To The Moon

$AppLovin Corporation(APP)$ s recently disclosed second quarter results for fiscal year 2025 were impressive, with revenue surging 77% year-over-year and adjusted EBITDA nearly doubling, resulting in a profit margin of 81%. Free cash flow was $768 million, up 72% year-over-year, which was still strong despite falling short of some expectations.

Market expectations are too high, with profit margins already reaching 81%. Based on this hard data, AppLovin's overall profitability and cash flow position demonstrate extremely strong organic growth and operational efficiency.

What continues to drive growth?

The first is game advertising + MAX market: focusing on advertising to open up incremental space.

During the conference call, management emphasized that performance was primarily driven by the game advertising business, with the underlying drivers being technological upgrades, strong market demand, and supply-side expansion. The MAX market has consistently been the core growth driver, maintaining "double-digit growth," significantly outperforming the in-game purchase market.

One of AppLovin's key strengths is its core position in the SSP (supply-side platform) market, which enables it to establish a natural connection with advertisers. "In the long term, it has focused on the SSP... locking in their supply side... Max... now likely holds about 80% of the market share," establishing a moat-level competitive advantage.

The second is its AI-driven proprietary model, which has strong blood-forming capabilities. The proprietary model continuously optimizes prediction and placement efficiency, maintaining a leading position in the industry. The company is confident in maintaining 20–30% annual growth in its core game advertising business, and the AI engine Axon 2.0 has been proven to be the driving force behind advertising growth.

The most notable new engine is the launch of AXON Ads Manager — a self-service advertising platform with multiple features such as credit card payment, Shopify integration, attribution deep linking, and intelligent automation support. It will be available on a limited basis starting October 1 to coincide with the holiday peak season. Global rollout is expected in the first half of 2026, unlocking the non-gaming advertiser and SME market and laying a solid foundation for incremental growth. Management is confident: "Once the platform is fully launched, paid marketing will be activated, driving sustained compound growth."

market evaluation

Long-term trends in the ad tech and digital marketing industry include: AI tools optimizing ad delivery efficiency, huge growth potential in the non-gaming ad market, and rapid growth in e-commerce advertising. AppLovin has taken the lead in integrating technology and supply-side advantages to maintain its leading position among many competitors. In addition, AppLovin has sold its gaming app business and is focusing its resources on ad tech, which is a key strategic move to increase focus and improve capital efficiency. $Meta Platforms, Inc.(META)$

The market reaction has been quite positive, with several analysts raising their target prices and maintaining their buy ratings:

• Benchmark raised its target price to $525 and maintained its "buy" rating.

• Scotiabank maintains its "outperform" rating, raising its target price from $430 to $450.

• Piper Sandler raised its target price to $500; JPMorgan raised its target price to $425; both reflect positive outlooks.

The market has high expectations for the new platform (AXON) and its ability to generate sustained profits and growth, and this consensus provides strong support for its valuation.

High valuations and international expansion challenges

Despite strong momentum, caution is needed regarding **high valuations, as high net profits and high growth have already been reflected in stock prices, and continued performance is required going forward; meanwhile, the complexity of internationalization, including overseas promotion of the platform and localization of regulations, languages, and attribution systems, will still take time. Additionally, in the AI environment, competition is intensifying, particularly in the e-commerce and SMB advertising sectors, where the company faces strong competition from Meta, Google, TikTok, and others.

Main points

• Q2 Financial Report in Full Swing: Excellent revenue, profits, and cash flow with a clear structure;

• Clear path to strategic execution: AXON Ads Manager opens up new markets and expands systematically.

• Strong moat: MAX SSP and first-party data capabilities build advertiser stickiness.

• Valuation reminder: Although the growth logic is excellent, it is still necessary to closely monitor international coverage and the substantive conversion of new businesses.

AppLovin has demonstrated outstanding performance in Q2, announced its AXON strategy, and gained market recognition, with its narrative and execution becoming increasingly comprehensive. If it can maintain a growth rate of 20–30% and successfully expand into non-gaming and global markets, it will truly validate its positioning as a "digital advertising platform leader." In the long term, if you believe in this, this stock is worth paying close attention to. $Alphabet(GOOGL)$