Should You Buy, Sell, or Hold AppLovin Stock Before Q4 Earnings?

Core Insights - AppLovin Corporation (APP) is set to report its fourth-quarter 2025 results on February 11, with earnings expected to reach $2.89 per share, reflecting a 67% increase year-over-year, and revenues projected at $1.6 billion, indicating a 16.9% growth from the previous year, driven by gaming advertising and the MAX platform ecosystem [1][5]. Earnings Estimates - The Zacks Consensus Estimate for the upcoming quarter remains unchanged, with one estimate revised downward in the last 60 days [2]. - The earnings surprise history shows that AppLovin has consistently exceeded earnings expectations, averaging a surprise of 15.3% over the last four quarters [3][4]. Stock Performance and Valuation - AppLovin's stock has declined by 25% over the past three months, compared to a 10% decline in the broader industry, yet it continues to trade at a forward price-to-earnings ratio of 29.71x, above the industry average of 23.64x, and a price-to-sales ratio of 19.74x, significantly higher than the industry average of 2.6x, indicating that the stock remains relatively expensive [7]. Competitive Landscape - Competitors in AI-driven performance advertising, such as Alphabet and Meta Platforms, have shown positive stock performance, with Alphabet gaining 19% and Meta Platforms increasing by 9% over the past three months, while AppLovin's specialized platform is achieving superior results in its niche [8]. Growth Drivers - AppLovin's growth is increasingly supported by its Axon engine, an AI system that automates ad placement and optimization, allowing for faster campaign deployment and measurable returns [9]. - The expansion of the Axon platform into e-commerce advertising is broadening AppLovin's addressable market without compromising margins, following the divestiture of its Apps segment in June 2025 [10]. Investment Outlook - The investment case for AppLovin is characterized by structural advantages and a focus on long-term growth rather than short-term market fluctuations, with the Axon-led platform enhancing advertiser engagement and expanding into higher-value performance use cases [13].