Why AppLovin Stock Lost 30% in January

Shares of AppLovin (NASDAQ: APP), the volatile, mobile game-focused adtech stock, were moving lower last month as the company faced another short-seller attack, software valuations came under scrutiny due to threats from AI, and Google unleashed a new platform for AI game creation, which was seen as a threat to gaming stocks.

As a result, AppLovin stock fell sharply last month, closing January down 30%, according to data from S&P Global Market Intelligence. As the chart below shows, the stock traded lower throughout most of the month, but fell especially hard on the last day of January following the launch of Google's new Project Genie.

APP data by YCharts

What happened with AppLovin

AppLovin entered 2026 after a blowout year, with the stock doubling in 2025 on the back of strong growth. However, that's led to doubts about its valuation, especially as software stocks endured a brutal sell-off last month, which seemed partly based on fears of AI and partly based on valuation. Even after last month's decline, AppLovin is trading at a price-to-sales ratio of 31.

While most of the analyst coverage on the stock was positive, that wasn't enough to push AppLovin higher, especially as reports of an SEC investigation into its data collection practices are hanging over its head.

Those fears increased when the stock got hit with another short-seller attack on Jan. 20 after CapitalWatch said that the company had skirted anti-money-laundering controls, among other improprieties. However, AppLovin has faced similar short-seller allegations in the past, and none of them seem to have stuck. It pushed back on the claims, calling them "false, misleading, and nonsensical."

Finally, the stock plunged 17% on Jan. 30 in response to Google's launch of Project Genie, an AI game-creation platform that some feared could disrupt the gaming industry. AppLovin was one of several gaming stocks that fell on the news.

Image source: Getty Images.

What's next for AppLovin

The sell-off in AppLovin stock last Friday seems misdirected, as the company is no longer in the business of mobile games after selling off its apps business last year.

Instead, it monetizes mobile games through adtech, which means that more games overall could be a tailwind for the company. It's too early to judge the impact of Project Genie, and the market seems to be jumping to conclusions too fast here.

AppLovin will report fourth-quarter earnings next week on Feb. 11, which will be a major test for the growth stock. Analysts are expecting revenue to grow 17% to $1.61 billion, which includes a headwind from the sale of the apps business, and they see adjusted earnings per share jumping from $1.73 to $2.95.

The bottom-line results will be key for AppLovin as it can justify its high valuation with strong profit growth.

Jeremy Bowman has positions in AppLovin. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.