AppLovin Corp (NASDAQ:APP) saw a 16% drop in its shares in early trading on Thursday, despite the company exceeding expectations with its fourth-quarter earnings and raising its outlook for 2026.
In Q4, AppLovin reported revenue of $1.66 billion, a 66% increase from the previous year and slightly above analyst estimates of $1.61 billion. Adjusted earnings per share came in at $3.24, surpassing the Streetâs forecast of $2.96. Additionally, adjusted EBITDA rose by 82% to $1.399 billion, resulting in a record 84.4% margin. Net income for the quarter surged by 84% to $1.102 billion, with free cash flow totaling $1.31 billion.
Looking ahead, AppLovin projected first-quarter revenue between $1.745 billion and $1.775 billion, with adjusted EBITDA expected to be between $1.465 billion and $1.495 billion, maintaining a high margin of around 84%. These figures exceeded consensus expectations.
Analysts at Wedbush maintained an âOutperformâ rating on the stock, raising their 12-month price target to $640 from $465. They cited AppLovinâs leading position in mobile gaming advertising, its AI-driven platform, and expansion into e-commerce and connected TV as key drivers of growth. Wedbush noted that AppLovin has consistently shown strong growth potential with a remarkable profit margin.
AppLovin credited its strong performance to its Axon 2.0 engine, which converted 95% of incremental revenue into EBITDA, and its early pilot phase in e-commerce. The company emphasized a cautious approach to expanding into new verticals, highlighting the need for substantial data ingestion to deliver meaningful value.
Despite the impressive results, the stock experienced a sell-off as investors may be concerned about high valuations and competition in the ad-tech sector.
Overall, AppLovinâs strong Q4 earnings and positive outlook for 2026 demonstrate the companyâs continued growth trajectory and potential for long-term success in the mobile advertising software industry.
