AppLovin (APP) shares fell almost 6% to $319 after Bank of America lowered its rating on the tech stock to "Neutral." The move came just days after the ad tech company posted second quarter results that fell short of its own guidance, forcing analysts to ask a key question: can AppLovin continue to grow at the pace it has promised? That promise is 30% annual revenue growth over the long run. It's an ambitious number, and until recently, Wall Street mostly took it at face value.
Now, at least one major bank wants more proof. Dear Intel Stock Fans, Mark Your Calendars for August 12 Ahead of Nebius Earnings, Here's What Barchart Data Says Comes Next for NBIS Stock Nvidia's Best Customers Have a Reason to Stop Buying So Many Nvidia Chips Stop Missing Market Moves: Get the FREE Barchart Brief – your midday dose of stock movers, trending sectors, and actionable trade ideas, delivered right to your inbox. AppLovin built its business on advertising technology that helps mobile game developers find and target new players.
Its models learn from advertiser data, then use that data to place ads that convert into paying users. This flywheel has powered explosive growth for years. In the most recent quarter, revenue reached $1.92 billion, up 53% from a year earlier.
Adjusted EBITDA came in at $1.61 billion, up 58% year-over-year (YoY). While AppLovin continues to grow at an enviable pace, its Q2 numbers missed management guidance. CEO Adam Foroughi said the pace of model improvement was lighter than normal during the quarter, and the next meaningful upgrade landed just after the quarter closed.
He added that nothing in the data pointed to weaker advertiser demand or a tougher competitive environment and that the business was already reaccelerating in the third quarter. Bank of America explained that engineer-led improvements to AppLovin's gaming models appear to be the main driver of quarterly growth. However, it's now less clear whether a previously assumed 3% to 5% sequential lift from self-learning still holds.
Given AppLovin's roughly double market share advantage over its next closest competitor, the bank said that self-learning boost may no longer be a reliable long-term assumption. Bank of America also pointed out that AppLovin's next phase of innovation, training larger and more complex models, still needs more proof before it can support the 30% growth target. Management has said this approach could unlock bigger gains over time, similar to how larger language models improve with more computing power.
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