AppLovin (APP) is delivering record profits, generating cash like a fortress, and growing revenue at breakneck speed. Yet its stock has been nearly cut in half in 2026—a brutal reminder that in today’s market, even the strongest businesses can be punished for the sin of being too expensive.
The advertising technology company reported fourth-quarter 2025 results this week that, on the surface, left little to be desired. Revenue surged 66% year over year to nearly $1.7 billion, bringing full-year sales to approximately $5.5 billion—a 70% jump. Net income more than doubled for the year, rising 111% to $3.3 billion, while free cash flow hit $3.95 billion, translating to an eye-popping 72% margin.
CEO Adam Foroughi struck an upbeat tone on the earnings call, crediting the company’s AI-driven platform. “We are delivering the strongest operating performance in our history,” he said.
So why did the stock fail to rally? Instead, shares have tumbled 48% since the start of the year—and they’ve now lost nearly half their value since December, when one analyst cautioned that despite “impressive business momentum, staying on the sidelines and hoping for a better price is probably wise.”
That better price has arrived, but so have new concerns.
The first red flag is deceleration. AppLovin guided first-quarter 2026 revenue in the range of $1.745 billion to $1.775 billion. Adjusting for last summer’s divestiture of its mobile gaming business, the midpoint implies year-over-year growth of roughly 52%. For a company that had been consistently delivering 70%+ top-line expansion, that slowdown—while not unusual in absolute terms—landed with a thud.
For a stock trading at euphoric multiples, any sign of moderation can trigger a sharp repricing. As of this writing, AppLovin still commands a market capitalization of $124 billion, or about 38 times trailing-12-month net income of $3.3 billion. Its price-to-operating-cash-flow multiple stands at 45.9x—more than double its five-year average of 19.7x.
In other words, the market is no longer willing to pay a premium for even high-quality growth.
Beyond valuation and slowing guidance, longer-term risks are creeping into view. AppLovin’s 72% free cash flow margin and triple-digit earnings growth are magnets for competition. Rivals are sure to circle a business this profitable. And while AI has been a tailwind, management’s insistence that it remains a catalyst doesn’t rule out the possibility that it could one day become a threat.
“AppLovin is still a great business,” one seasoned investor said. “But a great business and a great stock are two different things. No matter how strong the fundamentals, price matters. Chasing momentum too far isn’t buying the future—it’s buying the hype.” With the stock down 48% and counting, the lesson is already expensive. Whether it’s enough to restore valuation discipline remains to be seen.
