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TL;DR (Too Long; Didn't Read)
AppLovin (APP) is a highly profitable mobile advertising technology company poised for continued growth after selling its gaming division to concentrate on its core, high-margin ad-tech business. As of June 30, 2025, the stock has pulled back to $338 after a strong run-up ended with the S&P's decision not to include it in the S&P 500 index. The stock is now at a critical technical juncture, testing the 20-week exponential moving average, a support level that has historically acted as a springboard for the price to move higher.
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Key Points
AppLovin Corporation is a leading mobile marketing platform, leveraging powerful AI and machine learning to help businesses acquire and monetize users.
We see potential due to its strong growth in advertising, strategic divestment of its games business to focus on core ad-tech, and expansion into new markets like web advertising
Robust free cash flow ($826 M) funded a $1.2 B buyback, but leverage remains sizable at $3.7 B, warranting balance‑sheet vigilance.
Management guides to 81 % Advertising EBITDA margin in Q2 despite expected seasonal revenue dip—execution on web‑ads self‑service is the swing factor.
As of June 24th 2025 pre market, the stock trades at $348, down 12% on the last month, but still below its all-time highs of $525.
Company Overview
What AppLovin Corporation Does
AppLovin provides an end-to-end software and AI-powered platform that enables businesses of all sizes to connect with their ideal customers globally. Its core technology, AXON, helps advertisers optimize their marketing spend to achieve profitable growth and allows mobile app publishers to monetize their apps effectively through in-app advertising. The company is expanding its reach from mobile gaming into broader categories like e-commerce and web-based advertising.
For a 10-year-old: "AppLovin helps companies show the right ads to the right people on their phones and computers, so businesses can grow, and you see ads that are more interesting to you."
Why We Own It
We own AppLovin because it pairs hyper‑profitable mobile scale with a vast, under‑penetrated web and e‑commerce TAM. Continuous AXON model upgrades and a lightweight cost base turn incremental revenue into cash, enabling aggressive buybacks and optionality for M&A or data‑center expansion. If execution on self‑service onboarding delivers, we see a path to sustained high‑20 % topline growth
Company Background and Operations
AppLovin, headquartered in Palo Alto, California, was co-founded by Adam Foroughi, who serves as CEO and Chairperson. The company has evolved from a mobile game discovery platform into a comprehensive mobile marketing powerhouse. Its core advertising technologies, centered around the AXON machine learning platform, facilitate highly targeted and effective user acquisition and monetization for its clients.
In Q1 2025:
Advertising revenue soared to $1.16 billion, a 71% increase year-over-year.
The company announced the definitive agreement to sell its Apps (mobile gaming) business to Tripledot Studios.
AppLovin is actively developing and refining its web advertising solutions, including a self-service dashboard set for release to select customers.
The company emphasized its lean operational model and high efficiency, with adjusted EBITDA per employee in the advertising business reaching approximately $4 million annually.
This chart on revenue and employees tells the whole story on “high efficiency” (courtesy of Coatue)
Their Proprietary AXON AI Platform
AXON ingests >30 TB of real‑time user‑interaction data daily and retrains hourly, predicting engagement with multi‑channel reinforcement learning. The platform’s edge lies in producing high‑quality ROAS at scale, which in turn attracts more advertisers and supply—creating a reinforcing flywheel.
Earnings and Price Action
Latest Earnings Story
Q1 2025 revenue grew 40% YoY to $1.48 billion. Adjusted EBITDA increased 83% YoY to $1.01 billion, with an adjusted EBITDA margin of 68%. The Advertising segment was the primary growth driver, with revenue of $1.16 billion (up 71% YoY) and an impressive segment adjusted EBITDA margin of 81%. The company generated $826 million in free cash flow. Guidance for Q2 2025 for the Advertising business anticipates revenue between $1.195 billion and $1.215 billion, with adjusted EBITDA between $970 million and $990 million
Recent Price Movement
As of June 30th, 2025, in pre market the stock trades at $338. It remains way down from its 52-week high of $525 and up 6x from its $60 low.
The stock had a massive run leading up to the possible SP500 inclusion (which finally did not happen as S&P decided not to modify the index). And now pulled back to the EMA20 (weekly).
AppLovin is at a classic “trend-health check” level: the rising 20-week EMA. Historically that average has been a springboard in this advance. Holding it favors another leg higher; losing it suggests a longer consolidation or deeper mean-reversion. Watch this week’s close, volume, and whether bulls can quickly reclaim the $360-$380 zone for clues.
Investment Rationale
AppLovin is a cash‑gushing ad‑tech leader with a widening moat in machine‑learning optimisation. Its variable‑cost model and network effects support sustained margin leadership. We expect compounded EPS growth as web‑ads scale, capital returns shrink the share count, and the balance sheet de‑gears.
AXON delivers industry‑leading ROAS, boosting advertiser stickiness.
Self‑serve dashboard broadens reach to SMBs without heavy sales spend.
Divestiture of Games removes low‑growth drag and unlocks capital.
AI and data‑center investments are funded by internally generated cash.
Competitive Analysis
While Meta and Google dominate walled‑garden mobile ads, AppLovin thrives in the open ecosystem, leveraging first‑party SDK data and a large waterfall mediation footprint. Smaller SSPs lack its scale, and DSPs cannot match its closed‑loop performance data.
Growth Levers to Watch
Ongoing AI Model Enhancements: Continued improvements to the AXON platform, including both self-learning and directed engineering enhancements, are expected to drive better performance and scale for advertisers.
Web Advertising & E-commerce Expansion: The rollout and adoption of the self-service dashboard for web advertisers and further penetration into the e-commerce market represent a significant untapped opportunity.
Automated Ad Creation: Initiatives to enhance ad testing and develop generative AI-based ad creative tools could significantly improve campaign optimization and advertiser ROI.
App Store Regulatory Changes: Potential reductions in app store fees for developers could free up more budget for user acquisition, directly benefiting AppLovin's platform.
International Growth: While currently focused on U.S. only for its web advertising pilot, future global rollout presents another vector for expansion.
Market Trends
AppLovin is well-positioned within the growing digital advertising market, particularly in mobile. The increasing sophistication of advertisers demanding measurable ROI plays to AppLovin's strengths.
The shift towards AI-driven advertising solutions is a dominant trend, and AppLovin is at the forefront of this technological wave.
The company operates with a high adjusted EBITDA margin, reflecting its tech-driven leverage and efficient cost structure.
Seasonality tied to mobile device usage impacts its advertising business, with Q1 often benefiting from holiday periods and events like Ramadan and spring break.
Risk Management and Long-Term Outlook
AppLovin faces several risks, though management appears proactive in addressing them:
Execution in New Markets: Successfully scaling the web advertising business and ensuring the new self-service platform meets advertiser needs is crucial. Early churn, though low for larger clients, needs to be managed as the product matures.
Competition: The ad-tech space is dynamic, and maintaining a technological edge requires continuous innovation.
Attribution Challenges: Reliance on short cookie windows for web attribution can be a hurdle for certain advertiser types, though AppLovin is working on broader integrations.
Macroeconomic Factors: While currently insulated from some tariff concerns, broader economic downturns could impact advertising budgets.
Long-term, the outlook is strong. The company's focus on its core, high-margin advertising technology, coupled with significant growth opportunities in web and e-commerce, positions it well for sustained growth. Continued innovation in AI and a lean operational model are expected to drive shareholder value.
Investment Model
This is a model that projects revenue growth, earnings and EBITDA growth. The multiples may be too optimistic or too conservative. Up to you to decide.
Conclusion
AppLovin stands out as a highly profitable and rapidly growing leader in the advertising technology space. Its Q1 2025 results reaffirm its strong execution and the power of its AI-driven platform. The strategic divestiture of its gaming studios sharpens its focus on its core competency, paving the way for continued margin expansion and innovation in advertising solutions. While challenges exist in scaling new market segments, the long-term growth levers, particularly in web advertising and ongoing AI advancements, present a compelling narrative. AppLovin's ability to generate substantial free cash flow while investing in future growth initiatives makes it a noteworthy company in the current tech landscape.
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