Can AppLovin Stock Fall 30%? - Trefis
📉 AppLovin revenue growth slowed significantly to 52.8% in fiscal Q2 2026, down from 77.0% in the prior year's quarter.
🤖 Management attributes the slowdown to a timing delay in model releases rather than weaker advertiser demand.
💰 Operating margins expanded to 77.4% over the twelve months ended June 2026, demonstrating strong profitability despite growth deceleration.
📊 The stock trades at 20.1x trailing earnings, a multiple lower than the S&P 500's 23.0x valuation.
🔮 AppLovin forecasts fiscal Q3 2026 revenue growth between 46% and 48%, below the previous quarter's pace.
💻 Higher compute costs for training AI models have increased expenses, which management has factored into future outlooks.
Bullish Signals
- AppLovin maintained strong operating profitability with margins of 77.4% over the twelve months to June 2026, up from 69.6% a year earlier.
- Management stated that demand from advertisers remains robust and no signs of weakening were observed despite recent model timing delays.
Risk Factors
- Revenue growth decelerated to 52.8% in fiscal Q2 2026, a significant drop from the 77.0% growth rate recorded in fiscal Q2 2025.
Full Analysis
AppLovin (APP) stock has experienced significant volatility, dropping 52.2% over the twelve months ending October 2026, while its revenue growth rate has decelerated from 77.0% in fiscal Q2 2025 to 52.8% in the same quarter of 2026. Management attributes this slowdown to a timing issue where their next major model improvement landed just after the quarter ended, rather than a fundamental decline in business health.
The company's revenue trajectory relies heavily on periodic improvements in its ad models, which allow advertisers to increase budgets while maintaining return goals. However, these improvements are not guaranteed every quarter and depend on expensive research and development involving higher compute costs for training new models. Consequently, AppLovin expects fiscal Q3 2026 revenue growth to range between 46% and 48%, a figure below the previous quarter's performance.
Despite the slowing top-line growth, AppLovin maintains strong profitability with operating margins of 77.4% over the twelve months to June 2026, up from 69.6% a year prior. Management asserts that demand from advertisers remains robust and that the stock's current valuation of 20.1 times trailing earnings already reflects some of this growth slowdown, trading below the S&P 500 multiple.