AppLovin (NASDAQ:APP | APP Price Prediction) delivered a beat-and-raise quarter for the fourth quarter, with revenue and profits topping analyst expectations, and management issuing guidance for the coming quarter above Wall Street estimates.
Despite the stellar results, shares are plunging 18% in morning trading today, to around $371 per share, driven by investor fears that artificial intelligence’s (AI) advancements could erode its ad tech dominance. Coupled with some analysts cutting their price targets — even though the new levels remain well above where AppLovin currently trades — and it’s right to wonder just how far the stock can fall.
A Robust Performance
AppLovin’s Q4 revenue growth was fueled by enhancements to its core mobile gaming ad platform, seasonal demand, and expansion into e-commerce advertising. The top line surged 66% year-over-year to $1.66 billion, exceeding analyst estimates of $1.61 billion. Net income also climbed 84% to $1.10 billion, while adjusted EBITDA hit $1.4 billion with an 84% margin. The company issued Q1 2026 guidance for revenue of $1.745 billion to $1.775 billion and adjusted EBITDA of $1.465 billion to $1.495 billion, both above consensus estimates.
The apps segment, which includes its mediation tool MAX, contributed significantly, with adjusted EBITDA margins expanding over 700 basis points year-over-year, reflecting efficient operations and high flow-through from incremental revenue. Free cash flow reached $1.31 billion, an 88% increase, bolstering a $2.5 billion cash position.
For the full year 2025, revenue totaled $5.48 billion, up 70%, with net income at $3.33 billion, more than doubling from 2024. Share repurchases continued, with 0.8 million shares bought back in Q4 for a yearly total of 6.4 million at $2.58 billion. It reported a Rule of 40 score of 150, far exceeding the 40% benchmark for SaaS companies.
Management Brushes Off AI Disruption
During the earnings call, CEO Adam Foroughi addressed market volatility tied to AI, stating there is a “real disconnect between market sentiment and the reality of our business.” He downplayed AI as a threat, emphasizing that AppLovin benefits from advanced AI models to optimize ad delivery and user acquisition. This includes AI-driven tools in game development, where Foroughi noted AI enhances efficiency but does not undermine AppLovin’s monetization role.
Analysts echoed this, with some calling fears over AI prototypes like Google’s Project Genie “overblown,” as they focus on game creation rather than ad discovery or targeting. Foroughi highlighted that AppLovin’s platform integrates AI to drive sequential growth, projecting 5% to 7% revenue increases into Q1.
Dismissing Meta as a Competitive Overhang
Concerns also arose from Meta Platforms (NASDAQ:META) potentially bidding more aggressively on mobile gaming ad inventory, which could pressure AppLovin’s market share. Meta’s scale in social ads might allow it to capture more off-platform demand, eroding AppLovin’s mediation advantages.
However, Foroughi dismissed this as routine, noting AppLovin has “added more competition in the MAX auction” multiple times without harm. He argued that increased competition strengthens the auction ecosystem, benefiting overall efficiency, and tied this to broader AI trends where AppLovin adapts rather than competes directly. Analysts like JPMorgan cited Meta as an ongoing overhang but maintained price targets above current prices.
The Long, Lingering Short-Seller Shadow
AppLovin remains under a cloud from short-seller reports last year, including allegations from Fuzzy Panda, Culper Research, and Muddy Waters of improper data practices and terms-of-service violations with partners like Meta and Google. Management rebutted these, hiring Quinn Emanuel to investigate and publishing blogs clarifying data handling.
A January 2026 report from CapitalWatch accused AppLovin of having links to money laundering through shareholder Hao Tang, initially tanking shares 32%. On Monday, though, CapitalWatch retracted key allegations in its report and apologized, leading to a 14% rebound. Yet, the cumulative scrutiny, including an SEC probe into data collection triggered by earlier reports, continues to weigh on sentiment.
Key Takeaway
AppLovin has shed about 50% of its value from its December high near $746 per share, and now trades below $400 despite robust fundamentals. Even a standout earnings report failed to lift the stock, as AI fears, competitive pressures, and unresolved short-seller doubts persist.
With uncertainty around regulatory probes and AI’s long-term impact, this isn’t the moment to buy in. While the blowout earnings report provides some clarity, greater surety is still needed over AI’s threat, which AppLovin will need to provide in future quarters.
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