Key Highlights
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AppLovin experienced a significant rise in revenue this quarter.
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The advertising technology firm expects slower growth in the upcoming first quarter.
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AppLovin continues to produce considerable free cash flow.
Despite AppLovin’s recent performance, I was a bit cautious about its stock, as I mentioned last December. The rapid rise in tech stock prices had led to valuations that seemed, well, too high for comfort.
Since then, the stock has declined by 48%. Now, the question is whether it’s finally priced right for buying.
AppLovin’s Growth Performance
This week, the company wrapped up its 2025 financial year with impressive fourth-quarter results. Year-over-year revenue surged by 66%, reaching nearly $1.7 billion. All told, AppLovin’s total revenue for 2025 is expected to hit about $5.5 billion, showing a 70% increase over the previous year.
The company’s net income is rising even faster, as reflected in its Q4 results. By the end of 2025, net income is projected to be around $3.3 billion, which is an increase of 84% from last year and more than double the previous year’s figures.
This strong performance led to remarkable cash flow, with free cash flow for 2025 at $3.95 billion, a notable jump from $2.1 billion in 2024. This works out to around 72% in terms of cash flow as part of total revenue.
During the fourth quarter earnings call, CEO Adam Foroughi mentioned that the company is leveraging advancements in artificial intelligence. He expressed optimism, noting that as research in AI progresses, so will AppLovin’s growth.
Such momentum is certainly promising for the stock. However, potential investors should remain cautious, especially in bear markets.
Considering the Risks
Despite the strong momentum, there are reasons to hold back. For instance, the forecast for first-quarter earnings points to a pronounced slowdown, which is surprising given the previously high growth rates.
AppLovin anticipates first-quarter revenue between $1.745 billion to $1.775 billion. When factoring in the sale of its mobile gaming division last summer, this suggests about 52% year-over-year growth—still decent but a drop from what we’ve seen.
A slowdown in growth isn’t atypical, but the stock’s current valuation means it’s facing close examination. Presently, AppLovin’s price-to-earnings ratio stands at around 38, which feels quite high, especially with a market cap of $124 billion based on a trailing net income of only $3.3 billion over the past year.
If the company can sustain its rapid growth, maybe that PE ratio isn’t so unjustified. Foroughi appeared upbeat during the earnings call about continued performance.
Moreover, it’s essential to consider the sustainability of AppLovin’s competitive edge. Its impressive cash flow is drawing interest from competitors, and if rivalry increases more than investors anticipate, growth could be stunted further. There’s also the risk that AI, while currently a boost, could pose challenges down the line.
All in all, while AppLovin has a strong foundation, the associated risks make its stock a potentially risky buy.
Should You Invest in AppLovin Stock?
Before making a decision on AppLovin, consider this:
According to our analyst team, there are other stocks that might offer better value right now. They’ve identified several options that could yield impressive returns that are generally outpacing AppLovin at this moment.
Some examples include stocks like Netflix and Nvidia, which have shown extraordinary growth since their initial recommendations.
It’s worth noting that overall, the average return for our stock advisor has significantly outperformed the S&P 500.
In short, it’s essential to evaluate various options before diving into AppLovin’s stock given its current valuation and potential risks.
