratings. Notably, not one analyst rates the stock a Sell.
Currently, APP’s average stock price target of $520 indicates about 12% upside from today’s levels. Thus, even after the stock’s already extreme rally, APP stock appears to offer meaningful upside potential ahead.
For Bulls, AppLovin is a Thrilling Ride
AppLovin has emerged as a rare growth-and-profitability story, with AI and automation providing real staying power. Q2 demonstrated that the model can scale; Q3 should extend the momentum, and AXON’s rollout could mark the next chapter. Still, at nearly 50x earnings, the stock assumes flawless execution. For growth bulls, APP may remain a compelling ride—but it’s one without a seatbelt if the pace slows.