📦 Unpacked #2: AppLovin

Our In-Depth Fundamental Analysis & Final Score of AppLovin⭐

Apr 21, 2025

Welcome to another edition of Unpacked, our monthly series where we explore a different company in detail. Each month, we break down its story, business model, and highlight the latest developments.

Additionally, we do a detailed fundamental analysis, diving into the company’s management, market, financials, and growth estimates. We score each area separately, leading to a final score between 0 and 100. This score reflects how fundamentally attractive we believe the company is as an investment, ranging from:

🔴 Below 50 → Uninvestable
🟠 50 - 59 → Questionable
🟡 60 - 69 → Reasonable
🟢 70 - 79 → Quality
🔵 80 - 89 → High-Quality
🟣 90 or above → Exceptional

The goal? To give you a full deep dive into this company, as a complement to your own research, so you can decide if it’s the right investment for you.

In case you missed it, here you can read the previous edition of Unpacked:

Unpacked #1: McDonalds

In our second Unpacked, we’re taking a closer look at AppLovin, a name that may be unfamiliar to many, but one that has been growing rapidly in recent years. AppLovin is a fast-growing player in the mobile app industry, known for its platform that helps app developers reach a larger audience and maximize their revenue. Through smart acquisitions and a strong focus on technology, AppLovin has positioned itself as a key player in the mobile app space.

What sets AppLovin apart? Is it the potential for scale, the tech they bring to the table, or their approach to quick expansion? And the key question — is AppLovin a smart pick for your portfolio?

Now let’s unpack the fundamentals of this growing company — and check out how we score it!

History and Business Model

AppLovin was founded in 2011 by Adam Foroughi, John Krystynak, and Andrew Karam. The company started as an advertising platform focused at helping mobile app developers grow and monetize their apps. The platform was officially launched in 2012, and from that point on, AppLovin focused on helping developers target the right users through advanced advertising systems.

In the years that followed, AppLovin expanded its operations, becoming an essential tool for many mobile app developers. The company formed strong partnerships with game studios like Lion Studios, Machine Zone, and Belka Games, which led to the expansion of its own portfolio of mobile games. Through these strategic collaborations, AppLovin grew not only as a platform but also developed into a player in the gaming market.

AppLovin’s business model is built around providing an advertising platform that helps app developers make money from their apps. Its AXON technology helps brands improve their ads and reach the right people. This technology uses data and machine learning to make ads work better and increase revenue for developers. Besides making money from ads in apps, AppLovin also provides tools to help developers attract and keep users.

Source: AppLovin IPO Prospectus

The company’s products include:

AppDiscovery: Helps businesses find and attract the right users through targeted ads.
MAX: Helps mobile apps make more money by improving ad revenue.
SparkLabs: Helps create ads that get better results.
AppLovin Exchange: A program that gives businesses access to a wider audience.
Array: Helps businesses get more value from their customers by improving engagement.
Adjust: Offers tools to track and measure marketing efforts.
Wurl: Helps businesses make money from users on streaming TV.

These products work together to help businesses attract users, increase revenue, and improve performance across various channels.

Revenue Breakdown

In 2024, AppLovin brought in a total of $4.71 billion in revenue, split across two main areas:

Advertising (68%): This reflects revenue from AppLovin’s advertising platform, including tools like AppDiscovery, MAX, and ALX, powered by the AI-driven AXON engine. This segment grew with a significant 75% compared to 2023.
Apps (32%): This is the revenue from AppLovin’s mobile apps, mostly games by studios like Lion Studios, through in-app purchases and ads. It grew with a modest 3% increase from last year.

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Recent Developments

In recent years, AppLovin has made significant moves to adjust its strategy and focus. Below are the key recent developments:

Focus on AI Technology with AXON 2.0:
AppLovin has further developed and improved its AI-driven advertising platform, AXON 2.0, launched in 2023. This platform has become more efficient in delivering targeted ads, leading to improved performance for advertisers and strong growth in the software platform segment.
Strengthening the MAX Advertising Platform
Last year, AppLovin invested over $150 million to acquire specific assets from Zynga’s portfolio, aiming to significantly improve and expand the capabilities of its MAX advertising platform. This strategic acquisition allowed AppLovin to integrate valuable gaming-related resources and technology, further building its position and influence within the gaming advertising market
Expansion into E-Commerce
A significant strategic shift is AppLovin’s entry into the e-commerce sector. The company is starting to focus on providing new advertising opportunities for businesses that sell products online. In Q2 2024, AppLovin launched a pilot program for e-commerce advertising, which showed promising results with nearly 100% incremental lift for advertisers. Analysts expect e-commerce to account for 10% of revenue in 2025 and 16% in 2026, reducing AppLovin’s reliance on mobile gaming and positioning it to compete with companies like Meta.
Sale of the Apps Division
Two months ago (February 2025), AppLovin announced plans to sell its Apps (gaming) division for $900 million, with the deal expected to close in Q2 2025. CEO Adam Foroughi stated that the company’s true focus has always been on advertising technology, not game development. This divestment allows AppLovin to shift its focus entirely to advertising, positioning itself to attract a broader range of advertisers and become a key player in the global digital advertising market.
Concerns from Research Firms
AppLovin’s stock dropped in late February after negative reports from Fuzzy Panda Research and Culper Research. The reports claimed the company was involved in ad fraud, illegal tracking, and improper data use, saying that AppLovin took advantage of app permissions and collected data without consent. CEO Adam Foroughi quickly responded, calling these claims “false and misleading” and stating that the company follows app store rules. Despite the controversy, most analysts stayed positive, noting that there were no legal issues or fraud concerns in AppLovin’s financial audits.

AppLovin is changing its focus by improving AI, expanding into e-commerce, selling its app development business, and growing its advertising platform through key acquisitions. These moves show its shift toward a larger, more scalable focus on advertising technology.

Fundamental Analysis

In the fundamental analysis, we evaluate three key areas: management, market, and financials & growth estimates. Each aspect is scored individually, leading to a final score between 0 and 100, ranging from uninvestable to exceptional.

Management (max 25 points):
- CEO/Founder: 10 points
- Glassdoor: 5 points
- Historical management strength: 10 points
Market (max 35 points):
- Leadership & competition: 10 points
- Moat (competitive advantage): 15 points
- Total Addressable Market: 10 points
Financials & Growth Estimates (max 40 points):
- Revenue growth: 11 points
- EPS growth: 7 points
- Gross margin: 5 points
- Net margin: 4 points
- Free Cash Flow (FCF) yield: 3 points
- Return on Invested Capital (ROIC): 3 points
- Debt to Equity Ratio: 3 points
- Earnings result: 4 points

Finally, we check if the stock meets certain criteria (as we believe these carry more risks), and points will be taken off for the following factors:

Chinese company: -10 points
Chinese companies receive -10 points because of higher geopolitical risks, unpredictable regulations, and limited transparency.
High cyclical or high-risk sectors: Banks, Biotech, Energy, or Commodities: -10 points
High cyclical or high-risk sectors receive -10 points because they are more sensitive to economic downturns and market volatility.
Geopolitical risk: -5 points
Geopolitical risk receives -5 points because it can lead to instability, affecting market performance and company operations.
Small and Micro-cap stocks: -5 points / -10 points
Small-cap stocks with a market cap < 2 billion receive -5 points and Micro-cap with a market cap < 300 million receive -10 points, because smaller companies often face higher volatility, limited financial resources, and more difficulty accessing capital.
Altman Z and Piotroski-F: -4 points / -2 points
The Altman-Z score and Piotroski-F score are financial models used to assess a company's financial health. The Altman-Z score predicts the likelihood of bankruptcy based on balance sheet ratios, while the Piotroski-F score evaluates financial strength through profitability, liquidity, and operational efficiency. A low Altman-Z or Piotroski-F score indicates weak financial health, suggesting a higher risk of financial distress or bankruptcy. For this reason, we deduct points from companies with low scores. When the Altman-Z score is <= 1.8, it falls in the Distress Zone, and the company receives -4 points. An Altman-Z score between 1.8 and 3 places the company in the Grey Zone, resulting in a deduction of -2 points. If the Altman-Z score is >= 3, the company is in the Safe Zone and receives no deduction. For the Piotroski-F score, a score between 0 and 3 indicates poor financial health, and the company receives -2 points. A score between 4 and 6 is considered stable, while a score of 7 or higher is considered good, with no deduction in points for these companies.

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Final Scoring

To determine the investment potential of a stock, we use the following rating scale based on the final score:

🔴 Below 50 → Uninvestable
🟠 50 - 59 → Questionable
🟡 60 - 69 → Reasonable
🟢 70 - 79 → Quality
🔵 80 - 89 → High-Quality
🟣 90 or above → Exceptional

Unlock the full fundamental analysis below and see how we score AppLovin on a scale from 0 to 100 — exclusive available for our premium members! 🚀

1. Management

1.1 CEO and Founder
Adam Foroughi is the CEO and co-founder of AppLovin. Adam was born in Iran in 1980, he immigrated to the U.S. as a child and later earned a B.A. in economics from UC Berkeley. Before founding AppLovin in 2011 with John Krystynak and Andrew Karam, Foroughi worked as a trader and launched two marketing companies. Under his leadership, AppLovin went public in 2021 with an IPO valuation of $24 billion and has since grown its market cap to around $100 billion today. Under his leadership, AppLovin has transformed from a startup into a major player in the tech industry, continually adapting to new challenges and opportunities.

1.2 Glassdoor
Reviews on Glassdoor give a mixed view of AppLovin, where it scores 3.5 out of 5 stars. This rating shows that employees find it decent but not amazing, suggesting the company could still improve some aspects of the work environment. Adam Foroughi has a CEO approval rating of 65%, with more than half the staff supporting him, but many employees are not fully convinced by his leadership.

1.3 Historical Management Strength
AppLovin’s management has shown a great skill for adapting and growing the company into a worldwide name in advertising technology. It started as a startup and reached a successful IPO in 2021. Its success, despite early rejections from venture capital firms, shows Foroughi's drive.

Some key successes include the launching of their AI-powered ad platform and expanding into gaming with several titles and big acquisitions, like Machine Zone. Recently, the company focused more on e-commerce ads and sold its Apps division to concentrate on ad tech, a smart move that shows good decision-making.

But there have also been some bumps along the road: rapid growth and several acquisitions raised doubts. Do these acquisitions add value? Additionally, short sellers recently brought up the advertising practices, which caused some uncertainty, but those claims were quickly dismissed by management.

Despite these challenges, the management’s choices show a team that grabs opportunities and keeps innovating.

1.4 Scoring

AppLovin has been led by one of its founders since the company’s beginning in 2011. The current CEO still holds his leadership position, which he has fulfilled for 14 years. Based on this, we give the company a score of 10 out of 10 for leadership.
The Glassdoor rating of 3.5 and CEO's approval rating of 65% result in a score of 2 out of 5.
The management has demonstrated adaptability, growth, and innovation. Its transition into a global adtech player and the decision to divest the Apps division reflect strong strategic choices. At the same time, numerous acquisitions and recent criticism from two short sellers raise questions. For these reasons, we give AppLovin a 7 out of 10 for Historical Management Strength.
This result in a total management score of 19/25 🟢

2. Market

2.1 Leadership & Competition
AppLovin is a strong player in the mobile advertising market but not the absolute leader. It holds a 3.57% market share in mobile ad networks and dominates mobile gaming ads with 42%, a key niche in this industry.

That said, there are significant competitors with solid positions, such as:

Google AdMob, a giant with massive reach thanks to Android.
Facebook Audience Network, big due to Meta’s targeting and user base.
Unity Ads, a direct rival in gaming ads, though less dominant lately.
Digital Turbine, known for device-based advertising.
The Trade Desk, a major name in programmatic advertising.
TikTok, a fast riser, especially popular with younger audiences.

AppLovin isn’t the biggest in the overall market, but it excels in gaming and is growing fast. By selling its apps division, AppLovin is putting all its focus on advertising. This gives them more room to grow and helps them attract not just gaming companies, but all kinds of advertisers. With this move, AppLovin aims to become a bigger player in the world of online ads. Thanks to this choice, their market share could grow, and they can compete more strongly with the big names in the market in the future.

2.2 Moat
For us, AppLovin has a moderate "economic moat," with the potential to strengthen over time. It doesn’t have the same dominant position as companies like Google or Meta, but it holds a solid niche in the adtech industry. Here's a breakdown of its main competitive advantages:

1. Advanced AI and Proprietary Data
AppLovin’s Axon engine uses AI and a large amount of proprietary data from ad auctions to deliver precise and high-converting ads. This data advantage is tough for competitors to replicate, especially without similar scale.

2. Dominance in Mobile Gaming Ads
AppLovin leads the mobile gaming ad space with a 42% market share and over 1 billion daily users. This scale and network effect create significant barriers for new competitors, even with bigger companies in the field.

3. Strategic Focus and Unified Platform
By selling its apps division, AppLovin sharpens its focus on advertising. Its unified platform, which integrates acquisition, monetization, and analytics, streamlines operations for developers and is improved by acquisitions like Adjust.

4. Customer-Centric Solutions
AppLovin offers customizable tools, a range of ad formats, and transparent revenue-sharing. These features build trust and loyalty with clients, while real-time analytics add extra value.

2.3 Total Adressable Market
AppLovin holds a strong position in the global mobile ad market. Its Total Addressable Market in 2025 is expected to be between $150-$200 billion, which includes gaming ($40-$50 billion) and a rapidly growing e-commerce ad segment ($120 billion). The shift towards e-commerce significantly expands its TAM, potentially reaching $160-$170 billion. AppLovin has a strong niche, but its overall market share still lags behind industry giants like Google and Meta.

By selling its apps division, AppLovin will sharpen its focus on advertising, allowing it to target a broader base of over 10 million businesses, further boosting its TAM. Growth will be driven by AI targeting and the MAX network, with e-commerce already seeing a $1 billion annual spend from 600 advertisers in 2024. We believe that competition from Google, Meta, The Trade Desk, and others like Unity Ads and TikTok remains a challenge but in this market there will be room for multiple advertising players

2.4 Scoring

We give AppLovin a 4 out of 10 for leadership and competition. AppLovin dominates the mobile gaming ad niche with a 42% share, but its overall market share in mobile ads is just 3.57%. The company faces tough competition from giants like Google, Meta, Unity Ads, and TikTok. Although AppLovin has the potential to grow its market share and compete more effectively with the industry's biggest players, we prefer to invest in companies that already have a larger position within the market.
AppLovin benefits from its advanced AI, leadership in mobile gaming ads, and customer-centric platform, which give it a strong position in its niche. The advertising landscape is broadly divided, with many other players offering similar or even more extensive capabilities. As a result, we give AppLovin an 8/15 for its moat, recognizing that it has strong potential, but its competitive position could strengthen over time.
We give AppLovin an 8 out of 10 for its Total Addressable Market. With a strong position in the mobile gaming ad market and the potential to expand into the rapidly growing e-commerce ad segment, AppLovin's TAM is projected to reach $160-$170 billion by 2025. The competition from other players like The Trade Desk, Unity Ads, and TikTok presents a challenge , in this market there is room for multiple players. There is growth potential, especially through its shift in focus and AI-driven expansion.
This result in a total market score of 20/35 🟠

3. Financials & Growth Estimates

3.1 Revenue Growth
AppLovin expects to grow its revenue at an compound annual growth rate (CAGR) of 19.79% over the next three years (source: Koyfin). This is solid for a growth company, but it also represents a slowdown compared to last year’s 43.6% increase and the 36.5% CAGR over the past five years. This suggests that while AppLovin is still expanding, its growth trajectory is moderating.

3.2 EPS Growth
EPS growth is an important measure of a company’s profitability and financial health. For AppLovin, analysts expect EPS to grow by 16.13% per year over the next three years (source: Koyfin). While this is still a solid growth rate, it is slowing down compared to previous years, much like the company’s revenue. This suggests that AppLovin remains on a solid growth path, but at a more moderate pace.

3.3 Gross Margin
AppLovin's gross margin over the past 12 months is 75.2% (source: Koyfin), showing the strong profitability of its AI-driven ad platform. This is a healthy margin for a software-focused business, but slightly lower than some peers, like The Trade Desk, which has a gross margin of 81.8%. By keeping high margins, AppLovin can invest in growth and still making a profit.

3.4 Net Profit Margin
AppLovin's net profit margin of 33.5% (source: Koyfin) over the past 12 months is more than double that of The Trade Desk, which reported a net profit margin of 16.1% for the same period. Given AppLovin’s growth stage, this level of profitability is impressive and shows the company’s ability to scale efficiently and maintaining strong margins.

3.5 Free Cash Flow (FCF) yield
AppLovin generated $2.09 billion in free cash flow over the past 12 months, with a current market cap of $104.32 billion. This results in a free cash flow yield of 2% (source: Koyfin), which is on the lower side. A lower yield often indicates that the market is pricing in strong future growth, and in AppLovin’s case, its market cap seems to be running ahead of its current cash generation.

3.6 Return On Invested Capital (ROIC)
AppLovin generates a solid return on its investments, with a Return on Invested Capital of 25.8% (LTM) (source: Koyfin). This indicates that the company is effectively using its capital and resources to drive growth and maximize value.

3.7 Debt to Equity Ratio
AppLovin has a book value of $1.09 billion and total debt of $3.56 billion, which gives it a debt-to-equity ratio of 3.26. This shows they’ve taken on a lot of debt compared to what they own. But that doesn’t mean they’re in trouble. By late 2024, their debt-to-EBITDA ratio is 1.5, so their earnings can comfortably cover the debt. They also have strong cash flow and a current ratio of 2.76, meaning they can easily pay their short-term bills. In late 2024, they adjusted their finances by issuing $3.519 billion in senior notes and setting up a $1 billion unsecured credit facility, making their debt structure more flexible. On top of that, their earnings (EBIT) grew by 323% in the 12 months ending September 2024, showing they’re managing their debt well. All data is sourced from stockanalysis.com.

3.8 Earnings Result
AppLovin reported its latest fourth-quarter 2024 earnings on February 12. The company posted an EPS of $2.07, surpassing the expected $1.83, a surprise of 13.3%. Revenue for the quarter came in at $1.37 billion, exceeding the estimated $1.26 billion. For Q1 2025, AppLovin raised its outlook, now expecting revenue to be between $1.36 billion and $1.39 billion, compared to the previous estimate of $1.32 billion.

3.9 Scoring

We give AppLovin a score of 7 out of 11 for revenue growth. The growth remains solid, but it has slowed after the very high growth in previous years. Analysts expect a revenue increase of 19.79% over the next three years, showing continued growth, but at a slower pace compared to the rapid expansion in the past. This steady growth shows AppLovin’s ability to maintain positive revenue momentum, even after the exceptional performance in recent years.
Analysts expect AppLovin’s EPS to grow at a 16.13% CAGR over the next three years. This is solid but not exceptional for a high-growth company, especially considering the rapid expansion in prior years. Still, it shows AppLovin’s ability to keep growing at a more moderate pace. For this reason, we give AppLovin a score of 4 out of 7 for EPS growth.
We give AppLovin a score of 5 out of 5 for gross margin. With a gross margin of 75.2% (LTM), the company demonstrates strong efficiency in managing its direct costs. While some competitors may have similar or even higher margins, AppLovin proves its ability to maintain a high margin through effective operational processes.
We give AppLovin a score of 4 out of 4 for its impressive net profit margin of 33.5% (LTM). This exceptional margin is particularly notable considering the company's growth stage. AppLovin’s ability to convert revenue into profit at such a high rate underscores its strong operational efficiency and effective scaling.
AppLovin’s FCF yield of 2% (LTM) reflects a modest ability to generate cash relative to its market cap. This FCF yield is not exceptionally high, but it signals the market's high expectations for future growth. This suggests confidence in AppLovin's ability to scale its ad platform beyond gaming, although the high market cap may indicate its valuation is ahead of current cash generation. Based on this, we give AppLovin a 2 out of 3 for its free cash flow yield.
AppLovin's ROIC of 25.8% (LTM) demonstrates the company’s effective use of capital, delivering strong returns well above its cost of capital. As a result, we give AppLovin a 3 out of 3 for ROIC.
AppLovin’s debt-to-equity ratio of 3.26 shows significant debt relative to its equity. However, with a debt-to-EBITDA ratio of 1.5, strong cash flow, and a more flexible debt structure, the company can comfortably manage its debt. Despite this, the high debt-to-equity ratio results in a score of 1 out of 3 for debt-to-equity.
AppLovin exceeded both revenue and EPS estimates for Q4 2024 and raised its outlook for Q1 2025. This positive performance and revised guidance lead us to give AppLovin a score of 4 out of 4 for earnings results.
This result in a total financials & growth estimates score of 30/40 🟢

4. Risk Adjustments

Criteria:
- Chinese company: -10 points
- High cyclical or high-risk sectors: Banks, Biotech, Energy, or Commodities: -10 points
- Geopolitical risk: -5 points
- Small and Micro-cap stocks: -5 points / -10 points
- Altman-Z and Piotroski-F: -4 points / -2 points

AppLovin doesn't receive any point deductions under our risk criteria. The company is not based in China, and it doesn't operate in high-risk or cyclical industries such as Biotech, Banks, Energy, or Commodities. Additionally, it is not significantly affected by geopolitical risks. As a non-small and non-micro-cap stock, AppLovin avoids deductions based on market size. With an Altman-Z score of 7.27 (source: Koyfin) and a Piotroski-F score of 7 (source: stockanalysis.com), the company demonstrates a stable financial position and a lower risk profile.

Therefore, no point deductions are applied to AppLovin in this category.

5. SWOT-analysis

In this section, we present a overview of the company's strengths, weaknesses, opportunities, and threats. This analysis will help you as an investor to get an overview of the company strategic position and to determine if AppLovin is a company you want to invest in.

Conclusion & Final Score

AppLovin is a fast-growing company in advertising technology, with a strong position in mobile gaming ads and a focus on AI-driven solutions like the AXON engine. The company shows impressive gross margins and very high net profit margins, indicating efficient scaling. Recent strategic moves, such as the sale of its Apps division and expansion into e-commerce, boost its growth potential. However, a slowdown in growth, high debt levels, and strong competition from major players somewhat limit its outlook. AppLovin is a good fit for investors who believe in the growth of digital advertising. It is less appealing to conservative investors who prefer companies with low debt and a stronger market position.

After summing up the points, AppLovin receives a final score of 69/100 🟡

The Future Investors (Vincent & Stefan) currently do not hold a position in AppLovin.

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