AppLovin Corporation APP will report its first-quarter 2025 results on May 7, after the bell.
The Zacks Consensus Estimate for earnings in the to-be-reported quarter stands at $1.45, indicating 116.4% growth from the year-ago reported quarter. The consensus estimate for revenues stands at $1.38 billion, implying 30.2% year-over-year growth. There has been no change in analyst estimates or revisions lately.
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The company has an impressive earnings surprise history. Earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, with an earnings surprise of 23.5%, on average.
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Q1 Earnings Beat Seems Unlikely for APP
Our proven model doesn’t conclusively predict an earnings beat for APP this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
APP has an Earnings ESP of 0.00% and a Zacks Rank #3. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
You can see the complete list of today’s Zacks #1 Rank stocks here.
Software Platform Should Drive Performance Growth
We expect year-over-year improvement in the company’s top line in the to-be-reported quarter to be driven mainly by an increase in the Software Platform. The consensus estimate for the Software Platform revenues is pegged at $1.05 billion, indicating 54.3% year-over-year growth. The consensus mark for Appsrevenuesis pegged at $331.7 million, suggesting a 12.7% year-over-year decline.
The consensus mark for the Software Platform’s adjusted EBITDA is pegged at $829.4 million, suggesting 68.6% year-over-year growth. APP’s adjusted EBITDA is expected to decrease 16.8% year over year.
APP Stock is in a Great Mood
APP has rallied a staggering 300% over the past year, easily outpacing the broader industry's 27% gain. In contrast, competitors like Alphabet GOOGL and Meta Platforms META have delivered mixed results. Alphabet shares slipped 2% during the same time frame, highlighting weakness in parts of its ad-driven business. Meanwhile, Meta Platforms climbed 29%, benefiting from its strong position in social media advertising. Both Alphabet and Meta Platforms remain major players, but AppLovin’s specialized platform is delivering superior returns in this niche.
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Investment Risk and Rewards for APP
AppLovin's recent financial results underscore its strong fundamentals and impressive growth trajectory. The company continues to benefit from its AXON 2.0 technology and strategic expansion within the gaming and in-app advertising sectors. In the fourth quarter of 2024, revenues surged 44% year over year and 14% sequentially, reflecting strong market demand. Adjusted EBITDA jumped 78% year over year and 17.5% sequentially, showcasing improved operational efficiency. Net income skyrocketed 248% from the prior year and 38% sequentially, demonstrating APP’s ability to translate revenue growth into significant profitability.
For the full year 2024, revenues climbed 43% year over year, while adjusted EBITDA surged 81%, underscoring AppLovin’s ability to seize market opportunities while maintaining efficiency. Looking ahead, management has guided for $1.4 billion in the first quarter of 2025 sales, slightly above the Zacks Consensus Estimate of $1.37 billion. Historically, AppLovin has consistently beaten earnings expectations, increasing the likelihood of another outperformance.
However, potential risks persist. The growth in the in-game advertising segment may face challenges, and the uncertain impact of the company’s ventures outside gaming could introduce volatility. Nonetheless, AppLovin's strategic focus on innovative technology and expansion within the gaming industry positions it well for sustained growth. With AXON 2.0 driving operational efficiencies and a diversified approach to revenue generation, the company is poised to maintain its growth momentum, making it an attractive option for long-term investors.
Hold Recommendation
The stock has delivered exceptional growth over the past year, with the company showing robust financial results driven by its Software Platform and AXON 2.0 technology. While first-quarter 2025 earnings are expected to show strong year-over-year growth, the absence of a positive Earnings ESP and modest decline in App revenues suggest potential volatility. Still, APP’s consistent earnings beats, operational efficiency, and leadership in mobile advertising make it a compelling long-term play. Given near-term uncertainty around earnings and potential sector risks, a Hold is prudent as investors await clearer post-earnings direction and sustained performance confirmation.
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