AppLovin (APP) has turned heads on Wall Street after delivering stellar Q1 earnings and making a bold strategic move of divesting its gaming division to double down on its high-margin software business. The market responded enthusiastically, sending AppLovin shares soaring over 13% in after-hours trading on Thursday. With a leaner, more focused business model and growing momentum in ad tech, now may be the ideal time to consider adding APP stock to your portfolio.
AppLovin provides AI-powered solutions designed to help companies expand their advertising reach. AppLovin stock has surged over 300% in the last 12 months, driven by optimism around its AI-powered technology.
Earnings Beat and Gaming Exit
For Q1 2025, AppLovin reported a net income of $1.67 per share, a significant increase from $0.67 a year ago, surpassing analyst expectations of $1.45. Meanwhile, revenue grew 40% year-over-year to $1.48 billion, exceeding the expected $1.38 billion. The standout performance was a 71% increase in advertising revenue. These strong results emphasize AppLovin’s continued growth in software and AI-driven advertising, which are key drivers for the company.
However, the company guided for second-quarter advertising revenue between $1.2 billion and $1.22 billion, falling short of Wall Street’s forecast of $1.38 billion.
Along with the results, the company announced the sale of its mobile gaming business to Tripledot Studios for $400 million in cash. As part of the deal, which is expected to be completed in Q2, AppLovin will also get about a 20% ownership stake in Tripledot. Notably, Tripledot developed popular games like Sudoku Friends, Puzzletime, and Solitaire Classic.
What It Means for Investors
The sale of AppLovin’s gaming division highlights the company’s increasing focus on its software and AI-powered advertising business, now its main driver of growth. Additionally, the sale simplifies operations and aligns with growing demand in adtech, especially AI and performance-based ads. Investors viewed the move as a bullish signal, as it allows AppLovin to concentrate capital and resources on its higher-margin, more scalable segments.
Although investors remain cautious due to AppLovin’s high valuation and uncertainties around its guidance, the earnings beat signals increasing confidence in the company’s operational strength.
Is AppLovin a Good Stock to Buy?
Overall, analysts were bullish on APP stock before the earnings release, and this positive sentiment is likely to persist.
According to TipRanks, APP stock has received a Moderate Buy consensus rating based on 15 Buys, three Holds, and one Sell assigned in the last three months. The average AppLovin stock price target is $470.41, suggesting an upside of 55% from its current price.
