After the performance surge of 12% has become commonplace! AppLovin's e-commerce business is delayed, but the 2026 expectations have been significantly raised

For most companies, a double-digit rise in stock price after earnings reports is worth celebrating, but for AppLovin, it's just another ordinary day in the office.

On Thursday, August 7, the mobile advertising platform AppLovin released its second-quarter earnings report, with revenue reaching $1.259 billion, a 9% increase from the previous quarter, exceeding Wall Street consensus expectations. The adjusted EBITDA margin reached 81%, maintaining a high level of profitability, consistent with Wall Street expectations and the company's guidance.

Following the release of this better-than-expected earnings report, the company's stock price rose nearly 12%, but this increase is seen as a relatively mild reaction for one of the most volatile stocks in the U.S. market.

According to the latest report from Barron's, AppLovin's beta coefficient over the past 12 months has reached 3.7, the highest in the Russell 1000 index, surpassing other high-volatility stocks such as Advanced Micro Devices, Robinhood, and Coinbase. The company has experienced double-digit percentage fluctuations on the first trading day after earnings reports in 13 out of the past 14 quarters, with an average fluctuation of about 21%.

Although the full launch of the company's e-commerce self-service has been confirmed to be delayed until the first half of 2026, Bank of America Merrill Lynch still maintains a "buy" rating and has raised its earnings expectations. Analysts have increased the 2026 revenue forecast from $8.09 billion to $10.05 billion, primarily based on the launch of the e-commerce advertiser recommendation program and the expansion of services aimed at small and medium-sized enterprises.

AppLovin's stock price has risen approximately 38% this year and surged about 480% over the past 12 months, with a market capitalization exceeding $132 billion, and it is expected to join the S&P 500 index after the merger between Paramount Global and Skydance Media.

E-commerce Business Delayed

Management's revenue guidance for the third quarter is $1.33 billion, a sequential growth of about 5%, slightly above market expectations but below some investors' previous expectations for double-digit growth. Management stated that the growth pace of the e-commerce business is relatively slow, with third-quarter e-commerce revenue expected to remain flat, primarily due to the self-service not being fully launched yet.

Despite the overall strong performance, market expectations for AppLovin's growth are undergoing subtle changes. Analyst Omar Dessouky pointed out that the better-than-expected performance in the second quarter mainly came from the gaming business, while the e-commerce business "has not shown improvement."

AppLovin confirmed that its e-commerce self-service platform will achieve full opening in the first half of 2026, which is later than the market's original expectations. This platform is aimed at small and medium-sized enterprise customers and is expected to become an important driver of future growth

Optimistic Long-Term Potential: Bank of America Raises Forward Forecast

Despite short-term uncertainties, Bank of America remains optimistic about AppLovin's long-term prospects and has significantly raised its forward financial forecasts. The bank has increased its revenue forecast for AppLovin's fiscal year 2026 from $8.1 billion to $10 billion, and the EBITDA forecast has also been raised from $6.7 billion to $8.4 billion.

The cornerstone supporting this optimistic forecast is several key initiatives promised by management in the earnings report. Analysts believe that the fourth quarter will become "interesting," with growth momentum primarily coming from:

1. New Referral Program: Set to launch on October 1, 2025, aimed at re-accelerating the acquisition of large e-commerce advertisers.

2. Global Market Expansion: Activating audiences in the "Rest of World" outside the U.S. for existing advertisers to enhance the average spending per advertiser.

3. Small and Medium-Sized Enterprises Market: Although delayed, the e-commerce self-service platform expected to launch in the first half of 2026 is anticipated to unleash significant advertising demand from small and medium-sized enterprises.

Management reiterated its vision of becoming a marketing channel of systemic importance, akin to Meta and Google.

E-commerce Plan Faces Execution Risks

With the new growth expectations, Bank of America maintains its target price of $580 for AppLovin, but its valuation logic is more cautious. The report notes that the enterprise value/EBITDA multiple used for its valuation has been lowered from 32 times to 24 times to reflect the "execution risks" the company faces in its e-commerce referral program and self-service platform promotion.

The report argues that even so, AppLovin, with its dominance in the mobile gaming advertising market, should enjoy a significant premium relative to its large online advertising peers.

At the same time, the report also highlights potential downside risks, including macroeconomic recession, tightening financial conditions by the Federal Reserve, policy changes from mobile platforms like Apple and Google, and Facebook's strong recovery in the iOS ecosystem, all of which could negatively impact AppLovin's stock price