Shares of leading adtech behemoth AppLovin (APP 16.12%) were down 16% as of 3 p.m. ET on Wednesday, extending the stock's 42% decline so far in 2026. AppLovin has battled an array of headwinds to start the year, but today's drop seems to stem from increased competition from AI-powered peers threatening to disrupt AppLovin's dominance in mobile gaming ad monetization. CloudX -- a start-up that looks to bring automation to the mobile gaming ad niche via LLM agents -- released its solutions to general availability on Wednesday, and the market worried about AppLovin's ability to stand a barrage of AI-powered competition.
NASDAQ: APP
Key Data Points
AppLovin's awful 2026 (so far)
After its stock rose more than 5,000% in less than three years, AppLovin has seemingly faced pressure from all sides in 2026, stemming from events like:
- a short report from CapitalWatch, accusing AppLovin of playing a role in money laundering
- Google's launch of Project Genie, which could democratize game development and potentially upend AppLovin's ad business
- a sectorwide software sell-off, as the market weighs AI disruption potential
- CloudX, specifically, put a name to this broader AI threat for AppLovin today
- an ongoing SEC investigation into the company's data collection practices
- other short reports in addition to CapitalWatch
Image source: Getty Images.
That said, AppLovin sold its mobile gaming portfolio (not its mobile gaming ad business) in July of 2025, so the project Genie threat may prove to be a nothing-burger -- or even a tailwind with more games available to place ads on. Furthermore, while AppLovin faces these headwinds, it grew sales and net income by 72% and 128%, respectively, in the first three months of 2025, so these worries have yet to affect the financials. Trading at 40 times free cash flow and 28 times next year's earnings, the company's valuation has become reasonable following its dramatic sell-off at the start of the year. However, I personally won't be buying shares just yet, as I need more clarity from the stock regarding this long list of volatility-inducing headwinds. AppLovin reports earnings on Feb. 11, so we should get some valuable insights soon.
