Nicholas Mugalli
Institutional TMT & Macro Research, AI/Semiconductors/Policy
AppLovin's ad yield engine has run out of gas, setting up the same structural decay that hit The Trade Desk as ad spend consolidates into walled gardens. Conversion rates stalling around 1.4%, delayed AI rollouts and mounting litigation point to a fundamental tailspin that Piper Sandler's cautious call understates. Being down 60% this year is not a bottom; buying here is catching a falling knife on a broken narrative. x.comÂ
AppLovin's engine is running out of road as its main product hits a hard growth ceiling and market share stalls, which breaks the infinite ad-tech monopoly story. Edgewater's new note reflects what the market has priced for months, with late-2026 and 2027 estimates slashed. Once real competition chips at margins, a stock priced for flawless execution is exposed fast, as The Trade Desk showed. Short interest is rising, and the stock is headed to zero. x.comÂ
AppLovin is in a dying, cutthroat business: mobile is not growing, and culturally people are tired of ads. x.com x.comÂ
AppLovin needs a very clean quarter to rebuild confidence. Investors question how much market-share runway its gaming ad business has left and how sustainable its very high margins are, and last quarter's model-upgrade cadence issues raised new execution concerns. Gaming ads must remain the central growth engine, since e-commerce will not be big enough for a while. x.com x.comÂ
AppLovin looks like an attractive ad-tech opportunity around $280 because its advertising platform has opened to all businesses, offering access to over 1 billion daily users, and management expects Q3 revenue above $2B. Shares are down nearly 62% from $733 despite Q2 revenue growth of 53% year over year. x.comÂ
AppLovin is $200 cheaper and insiders still don't want to buy it. x.comÂ
AppLovin's economics and margins may be almost too good to last, because unusually good economics act as a flashing red light inviting competition. Rivals could gradually raise acquisition costs, bid harder for supply or push AppLovin to share more with advertisers and publishers, shrinking 80% margins toward 60% without any rug pull. The moat's strength is unclear; if the economics hold for five years, buying now would work well, and its buybacks have been smart. x.com x.com x.com x.com x.comÂ
AppLovin looks cheap for its growth, at just 15 times forward earnings after 61% growth over the last twelve months. More marketers have lately mentioned AppLovin as a place they want to spend, though the stock is a controversial pick. x.comÂ
AppLovin has zero moat in AI advertising, where 50 companies do the same thing and AI can do it without any of them. It is value-trap garbage, just another The Trade Desk, and all of these companies could be bankrupt someday. x.com x.comÂ
AppLovin is priced for perfection heading into earnings while its leading indicators are softening. Pixel additions slowed in June and checks on advertisers' return on ad spend have weakened. x.comÂ
AppLovin's selloff prices in a significant slowdown while the underlying numbers remain incredible, making the risk/reward interesting. Q2 revenue rose 53% to $1.92B at an 84% adjusted EBITDA margin, and Q3 guidance implies 46-48% growth. It generates billions in free cash flow on a ~$100B market cap, has only ~$700M of net debt and buys back shares. Expanding into e-commerce could greatly enlarge its market; slower AI model gains and competition from Meta and Alphabet are the risks. x.comÂ
AppLovin is probably stuck for a while after falling more than 50% this year, partly penalized unfairly for The Trade Desk's fall as a fellow black-box ad-tech name. Too few holders understood the business on the way up, which makes the way down painful. It may become a good long in 2027, pending more work on valuation. x.comÂ
