When artificial intelligence (AI) is upending every industry known to the world, can advertising be far behind? After crypto mining company Cipher (CIFR) got Google’s (GOOG) (GOOGL) backing for its pivot towards the industrial data center business, mobile ad tech company AppLovin (APP) is set to launch a self-serving tool targeting non-gaming advertisers on Oct. 1.
AppLovin’s AI-based ad engine, Axon Ads Manager, will do away with the manual onboarding process for the company’s e-commerce and other non-gaming customers, leaving analysts at Morgan Stanley and Phillip Securities believing that this could be a game-changer for the company. While Phillip Securities has assigned an “Accumulate” rating for the stock with a $725 price target, Morgan Stanley has considerably raised its price target on the stock to $750 from $480 while reiterating its “Overweight” rating.
Founded in 2012 and based out of the startup hub of Palo Alto, CA, AppLovin offers tools and platforms for app developers & advertisers to market, monetize, analyze, and publish mobile apps. Since its listing in April 2021, APP stock is up a whopping 1,067.8%.
Valued at a market cap of $226.6 billion, the APP stock has had a stellar 2025 so far as well, with the stock up 120% on a year-to-date (YTD) basis.
However, is this enough for AppLovin to find the love in an investor’s portfolio? Let’s try and answer that.
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AppLovin’s financials are as strong as they can be, with the company reporting an earnings beat in nine consecutive quarters. The story remained the same in the most recent quarter as well, as AppLovin’s revenue and earnings both surpassed Street expectations.
In Q2 2025, revenues came in at $1.26 billion, up a considerable 77% from the previous year. Earnings witnessed an even sharper jump of almost 3 times to $2.39 per share from $0.89 per share in the same period a year ago. Moreover, it was also much ahead of the consensus estimate of an EPS of $1.96.
Meanwhile, net cash from operating activities doubled to $1.6 billion for the first six months of 2025 from $847.3 million in the prior year. Not only that, AppLovin bolstered its cash balance to close the June ’25 quarter with cash and cash equivalents of $1.2 billion compared to $697 million at the start of the year and no short-term debt on its books.
Also, the company hived off its mobile gaming business, Apps, to TripleDot Studios for $400 million in cash as the company looks to become a fully AI-focused advertising company.
Lastly, for Q3 2025, AppLovin is expecting revenues to be in the range of $1.32 billion to $1.34 billion, the midpoint of which would denote an annual growth of about 11%.
AppLovin’s future looks strong, driven by several key factors such as integrating in-app purchases (IAP), leveraging generative AI, and successfully scaling its self-serve platform. These elements combine to create a solid foundation for extended growth.
Specifically, AppLovin is aggressively expanding its advertising network to include IAP-based games that traditionally relied on in-game spending. Management recently highlighted a major success, which was introducing AppLovin ads into the blockbuster mobile game Candy Crush. This boosted the game publisher’s revenue by 15%. This achievement is promising because it immediately opens up a massive new pool of advertising inventory with minimal extra effort required to find advertisers.
In the sphere of generative AI, AppLovin plans to soon release new tools within its ad ecosystem. These will permit advertisers to rapidly create, test, and refine creative content. The company expects these tools to significantly lift win rates and improve overall return on investment (ROI). Crucially, providing advertisers with faster feedback loops could lead to a sustained, higher level of total ad spending, directly accelerating the firm’s growth trajectory.
This technological progress, along with the company’s strides in scaling its self-serve platform, which reduces complexity for smaller businesses, and the strong performance seen in e-commerce due to higher ROI, means AppLovin continues to unlock a far larger total addressable market (TAM) than it currently serves.
Notably, AppLovin initially built its core around ad tech specifically for the gaming industry. It is now strategically applying that highly effective marketing engine to new areas, namely e-commerce and web advertising. The Axon Ads Manager is central to this diversification. Axon AI’s advanced predictive algorithms handle the heavy lifting for clients by automatically evaluating every potential ad impression. The explicit goal is always to achieve the advertiser’s stated target. The system precisely identifies and targets users most likely to download an app, complete a purchase, or otherwise engage with the product.
Encouragingly, the platform’s competitive edge continues to sharpen through new features like automated workflows, automatic credit card billing, and dynamic card creation. In fact, AppLovin has strategically integrated Axon with Shopify (SHOP) as part of its calculated move into the e-commerce market. Since Axon relies on AI and machine learning to manage and automate mobile and connected TV campaigns, the company aims to deploy this proven technology beyond gaming to substantially increase its TAM and accelerate its revenue growth.
The expansion of the e-commerce and web advertising platform also has an international dimension. While Axon’s use for these new sectors has so far been restricted to U.S.-based advertising, the company intends to expand into global markets when the platform fully opens its new verticals. This expansion leverages AppLovin’s existing global network, which includes offices in major world cities such as Berlin, Dublin, Tokyo, Beijing, and Seoul.
Ultimately, because the platform’s foundation is AI-driven, every new advertiser supplies incremental data to its models. This consistently improves targeting accuracy. This self-reinforcing feedback loop creates a deepening competitive advantage as user adoption grows, ultimately resulting in enhanced pricing power and superior targeting precision.
Thus, analysts remain bullish about the APP stock, attributing to it a rating of “Strong Buy.” Although the mean target price of $567.48 has already been surpassed, the high target price of $810 indicates an upside potential of about 14.7% from current levels. Out of 23 analysts covering the stock, 19 have a “Strong Buy” rating, three have a “Hold” rating, and one has a “Strong Sell” rating.
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On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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