Core Viewpoint - Citi maintains a "Buy" rating for Applovin, focusing on its leadership in the "AI + Digital Advertising" sector, with a 12-month target price of $820, indicating strong growth potential in non-mobile gaming areas like e-commerce and fintech [1][2]. Company Overview - Applovin is recognized as a leader in AI-driven advertising solutions, with its core product, the Axon platform, showing robust growth. As of December 5, the number of e-commerce clients reached 3,545, a 17% increase from November 7, with a stable market share of 68.2% in the U.S. [1][2]. Financial Performance - Expected revenue for Applovin in 2025 is $5.74 billion, with an EBITDA margin of 78.3%. The forecasted free cash flow (FCF) for 2026 is $4.85 billion, supporting its long-term value as a core player in the AI advertising ecosystem [2]. Market Positioning - The target price of $820 corresponds to a 40x multiple of the expected FCF for 2027, significantly higher than the average 25-30x for peers. This premium is justified by Applovin's expected revenue CAGR of 33% from 2023 to 2026, compared to the industry average of 15-20% [2]. Macro Environment - The global digital advertising budget is projected to grow at a CAGR of 8-10% from 2025 to 2027, with AI-driven digital advertising expected to increase its share to 30%. The U.S. revenue share of 68% reduces international regulatory risk exposure [3]. Industry Trends - The integration of AI in digital advertising is becoming a significant trend, with major players like Google and Meta rapidly adopting generative AI technologies to enhance ad performance and user engagement [3][4]. Structural Impact of AI - AI enhances the precision and conversion rates of digital advertising, leading to higher ROI for advertisers. However, AI-generated content may also divert traffic, necessitating a reevaluation of traditional ad inventory value [4]. Company Operations - Applovin, headquartered in Palo Alto, California, specializes in AI-driven advertising solutions for e-commerce and gaming companies, optimizing ad placements through its Axon platform to significantly boost sales and profits for advertisers [4].