AppLovin Corporation (APP): A Bull Case Theory

We came across a bullish thesis on AppLovin Corporation on The Simple Side’s Substack. In this article, we will summarize the bulls’ thesis on APP. AppLovin Corporation's share was trading at $617.76 as of January 14th. APP’s trailing and forward P/E were 72.85 and 42.55 respectively according to Yahoo Finance.

AppLovin Corporation engages in building a software-based platform for advertisers to enhance the marketing and monetization of their content in the United States and internationally. APP’s Q3 2025 results highlight an exceptionally efficient monetization-driven growth model, where revenue expansion is coming from higher yield rather than higher traffic. Revenue reached $1.405 billion, up 68% year over year, despite installation volume declining 1%, as net revenue per installation surged 75%.

This operating leverage translated into extraordinary profitability, with adjusted EBITDA of $1.158 billion at an 82% margin, net income margins near 59%, and free cash flow of roughly $1.05 billion. Management’s Q4 guidance of $1.57–$1.60 billion in revenue with 82–83% EBITDA margins underscores confidence that this margin profile is sustainable, while the repurchase of $571 million of stock in Q3 and a remaining $3.3 billion authorization demonstrate how consistently high free cash flow can be redeployed into shareholder returns.

Strategically, the consolidation into a single Advertising segment sharpens focus on the core drivers of monetization quality, eliminating lower-return software lines and aligning KPIs with bid efficiency, conversion accuracy, and revenue per install.

The MAX + AXON 2 optimization system sits at the center of this model, dynamically allocating budgets and calibrating bids across auctions using real-time and historical data. Improvements to these models over the past year directly explain the sharp increase in per-install monetization, while the lack of incremental fixed costs allows nearly all incremental revenue to fall through to margins.

Looking ahead, AppLovin’s opportunity lies in continued model optimization, disciplined capital deployment, and sustained ROIC expansion supported by a low cost of capital. Risks center on advertiser budget sensitivity, competitive auction dynamics, privacy-related signal loss, and potential variability in model performance.

Even so, with revenue steadily scaling, margins holding firm, and free cash flow near $1 billion per quarter, AppLovin presents a compelling case where efficiency, scalability, and aggressive capital returns combine to support attractive long-term shareholder outcomes across bull, base, and even conservative scenarios.

Previously, we covered a bullish thesis on AppLovin Corporation (APP) by Jimmy Investor in March 2025, which highlighted the company’s AI-driven ad tech platform, digital advertising tailwinds, and capital-light software transformation. APP’s stock price has appreciated by approximately 140% since our coverage as the thesis played out. The Simple Side shares a similar view but emphasizes free cash flow durability, operating leverage, and capital returns.

AppLovin Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 110 hedge fund portfolios held APP at the end of the third quarter which was 109 in the previous quarter. While we acknowledge the risk and potential of APP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than APP and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.