AppLovin's stock fell 18.6% in afternoon trading Thursday, putting it on track for its worst day since March 2025, after the company missed second-quarter revenue estimates and its pace of AI model improvement slowed. Wall Street's debate now centers on whether that slowdown is temporary or a deeper problem, and one analyst has already cut his price target on the stock.
AppLovin shares dropped 18.6% in afternoon trading Thursday, putting the stock on track for its steepest one-day decline since March 2025. The slide followed underwhelming second-quarter earnings and new analyst concerns that the company's advertising AI models aren't competitive enough.
The stock was one of the S&P 500's biggest decliners Thursday, as investors weighed the earnings miss alongside doubts about AppLovin's AI roadmap. AppLovin's software platform serves businesses and game developers, and its AI models predict ad engagement, click-through rates and site engagement for advertisers in gaming, e-commerce and subscription services.
AI model progress stalls
According to AppLovin's management, model performance is a key growth driver for the company. But the pace of model improvement was slower than usual in the second quarter, William Blair analyst Ralph Schackart wrote in a note. The company's next model release was also delayed until after the quarter ended.
As a result, Schackart framed the coming debate as whether AppLovin faces a fundamental slowdown or merely timing-related swings in its model-development cycle.
Revenue and guidance miss estimates
AppLovin reported $1.92 billion in revenue for the second quarter, up 53% from a year earlier, short of the $1.94 billion analysts tracked by FactSet had expected. The company's adjusted EBITDA also came in $1.2 million below the low end of its own guidance.
Management guided for $2.055 billion to $2.085 billion in third-quarter revenue, below the $2.074 billion Wall Street analysts were looking for.
Analysts split on the outlook
Benchmark analyst Mike Hickey wasn't convinced by AppLovin's explanation for the shortfall. Management pointed to architectural changes and additional computing power as a way to support more complex models, but Hickey does not buy that view. According to Hickey: "not convinced that higher compute alone provides a durable solution"
Hickey lowered his price target to $500, from $775. AppLovin shares were trading at just north of $340 Thursday, at last check.
Source: MarketWatch
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