although NVIDIA The spectacular surge remains the biggest story in the tech industry, with the artificial intelligence chip maker’s performance in the market this year dwarfed by that of a digital advertising company specializing in gaming.
Apply love The company’s shares soared 310% in 2024, beating all U.S. technology companies with a market capitalization of at least $5 billion, according to FactSet. Nvidia, which has led the artificial intelligence craze and become the world’s second-largest listed company by market value, has seen its stock price rise 173% this year.
AppLovin was founded 12 years ago and went public in 2021, setting off a craze for online gaming in the coronavirus era. Now, the company’s gaming unit is growing relatively slowly, but its online advertising business is booming due to advances in artificial intelligence that improve ad targeting.
With big returns come big expectations, AppLovin has a lot to prove in Wednesday’s earnings report as investors look for evidence to justify the rally. According to LSEG, analysts expected revenue to grow 31% to $1.13 billion in the third quarter report, after growing by more than 40% for two consecutive quarters.
In addition to revenue, AppLovin’s profits have also grown significantly. LSEG’s consensus is for earnings per share to more than triple to 92 cents, while analysts expect operating income to more than double to $424.2 million, according to FactSet.
AppLovin attributes much of its growth to its artificial intelligence advertising engine called AXON, especially since the release of an updated version 2.0 last year. The technology helps deliver more targeted ads on mobile gaming apps owned by the company and is available to other studios that license the software.
“AXON’s enhancements achieved through continued self-learning and our focused development efforts drove strong business results during the quarter,” AppLovin said in its report. Second quarter shareholder letter August. In the second quarter, software business revenue surged 75% to $711 million, accounting for approximately two-thirds of total sales.
Analysts are becoming increasingly optimistic.
Wells Fargo gave AppLovin the equivalent of a buy rating on Oct. 29, saying the company’s stock price was rising. BTIG analysts last week raised their price target to $202, the highest among companies tracked by FactSet. Oppenheimer, Stiffel Nicholas and Jeffries also raised their goals in October.
Wedbush analysts said that in the next ten years, the advertising opportunities in the mobile game industry will grow from the current US$10 billion to US$50 billion.
“Investors have bought into the story, driving APP shares to an all-time high, and we believe the rally is warranted,” Wedbush analysts wrote in an Oct. 11 note. They said the company’s “ “The real opportunity” is to seize the influx of brand advertising into mobile games from more traditional channels such as social media or traditional broadcast.
Because of its position in the digital advertising space, AppLovin faces potential competition from some of the best-capitalized companies in the world. AppLovin said in its latest annual report Google, Amazon and Facebook as a competitor. The company also relies on a small set of mobile platforms, notably Apple and Google, for distribution.
AppLovin did not respond to a request for comment.
One of the biggest financial beneficiaries of AppLovin’s historic rise is founder and CEO Adam Foroughi, whose stake has surged in value to about $5 billion.
Things could have turned out very differently.
In September 2016, a few years before the IPO, Foroughi agreed Sale of majority stake Acquired AppLovin from Chinese investment company Orient Hontai Capital in a deal valued at $1.4 billion. The deal never materialized because the agreement came as the U.S. government was cracking down on China’s involvement in the domestic technology industry.
Most recently, AppLovin was supposed to be on the other side of a deal that ultimately fell through. In 2022, AppLovin gives up its efforts to acquire game software developers unified software The company acquired the company for $20 billion after Unity shareholders rejected the takeover.
Unity has since fallen on hard times, losing more than half its value. Over the same period, AppLovin’s market capitalization has grown almost sixfold.
watch: LightShed’s Brandon Ross says AppLovin is “killing Unity”
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