AppLovin Earnings Preview (APP): Expectations High As Stock Momentum Slows

AppLovin Corporation (NASDAQ:APP) is another big name set to release earnings report after the closing bell today, with street expecting strong growth from the firm. The market is keenly awaiting the results to gauge the company's financial health and the success of its strategic pivot towards ad technology. Recent trading activity reflects this anticipation, with the stock exhibiting notable volatility.

Analysts project earnings per share (EPS) of $2.32 for the quarter, getting close to a double up from the same quarter last year ($1.17). Revenue is expected to reach $1.22 billion, representing a more modest 13% year-over-year growth.

APP stock has been building some momentum leading into earnings, rising 10.3% over the past month. Broadly speaking however, momentum in the stock has slowed markedly this year, with a 11.2% YTD gain standing in stark contrast to the 700%+ in gains seen during 2024. A slowing of momentum, whilst holding green on the year is not at all bad, yet APP bulls may be looking for more.

Analyst sentiment remains largely positive, with an average one-year price target of $471.05, representing a potential upside of more than 20% from current price action. The consensus recommendation from 26 brokerage firms is an “Outperform” rating, and 25 analysts currently rate APP a Buy.

These bullish views are underpinned by expectations for continued growth in the ad tech sector and the potential benefits from AppLovin's AI-driven solutions.

AppLovin is undergoing a strategic transformation, divesting its mobile games development business for $900 million to concentrate on its high-growth advertising segment, particularly the Axon 2 AI optimizer.

This move is expected to improve margins and accelerate growth within its core ad tech business. In the previous quarter, AppLovin reported a 44% year-over-year increase in total revenue to $1.37 billion and a 78% rise in adjusted EBITDA to $848 million, underscoring the strength of its advertising platform.

Analysts have remained fairly firm on previous estimates leading in to this report, with no change on EPS expectations in the month leading in.

As is typical for growth and momentum names, guidance is likely to prove pivotal in how the stock shapes up from here. The options market is implying a move of around 15% off the back of earnings, so volatility is expected. Buckle up, this one could be a blockbuster.