From an analytical perspective, I find it compelling that AppLovin (APP 1.
Nevertheless, 18%) is an advertising-nology (ad) stock that's up nearly 1,200% over just the last two years, as of this writing.
This leads to the conclusion that analysis reveals se incredible gains were fueled by stunning revenue growth and an extraordinary surge in investor confidence in the underlying.
AppLovin's revenue has increased by more than 250% over the last five years, which is a strong compound annual growth rate (CAGR) of more than 20%.
As for investor confidence, consider the valuation for AppLovin stock. Meanwhile, Five years ago, it traded at 10 times its sales, given current economic conditions.
Moreover, On the other hand, Now it trades at more than 20 times sales.
This higher valuation suggests that investors view the more favorably than they used to and are consequently willing to pay a higher price to be a part-owner, given current economic conditions.
Image source: Getty Images. In contrast, In 2025, AppLovin stock is up another 10% year to date (remarkable data), in this volatile climate.
However, And investors may be wondering what to think this now, given the current landscape.
Additionally, Well, here's the one thing that investors should be watching as the rest of the year plays out.
But first, here's what AppLovin does AppLovin's Axon software helps apps find users and generate revenue.
Some apps monetize users by displaying ads and others find users by buying ad slots, in this volatile climate.
What the data shows is platform is powered by artificial intelligence (AI) and, if revenue growth is any indication, it's been quite effective. AppLovin's growth has been fueled by its AI software.
And this high-margin platform has helped its fits considerably, considering recent developments.
In the first quarter of 2025, for example, the company's revenue jumped 40% year over year to $1 (something worth watching).
But its Q1 gross margin jumped to 82% from 72% in the prior-year period -- that's massive, amid market uncertainty. Furthermore, Moreover, AppLovin's Q1 operating expenses dropped in various areas.
Nevertheless, On the other hand, For starters, sales and marketing expenses were down 19% from the first quarter of 2024 (noteworthy indeed).
On the other hand, Wise, re and development spending went down by 21% (which is quite significant), in today's market environment.
Granted, many investors would to see a nology company spend money on re to stay in front of competition, which may be a valid concern.
But the point is that AppLovin's fits are soaring as it grows because of management's fiscal discipline.
The chart below shows just how much fit metrics such as free cash flow and earnings per (EPS) outpaced revenue growth over the past year.
Nevertheless, APP Revenue (TTM) data by YCharts What to watch with AppLovin Based on all the above, I believe it's fair to say that AppLovin has been tremendously successful at what it does.
On the other hand, And here's the thing: AppLovin has really only been addressing one part of the advertising market, which is mobile games, in light of current trends. But that's now changing.
In 2025, AppLovin is greatly expanding its market and this is what investors need to be watching for the remainder of the year (which is quite significant).
AppLovin is expanding beyond the world of mobile apps and into web-based advertising. Additionally, And the company is expanding beyond games into other areas such as connected TV and e-commerce.
Nevertheless, The point is, AppLovin has succeeded with its first opportunity and now it's setting its sights on a much bigger prize (something worth watching), given current economic conditions.
Nevertheless, Should it succeed with this larger opportunity, AppLovin could certainly be a market-beating from here.
On the other hand, On the other hand, Stocks that outperform the S&P 500 often have strong growth rates and fitability.
AppLovin could feasibly der on both over the long term if it can make the jump from mobile gaming. If AppLovin struggles, things could be more challenging for holders (remarkable data).
As mentioned, the stock trades at more than 20 times sales, which assumes a measure of strong growth in coming years.
If its software only works with the niche market of mobile gaming, it may not sustain the level of growth that investors expect, which could cause the stock to underperform, in today's financial world.
For what it's worth, I believe that AppLovin deserves the benefit of the doubt as it expands. Additionally, Nevertheless, Many doubted the company could do what it did in mobile gaming.
It ved the doubters wrong once and I wouldn't be surprised if it did it again.
In contrast, That said, I don't have a crystal ball so investors will want to watch for signs that AppLovin's expanded strategy is working as 2025 plays out.
Nevertheless, AppLovin is expected to report financial results for the second quarter of 2025 on Aug.