AppLovin Earnings Preview: Can the AI Darling Keep the Momentum Going?

 

AppLovin ($APP) is set to release its Q4 earnings on February 12 after the market closes, and there's a palpable buzz around the stock. A mobile app technology company specializing in AI-powered advertising solutions, AppLovin saw an incredible 712% surge in its share price last year and has become a standout performer on Wall Street—especially among AI-focused stocks. But the big question is: Can AppLovin keep this momentum going?

 

 

Analysts are expecting Q4 revenue of $12.64 billion, a solid 32.58% YoY increase, and EPS of $1.26, which would represent an eye-popping 156.71% YoY growth. For a company with a market cap of over $127 billion, these expectations are quite significant. The performance in recent quarters has been nothing short of stellar, with Q3 revenue nearing $12 billion, up 39% QoQ.

 

But don’t forget, AppLovin’s stock shot up by 46% the day after Q3 earnings, driven by its AI-powered advertising technology. This sets a high bar for the company to surpass, but heading into the earnings report, the momentum looks solid, especially considering its position as a leader in AI-driven advertising.

 

 

At the core of AppLovin’s success is its AI-powered AXON recommendation engine. The company’s flagship product, AppDiscovery, uses predictive algorithms to match apps with the users most likely to engage. This personalized approach to advertising isn’t just about serving ads; it’s about optimizing ad spend and delivering more efficient marketing campaigns.

 

The result? AppLovin’s clients are willing to pay a premium for the targeted reach and higher return on investment that AI can provide. This AI-driven advertising optimization has been a key factor in the company’s explosive growth, and it’s a major reason why AppLovin has been able to outperform competitors.

 

In the current AI boom, AppLovin is ahead of the curve. While large players like Meta ($META) and Google ($GOOGL) are also in the AI advertising game, AppLovin’s specialized tech and ability to harness AI for highly effective marketing gives it a serious edge over both the big players and smaller competitors.

 

 

Here’s a breakdown of the expected performance for Q4:

 

1. Software Platform: Predicted to bring in $890 million, a 54.7% YoY increase, accounting for 70% of total revenue. This segment has been the backbone of AppLovin's impressive valuation and continued growth.

 

2. Apps: Expected to generate $370 million in revenue, but this side of the business is facing a 1.85% YoY decline. However, the impressive growth in the software platform more than compensates for this.

 

 

Despite its already astronomical rise, analysts remain optimistic. Jefferies has raised its target price to $425, while Loop Capital increased its target to $450, citing strong growth in AppLovin’s core gaming business. Even with a high valuation, many experts believe AppLovin’s trajectory is strong enough to justify these price targets.

 

And when it comes to AI-driven marketing, it’s clear that the market is betting on the future of this sector. With companies like AppLovin leading the way in harnessing AI for targeted advertising, we may be looking at a future where AI marketing becomes the standard. In that scenario, companies like AppLovin, which have already proven their value, are poised for continued growth.

 

 

As with any high-growth stock, the question always arises: How much of the upside is already priced in? The recent +16% year-to-date gain shows that investors are still betting on significant future growth, but is that sustainable long-term? Personally, I’m curious to see if AppLovin can continue to exceed expectations. If they do, a place in the S&P 500 could be next on the horizon, and the stock may continue to benefit from the AI boom.