This Goldman Sachs Analyst Raised His Forecast For AppLovin - Here's Why

Core Viewpoint - AppLovin Corp has reported a strong quarter, driven by its AI-driven AXON 2.0 platform and the early success of its self-serve eCommerce portal [1][3]. Financial Performance - The company achieved approximately 85% incremental adjusted EBITDA margins, indicating industry-leading profitability [2][5]. - Revenue and adjusted EBITDA exceeded guidance, with fourth-quarter revenue projected at $1.59 billion, an increase from the previous forecast of $1.52 billion [6][7]. Strategic Developments - Management highlighted three key themes: continued strength in advertising, promising early results from the eCommerce portal, and sustained high incremental margins despite investments in cloud hosting and customer acquisition [4][5]. - The early tests in eCommerce suggest a significant long-term opportunity to expand its auction platform beyond gaming, with scaling expected to accelerate through 2026 and beyond [4][5]. Analyst Insights - Goldman Sachs analyst Eric Sheridan maintained a Neutral rating on AppLovin, raising the price forecast from $630 to $720, reflecting confidence in the company's growth potential [3]. - Sheridan noted that while eCommerce revenue growth is modest in the fourth quarter, its contribution is expected to scale significantly next year [6]. Shareholder Returns - The company expanded its share repurchase authorization to $3.3 billion, following $500 million in buybacks during the third quarter [6].