AppLovin Shares Fall 3.5% as Edgewater Flags Slower Market Share Expansion

AppLovin (NASDAQ:APP) shares fell 3.5% after Edgewater Research analyst Joe Wittine said recent channel checks indicated that growth in the mobile advertising company’s market share metrics had slowed.

Wittine forecast AppLovin’s fourth-quarter revenue growth at between 8% and 9% sequentially, below expectations he said had previously been reflected on Wall Street.

According to the analyst, AppLovin’s share-of-wallet and share-of-voice metrics are no longer increasing consistently from their current levels.

“This is primarily the inevitable result of MAX’s share reaching a functional ceiling, though our interpretation of feedback also increasingly indicates competition is compressing APP’s net revenue spreads, contributing to APP’s decel,” Wittine wrote.

Edgewater Revises View of MAX Growth

AppLovin’s MAX platform aggregates in-app advertising inventory, including supply from mobile gaming applications.

Edgewater’s latest assessment suggests the pace at which additional supply is being added to MAX has slowed compared with earlier in the year.

AppLovin reported revenue of $1.92 billion in its previous quarter. The company has guided third-quarter revenue to between $2.055 billion and $2.085 billion, representing sequential growth of approximately 7% to 8.6%.

Edgewater’s forecast of 8% to 9% sequential revenue growth for the fourth quarter would represent a similar rate of expansion if realised.

Wittine said the latest findings had affected the rationale behind Edgewater’s decision to upgrade AppLovin shares in May, when the firm expected hybrid and in-app advertising growth to provide additional supply for MAX.

“Our May upgrade thesis of hybrid/IAA growth yielding more MAX supply takes a meaningful hit in this update, with the pace of expansion slowing vs. the Spring,” Wittine said.

Analyst Flags Competition and Algorithm Performance

Wittine also assessed an algorithm update discussed by AppLovin management during the company’s second-quarter earnings call.

The analyst said Edgewater found only “spotty” evidence of improvement during August and interpreted much of the improvement as a recovery from a decline in July rather than additional progress.

Edgewater also identified Unity (NYSE:U) as a source of competitive pressure. Wittine said Unity’s increasing scale was contributing to pressure on AppLovin’s net revenue spreads.

These conclusions represent Edgewater’s assessment based on its channel checks and are not company guidance.

Edgewater Expects Consensus Estimates to Be Revised

Wittine said he expects sell-side estimates for late 2026 and 2027 to move lower ahead of AppLovin’s third-quarter earnings report.

“This has turned into a show-me story,” Wittine said.

The analyst characterised a potential reduction in consensus expectations as a “healthy” adjustment following previous expectations for AppLovin’s growth trajectory.

AppLovin has not changed its third-quarter revenue guidance in the information provided.

AppLovin stock price