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This Week's Featured Article
AppLovin Pops After Earnings With Growth Catalysts in SightAuthored by Leo Miller. Article Posted: 5/8/2026. 
Key Points
- After putting up momentous returns over the past three years, AppLovin shares have been in a bit of a rut lately.
- However, the company won over investors in its latest earnings report, seeing a solid 6% gain the next day.
- The company continues to make progress on its self-service and consumer strategies, which could be significant growth drivers going forward
- Special Report: Elon Musk: This Could Turn $100 into $100,000
Advertising technology stock AppLovin (NASDAQ: APP) has made a name for itself over the past several years. Shares rose more than 250% in 2023, more than 700% in 2024, and more than 100% in 2025. However, the stock has run into some trouble more recently and is now down around 30% from its 52-week high reached in December 2025. The stock also became caught up in the broader software sell-off this year. Reports surrounding an SEC probe have added to the pressure on shares.
Still, when push comes to shove, AppLovin has consistently shown the strength of its business. Shares have risen after nine of the last 10 earnings reports, with an average post-earnings gain of around 13%. This impressive track record extends to AppLovin’s latest report, with shares up more than 6%. Even with the stock still down significantly, the outlook for AppLovin remains solid. AppLovin Exceeds Top-Line, Bottom-Line, and Guidance EstimatesIn Q1 2026, AppLovin delivered meaningful beats on both the top and bottom lines. Revenue came in at $1.84 billion, rising 59% year over year (YOY) and surpassing expectations of $1.77 billion. Meanwhile, the company’s earnings per share (EPS) from continuing operations rose 70% YOY to $3.56 from $2.13. This differs from the firm’s reported EPS increase of 113%, which moved to $3.56 from $1.67. EPS from continuing operations is a more useful metric because it accounts for the 43-cent headwind the company faced a year ago from the sale of its gaming business. That makes the growth rate lower, but the 70% increase was still highly impressive. The company saw operating margins improve once again. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin hit 85%. This was a significant increase from 81% a year ago and 84% a quarter ago, showing that AppLovin continues to grow sales faster than operating costs. Notably, free cash flow (FCF) rose 50% YOY, although FCF margin declined moderately versus Q4 2025, from 73% to 70%. Even so, AppLovin’s ability to generate cash efficiently is exceptional. Among tech stocks in the S&P 500, its FCF margin is one of the highest. For perspective, Palantir Technologies (NASDAQ: PLTR), another highly profitable software company, posted an adjusted FCF margin of 57% in its latest quarter. For next quarter, AppLovin projects midpoint sales of $1.93 billion, or growth of 53.5% YOY. That exceeded estimates of $1.89 billion. The company also expects adjusted EBITDA margin to hold relatively steady between 84% and 85%. AppLovin Readies Self-Service Rollout as Consumer Push ProgressesAppLovin built its business by helping mobile gaming companies attract more users and generate more revenue. However, the company and analysts have focused heavily on its push into the e-commerce vertical, now renamed consumer. This is an emerging source of advertising demand for the company and is still ramping up, but management offered encouraging commentary on the consumer side. First, AppLovin said its consumer vertical is now growing faster than the gaming vertical. It also said consumer advertiser spending was 25% higher in March than in January, pointing to accelerating demand throughout the quarter. Furthermore, spending hit a record in April and was higher than in any month in Q4. This is important because industry-wide consumer advertiser spending tends to peak in Q4, along with the holiday season. AppLovin’s consumer push was strong enough to overcome that seasonal pattern. Additionally, AppLovin will fully open up its self-service capabilities in June. Over the past 14 years, not just anyone could advertise on AppLovin. Companies often needed referrals and had to go through an assisted onboarding process. In effect, this limited the company’s growth. Sometime in June, advertisers will be able to join the platform much more easily, which could provide a meaningful growth tailwind. This move is necessary to support AppLovin’s consumer push, since that space includes many more companies than the gaming vertical. It will be important to watch how the self-service rollout progresses over the coming quarters. Still, the early signs of the company’s consumer push look strong. AppLovin: A High-Growth Name That Looks Reasonably ValuedCurrently, AppLovin trades at a trailing price-to-earnings ratio (P/E) near 40x, more than 40% below its average of 69x since the start of 2024. Its forward P/E ratio sits near 28x, more than 10% below its average of 33x during the same period. Clearly, these valuation metrics remain meaningfully below recent levels. Analysts also remain optimistic. The MarketBeat consensus price target near $664 implies more than 40% upside in shares. The average of targets updated after the company’s report is moderately lower, near $638, implying upside of about 25%. Given AppLovin’s strong growth and profitability, along with the potential of its consumer push, the outlook for shares is attractive. Still, the SEC probe is a real risk and could pressure shares if a material finding emerges. |
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