Move Over The Trade Desk, This Is Wall Street's New Favorite Adtech Stock

In the rapidly evolving world of advertising technology (adtech), one company has emerged as Wall Street's latest darling, leaving The Trade Desk (TTD) in the dust. AppLovin (APP), a mobile app software company, has seen its market capitalization skyrocket towards $100 billion, surpassing The Trade Desk's eight-year journey from $1 billion to over $60 billion. Let's delve into the factors driving AppLovin's meteoric rise and explore what's next for this adtech powerhouse.

AppLovin's transformation began in late 2022 when it seemed like the company was ready to throw in the towel. A proposed merger with Unity, with terms favoring Unity, and a 2% year-over-year revenue drop in Q3 2022 painted a bleak picture. However, a closer look revealed a hidden gem: AppLovin's software business was surging, with a 59% year-over-year increase in revenue during the same quarter.



The launch of Axon 2.0 in Q2 2023 further catalyzed AppLovin's growth. This upgraded software platform enabled mobile app companies to see massive improvements in their return on investment, motivating them to increase usage. As a result, AppLovin's software revenue growth accelerated, reaching 91% in Q4 2023.

AppLovin's high profit margins have also contributed to its market cap growth. With a 40% free cash flow margin over the last 12 months, the company's profits have soared, driving its market cap towards $100 billion. This impressive profitability, coupled with rapid revenue growth, has made AppLovin Wall Street's new favorite adtech stock.



Looking ahead, AppLovin's customers are primarily mobile gaming app developers. However, the company's management believes it's time to branch out and expand into new app sectors. AppLovin is currently piloting a launch into the e-commerce app sector, with promising early results. This strategic move could further accelerate AppLovin's revenue growth and maintain its impressive profit margins.

In conclusion, AppLovin's AI-driven software business, the launch of Axon 2.0, and its expansion into new app sectors have all contributed to its market cap growth. As AppLovin continues to innovate and adapt, investors can expect this adtech stock to remain a Wall Street favorite for the foreseeable future.