AppLovin's 310% gain this year makes it the best-performing stock among all U.S. tech companies with a market cap of at least $5 billion, according to FactSet data.Nvidia's
Founded 12 years ago, AppLovin went public in 2021, riding a Covid-era wave of excitement in online games. Now, the company's games unit generates relatively slow growth, but its online ad business is bustling from advancements in AI that have improved ad targeting.Great returns bring great expectations, and AppLovin has a lot to prove in its earnings report on Wednesday, as investors look for proof that the rally is warranted.
AppLovin attributes much of its growth to its AI advertising engine called AXON, particularly since releasing the updated 2.0 version last year. The technology helps put more targeted ads on the mobile gaming apps the company owns, and works for other studios that license the software."AXON enhancements through ongoing self-learning and our dedicated development efforts have fueled robust business performance this quarter," AppLovin said in itsin August.
"Investors have bought into the story, driving APP shares to all-time highs, and we think that the rally is warranted," Wedbush analysts wrote in a note on Oct. 11. They said the company's"real opportunity" is to catch the influx in brand advertising towards mobile gaming from more conventional channels like social media or legacy broadcasting.