Down 41% in 2026, Reasons for AppLovin Optimism Remain

Core Viewpoint - AppLovin has experienced a significant decline in stock value in early 2026, despite strong revenue and earnings growth in previous years, primarily due to increased competition and market reactions to earnings reports [3][4][8] Financial Performance - In Q4 2025, AppLovin reported revenue of $1.66 billion, a 66% year-over-year increase, surpassing estimates of $1.61 billion [5] - Earnings per share (EPS) rose by 87% year-over-year to $3.24, exceeding expectations of $2.89 [5] - The adjusted EBITDA margin improved to over 84%, an increase of approximately 200 basis points compared to Q3 2025 [5] - For the next quarter, the company projects revenue of $1.76 billion at the midpoint, indicating a growth of 52% [6] Market Dynamics - AppLovin's stock has dropped over 40% in 2026, following a 700% return in 2024 and over 100% in 2025 [3][4] - A new competitive threat, particularly from Meta Platforms, contributed to a 16% drop in shares on February 4, followed by a nearly 20% decline after the latest earnings report on February 12 [4][8] - Analysts express concerns regarding potential competition from Meta, although AppLovin has specialized expertise in mobile game advertising, making it uncertain if Meta will aggressively pursue this niche [7] Competitive Landscape - Meta Platforms is projected to generate approximately $250 billion in revenue for 2026, compared to about $8 billion for AppLovin, which may limit Meta's financial incentive to disrupt AppLovin's market [7] - Despite the competitive pressures, analysts forecast more than 50% upside for AppLovin, indicating potential for recovery and growth [8]