Key insights
- The author presents a bullish case for AppLovin (APP), citing its dominance in mobile ad tech, high revenue growth and EBITDA margins, and a pristine balance sheet with share buybacks. Catalysts include its rapidly growing eCommerce business, AI-driven ad creatives, and a lean, execution-focused culture. The author believes the stock is undervalued based on its growth prospects and forward PE ratio, suggesting a positive influence on US equities.
NOTICE: I am an $APP bag holder since $520 at an around $23K investment
Overview:
AppLovin is a dominant force in mobile ad tech. To put it very simply, they run 80% of the auctions across all mobile games. They help game developers make the most amount of money possible by selling ads to help advertisers make the most amount of money by serving those ads to the most optimal users possible.
They own the supply, the game developers apps, which gives them a major advantage over anyone else in the space. The best data is fuel for their advertising engine, getting you much higher ROAS (return on ad spend).
They have also unleashed a rapidly growing eCommerce business that is a legit third place contender behind Google and Meta.
Financials:
APP grew revenues at 66% percent in 2025 with an EBITDA margin of 84%. That is a rule of 40 score of 150.
2026 is seeing same EBITDA margins with over 40% revenue growth.
They are trading at a 27x forward PE! Revenue is set to grow at a low 30% to high 20% in 2027. You can not beat this anywhere.
Strengths and Catalysts:
APP has a pristine balance sheet and all free cash flow goes to buybacks. Shares are expected to DECREASE 3-4%.
They run very lean, like a startup, with just 900 employees at $130B market cap. This enables them to move quick and EXECUTE. The CEO is ruthless and has established an “A Players will work with A Players culture”. These guys are known for an extreme work culture that demands excellence. None of that exorbitant SBC culture you see elsewhere in software.
Their ecommerce platform isn’t even in general availability yet. This represents a huge TAM explosion that isn’t yet baked in to assumptions.
They have recently launched AI ad creative, meaning AI generated ads. This sounds dumb, but you have to remember it is mobile gaming inventory and the ads are much simpler. These ads have performed very well and promise better ROAS because they are tailored to performance.
Reduction in Google Play Store fees, the growth of direct to consumer web shops, and the promise of Apple reducing fees create an environment where developers pocket gains. Developers actually reinvest these gains straight into more ads.
The growth of AI based slop will unleash a flood of new content. Supply goes up but demand stays the same (same amount of end users). Discovery and distribution become even more important, leading to higher ad prices and quantity.
Risks:
Competition from Meta and a newcomer CloudX. This is definitely a risk, but AppLovin has already corrected 45%. Plus AppLovin has a lock in effect. You want the best ROAS? You go with AppLovin because they have the data moat? You want to leave AppLovin ecosystem? Fine, there goes half your advertising spend because you are going on an inferior platform that can’t optimize and scale.
Summary:
I am an $APP bag holder since $520 at an around $23K investment. This is a remarkable company that has been unjustifiably getting shit on. They are literally the worst performer in the S&P when fundamentals have only gotten better.