Why AppLovin Stock Is Skyrocketing Today

AppLovin (NASDAQ: APP) stock is surging Thursday. The advertising-technology company's share price was up 24.3% as of 3:30 p.m. ET, according to data from S&P Global Market Intelligence.

For the fourth quarter of 2023, AppLovin reported earnings per share of $0.49 on revenue of $953.26 million. The performance blew past the average analyst estimate's call for per-share earnings of $0.35 on sales of $928.03 million.

AppLovin's Q4 report delivered wins on all key fronts

AppLovin's revenue jumped roughly 36% year over year in Q4, and revenue for its software platform segment grew 88% to reach $576 million. With the segment showing very strong demand indicators and now constituting more than half of overall revenue, it looks like strong sales performance is poised to continue in the near term.

Revenue for the apps segment decreased 5% year over year to $377 million, but that doesn't look particularly concerning given the strong growth in the other key segment. Notably, the strong performance for the software platform segment was driven in large part by the company's new AI-powered ad engine. Investors are looking for companies with strengths in artificial intelligence right now, and AppLovin's Q4 report showed Wall Street what it wants to see.

Margins also impressed. AppLovin posted a net income margin of 18% in last year's final quarter -- quite strong for a company that's still growing revenue at a rapid pace. The company's per-share earnings of $0.49 represented a dramatic improvement over the per-share loss the business posted in last year's comparable quarter, and the business ended the year with encouraging profits. AppLovin recorded earnings per share of $0.98 last year, swinging from a loss of $0.52 in 2022.

Strong performance looks poised to continue in Q1 2024

For the first quarter, AppLovin is guiding for sales to come in between $955 million and $975 million. While that points to relatively minor growth on a sequential quarterly basis, it's normal for ads-based businesses to see some quarterly cyclicality -- with Q4 performance typically being stronger than performance in Q1. For comparison, the business posted sales of roughly $715 million in Q1 last year -- so hitting the midpoint of its target for this year's first quarter would mean delivering sales growth of 35%.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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