AppLovin vs. The Trade Desk: Which Is the Better Digital Advertising Stock to Buy Going Into 2027?

The digital advertising landscape is shifting as automation and artificial intelligence redefine how brands reach consumers. Investors are weighing whether AppLovin (NASDAQ:APP) or The Trade Desk (NASDAQ:TTD) offers the better path for long-term growth.

AppLovin focuses on mobile app growth through proprietary AI software, while The Trade Desk operates a massive buy-side platform for digital ads across streaming, mobile, and the open web. Comparing these two involves looking at distinct approaches to ad-tech leadership and how each handles the evolving privacy landscape on mobile devices.

The case for AppLovin

AppLovin provides software solutions that help mobile app developers grow and monetize their products. Among tech stocks, it focuses heavily on its AXON AI engine, which automates ad auctions to increase efficiency for users. The company operates a self-serve platform and recently divested its own gaming apps to focus entirely on its software and marketing infrastructure, heavily integrating with Apple, Alphabet, and Meta Platforms.

Through the trailing 12 months ended Sept. 30, 2026, revenue reached $7.6 billion, representing a growth of 46.5% compared to the previous period. Net income for this time frame was $5.0 billion. This significant year-over-year increase in profitability follows the company's strategic shift away from owning apps to providing the underlying technology for others to grow theirs.

As of its December 2025 balance sheet, the current ratio was 3.3x. This figure indicates the company has $3.30 in short-term assets for every dollar of short-term liabilities, suggesting a strong ability to cover immediate obligations. The debt-to-equity ratio was 1.7x, showing the company uses more debt than shareholder equity to fund its operations. In the fiscal year ended Dec. 31, 2025, free cash flow reached $3.9 billion.

The case for The Trade Desk

The Trade Desk offers a self-service, cloud-based platform where advertising agencies buy and manage digital ad campaigns. It emphasizes an open internet approach, positioning itself as an independent alternative to large, closed ecosystems, such as Alphabet's Google. In its latest annual report, the company noted that two holding companies collectively represented more than 10% of gross billings, which creates a significant customer concentration risk.

In the 12 months ended Sept. 30, 2026, revenue reached close to $3.0 billion, which was a growth of roughly 7% compared to the prior period. Net income for this time frame was $329.4 million. The company maintains a consistent presence across diverse digital formats, including connected TV and mobile video, as it expands its reach beyond traditional web ads.

As of its December 2025 balance sheet, The Trade Desk maintained a current ratio of 1.6x, showing it has $1.60 in current assets for every dollar of short-term liabilities. The debt-to-equity ratio was 0.2x, indicating the company carries very little debt relative to its equity. In the fiscal year ended Dec. 31, 2025, free cash flow was $795.7 million. Note that stock-based compensation (SBC) represented 49.4% of operating cash flow, which inflates reported cash generation since SBC is a non-cash expense added back in the cash flow statement.

Risk profile comparison

AppLovin faces significant risks related to its reliance on third-party mobile distribution platforms like Apple and Google. These companies may change policies affecting data availability, which could hinder the AXON engine. Competition from Amazon and Unity Software remains intense as the mobile app ecosystem evolves, and the company also faces ongoing securities class action litigation regarding its financial disclosures.

The Trade Desk is vulnerable to shifts in advertising budgets, as is AppLovin, particularly during macroeconomic downturns. It faces intense competition from established tech giants like Google, its primary rival. The company depends on high-quality advertising inventory, which could be limited by publisher choices or new privacy-focused shifts in browsers and device operating systems, alongside potential legal challenges regarding data usage and privacy tort theories.

Valuation comparison

AppLovin carries a higher Forward P/E based on future earnings estimates, while that metric is much lower for The Trade Desk, and same for the P/S ratio, which looks at sales over the past twelve months.

Valuation metrics include sourcing from Financial Modeling Prep (FMP) and may differ from other data providers.

Which stock would I buy for 2027?

AppLovin and The Trade Desk are two giants of the digital advertising ecosystem. I liked the latter's role as a platform for advertisers to run ad campaigns, and bought shares. However, since then, The Trade Desk has fallen on hard times. That's why I recommend AppLovin for 2027, at least until The Trade Desk can prove its current woes are not a sign of a death spiral.

The Trade Desk's sales growth has steadily declined in recent quarters. It ended 2025 with revenue of $2.9 billion, a solid 18% year-over-year increase. But by its latest quarterly earnings report, for Q3 of 2026, its growth days were over, as sales dropped 0.5% year over year to $736 million. The Trade Desk's sales trend makes it clear the advertising giant's business is struggling in the face of increased competition and the shifting ad landscape, where advertisers have adopted greater automation, including the use of AI tools that may not select The Trade Desk's solutions.

Meanwhile, AppLovin posted 55% year-over-year sales growth in Q3 to $2.2 billion, and a 72% jump in net income to $1.4 billion. Its strong performance demonstrates it is successfully navigating the evolving digital ad industry, and is why investors must pay a premium for shares over The Trade Desk. Since its business is in a better position, AppLovin is the superior stock for 2027.

Robert Izquierdo has positions in Alphabet, Amazon, Apple, Meta Platforms, The Trade Desk, and Unity Software. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, The Trade Desk, and Unity Software. The Motley Fool has a disclosure policy.