AppLovin Stock Soared in 2025 — What’s Driving the Rally?

TradingKey - AppLovin (APP), with a stock price increase over 120% year-to-date at the end of 2025; has been one of the top-performing stocks of this year. The rapid rise in share prices has been due to both strong revenue growth along with increasing profitability; indicating that AppLovin is transitioning from an "adtech" company to a "platform" with solid financial performance.

Metrics Indicate Strong Growth

AppLovin's revenues surged through the end of 2025, with Q3 revenues exceeding $1.4 billion (68% increase YOY) and 79% YOY increase in adjusted EBITDA, which reflects high levels of operating leverage. Revenue for the trailing nine-month period was also up about 72% YOY, and net income increased by roughly 128% – indicating both top line growth and improved profitability.

Management also guided for Q4 to be another strong quarter, projecting revenues of between $1.57B and $1.60B, and continued improvement in adjusted EBITDA over the prior 3 months.

Although impressive, the expected growth rate of 57% - 60% YOY for Q4 will represent a slight deceleration in growth compared to the previous quarters.

The underlying changes in how AppLovin generates its revenues are indicative of a shift in their business mix. AppLovin has positioned itself to focus on AI-enabled ad solutions that allow marketers to acquire, monetize and build large audience bases. According to company leadership, there has been a lot of early momentum within self-serve advertising tools with a lot of velocity in advertisers' weekly spend, but these are still at the infancy stage.

AppLovin's Valuation Difficulties

Despite having a solid foundation (high-quality products) in place at AppLovin, investors have already taken their gains into account when valuing AppLovin's future prospects. At the close of 2025, the stock was priced at approximately 40x Price/Sales (around 50x P/E) – both extremely high compared to most companies' stock prices; this implies that AppLovin will continue experiencing rapid revenue growth to support these multiples going forward. For many investors, this creates an extremely limited buffer against any potential errors during execution.

Thus, this creates an extreme level of uncertainty regarding AppLovin's future performance; even though AppLovin has a significantly improved product offering today (via Acquisitions) compared to one year ago, its extremely high valuation makes its future prospects highly dependent upon continuing to produce strong annual revenue growth as opposed to actually delivering good results each year. In extreme examples when valuations require perfection during execution (almost impossible in today's business environment), volatility in AppLovin stock may increase due to the possibility of weaker revenues due to; general economic conditions and/or overall weaker spend on advertising.

Views on Quality and Risks

The response from the analyst community about AppLovin's move away from gaming only and Gaming and into more general digital advertising has been mixed. Supply driven monetization tools paired with their AI driven ad optimization capabilities are viewed to be growth catalys; however, there have also been some elevated multiples (valuations) and guidance deceleration growth rates, thus making caution necessary when making investment decisions.

The recent behaviour in the marketplace regarding risk appetites has been evident in the Software Sector - the broader contrary to all technology, software stocks included have been impacted by a change in the investor's appetite for profit versus growth stories and have also created some volatility amongst the growth stocks that are richly valued.

What Does All This Mean for Applovin's Share Price?

The positive aspects that are driving AppLovin's share price expectation at 2025 are real momentum in business, which is shown by strong growth in revenue, profit, and a change in the strategy of going from mainly providing services to providing a combination of software and artificial intelligence (AI) driven methods for doing advertising. However, given the way the market has priced AppLovin's shares, it appears that investors are expecting to continue on essentially the same growth path in the foreseeable future.

The important point for investors to remember is:

• The underlying business has improved compared to one year ago, with increased revenue and profitability.
• The high expectations of stock price valuation could be putting the AppLovin share price at risk if their growth pattern were to or slow down.

In other words, there is a good possibility that AppLovin has a bright future and can perform well, but the risk to potential investors lies in the potential for poor earnings growth in the future is reflected in the current share price valuations.