AppLovin (APP +5.36%) might not be a household name, but the stock has exploded over the last few years.
In the last year, the stock is up more than 500% as it's pivoted from a mobile game publisher to an ad tech company, leveraging its knowhow of the mobile app economy into a highly profitable ad business.
Its ad tech business has been so successful that the company is now selling off its mobile games business for $900 million, though it will retain a minority stake in the business.
There's no question at this point that the advertising business is the engine of growth. In the fourth quarter, overall revenue rose 44% to $1.37 billion, but advertising revenue jumped 73% to $999.5 million. In addition to growing revenue rapidly, AppLovin is now highly profitable with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $848 million and generally accepted accounting principles (GAAP) net income of $599.2 million, or a profit margin of 44%.
With its return over 500%, AppLovin has already gotten plenty of investors on the path to becoming a millionaire, but can it do the same for you? Let's unpack the company's prospects after a blistering run on the stock market.
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AppLovin in 2025
AppLovin's ad business grew out of mobile games, but it's now expanding to new verticals beyond gaming as games typically advertise on other games.
In 2024, it began selling its technology to direct-to-consumer brands in e-commerce, and in 2025, it's focused on expanding to new verticals and channels, including connected TV (CTV), or ad-driven streaming. After the successful test with e-commerce brands, the company now believes that it has an addressable market of more than 10 million businesses that could use its platform profitably.
In 2025, it expects to expand to new verticals like fintech and automotive, showing that the ad business looks poised for another strong growth year.
The company also has plans to improve its technology, enhancing its AI models and personalizing ad experiences. It also expects to launch a self-serve dashboard powered by AI, similar to what The Trade Desk offers.
For the first quarter, management expects to generate $1.3 billion to $1.5 billion in revenue, representing more than a doubling in growth from the quarter a year ago. It sees adjusted EBTIDA of $805 million to $825 million. That kind of profit margin shows the superiority of the product and the business model as AppLovin is able to keep most of the money from sales as profit. That's a sign that its platform generates value for both customers and investors.
NASDAQ: APP
Key Data Points
AppLovin's value proposition
AppLovin stock is expensive, but it's pulled back from its post-earnings pop due to broader concerns in the market about consumer confidence, tariffs, and other issues.
AppLovin now trades at a price-to-sales ratio of 28, and a price-to-earnings ratio of 83, which seem like a reasonable price to pay considering its growth rate.
A number of DTC brands tested AppLovin in recent months with mixed results. Some found the platform delivers similar brand range to Meta Platforms, while others were disappointed with things like its measurement capabilities.
The company clearly has work to do to improve the product, and after overnight success, it may not be ready for mainstream businesses.
2025 will be the biggest test yet for the company, and expectations are high. However, if it can maintain its strong growth rate and healthy margins, the stock could still have a lot of upside ahead.
AppLovin still has a large market to tap into, and it's making investments to take advantage of that. The stock is expensive, but its growth rate justifies the valuation. AppLovin stock is risky, but the stock is positioned to help you become a millionaire. Keep an eye its results this year as its performance will indicate how much market share the company can grab as it expands beyond gaming.
