Last year's hottest tech stock in the US, AppLovin, reported earnings that exceeded expectations across the board, with its stock price soaring 30% in after-hours trading | Earnings report insights

Last year, the hottest tech stock in the U.S. market, mobile application advertising platform AppLovin, announced its earnings report after the market closed on Wednesday, showing that both its fourth-quarter performance and guidance for the next quarter exceeded Wall Street's revenue expectations, causing the company's stock price to surge by 30%.

Highlights of AppLovin's Q4 2024 earnings report:

Revenue: $1.37 billion, a year-on-year increase of 44%, exceeding analysts' expectations of $1.26 billion

Net Profit: $599.2 million, a year-on-year increase of 248%, compared to $172.3 million in the same period last year

Earnings Per Share: $1.73, higher than analysts' expectations of $1.26

Adjusted EBITDA: $776.7 million, exceeding analysts' expectations of $764 million

Operating Profit Margin: 44.3%, compared to 28.3% in the same period last year

Free Cash Flow Margin: 50.6%, compared to 46% in the previous quarter

Q1 2025 performance guidance:

Revenue Guidance: Between $1.36 billion and $1.39 billion, with a median of $1.37 billion, higher than analysts' expectations of $1.32 billion

EBITDA Guidance: Median of $870 million, exceeding analysts' expectations of $795.1 million

AppLovin's stock rose by 1.35% to $380.32 at the close on Wednesday. The strong performance combined with better-than-expected guidance spurred AppLovin's stock price to surge nearly 30% in after-hours trading. The company's stock price skyrocketed by 700% last year, primarily benefiting from its AI-driven advertising system.

AppLovin is an online application gaming and advertising technology company that profits through e-commerce advertising via mobile applications and gaming platforms.

In 2021, AppLovin went public on NASDAQ. At that time, during the pandemic, online gaming experienced a surge, and AppLovin profited from it, with Google, X, and Meta as its partners. Advertising spending is crucial for the growth of gaming products, and its influence is increasing.

With the rise of AI, AppLovin launched its AI advertising engine model AXON 2.0 in 2023, which helps its own gaming applications deliver more targeted ads and is licensed for use by other game studios. The company developed a new intelligent advertising software solution called eDiscovery using this search engine, capable of efficiently conducting large-scale ad auctions between demand and supply in just a few milliseconds.

According to the earnings report, the company's advertising revenue surged by 73% in the fourth quarter, reaching nearly $1 billion. AppLovin provides AI-driven advertising software and states that improvements to its AI model are still in the early stages, with plans for more personalized ad delivery in the future

"This will unlock higher consumer engagement and advertising response effectiveness."

AppLovin also stated that the company has "huge potential" in helping direct-to-consumer brands create targeted advertising in the connected TV (CTV) space. The company began allowing online retailers to purchase mobile ads last year, and analysts believe this new business could bring significant financial growth opportunities.

In a letter to shareholders, the company stated,

"The road ahead is filled with opportunities for iterative optimization, and as execution progresses, we believe we can continue to create value for shareholders."

Previously, Bank of America rated AppLovin as a "preferred stock" for 2025, optimistic about its software business growth, overall business performance, and development potential in the e-commerce sector