We recently published a list of 13 Most Profitable Growth Stocks to Buy Now. In this article, we are going to take a look at where AppLovin Corporation (NASDAQ:APP) stands against other most profitable growth stocks to buy now.
The growth factor in investing refers to companies that grow their revenue and earnings at rates significantly above the market. These companies are usually small and young, operate in high-growth and less mature industries, and often lack the financial stability and resilience of their more mature counterparts. As a result, the growth factor becomes highly attractive and outperforms during secular bull markets (such as the 2010-2021 period) dominated by macroeconomic stability and low interest rates. On the other hand, the return of growth stocks significantly lags behind during bear markets or periods of heightened uncertainty and volatility. For reference, the growth factor underperformed significantly during the 2022 bear market as well as the 2025 year-to-date.
While the growth strategy delivers superior returns most of the time, we believe there are ways to refine it and make it more reliable. One of the weaknesses of most growth stocks is weak profitability (due to aggressive investments in working capital for growth or R&D), which makes them more susceptible to economic downturns. The solution to this is to incorporate a profitability criterion as well – growth stocks with strong profitability will navigate economic slowdowns better and hold up well even during recessions. Our hypothesis is confirmed by modern financial research; the Fama-French 5-Factor Model (2015) introduced a profitability factor which, as the authors claim, can explain stock returns – stocks of companies with high profitability tend to outperform those with low profitability.
READ ALSO: 10 Most Profitable Blue Chip Stocks to Buy Now
As legendary Warren Buffett has advised, to be greedy when others are fearful, we believe the best way to make money in the market is to engage in smart contrarian bets when everyone else is reluctant. The US stock market is still more than 10% below its all-time high as market participants are still digesting the tariffs situation as well as the new economic data, which is quite disappointing. The Philadelphia Fed manufacturing index decreased to -26.4 in April, well below expectations and the lowest reading since April 2023. It is also the second lowest level outside of official recessions, which hints towards the possibility that we are already in a recession that will only be declared at a later date. The employment, shipments, and new orders components all decreased as well, further pointing towards a slowing economy.
Business surveys have also been quite grim – Hamilton Lane recently reported that at least 62% of CEOs see a recession on the horizon, while the 6-month Capex expectations fell to the lowest level since the pandemic. It is now clear that pretty much everyone is thinking about a recession now, and that’s actually the most bullish indicator out there. The stock market is a forward-looking animal, meaning that its prices reflect the state of the economy 6-12 months from now. Given that the average recession in the US has historically lasted for about 3-4 quarters, and assuming that revised Q1 2025 data will be later recognized as the beginning of the recession, odds are that the US economy will already return to growth in calendar 2026. Also, history shows that the forward-looking stock market tends to disappoint the majority of investors, which means that if the majority expects a recession, then odds are that it is already priced in and that the market bottom is already in the rear-view mirror.
To sum up, the fact that the US economy is in a slowdown and a state of uncertainty is pretty much obvious at this point. The key takeaway for readers is that stock prices are forward-looking and reflect the investors’ outlook for several quarters ahead. Once it becomes completely clear that calendar 2026 will be past the current tariff turmoil, the US stock market will very likely return to growth. It is therefore an opportune moment to look for the most profitable growth stocks to add in anticipation of a broad market melt-up.
A close-up of a mobile device, showing an advertiser reaching out to a consumer via a software-based platform.
Our Methodology
To compile our list of most profitable growth stocks, we used a screener to identify stocks with at least 30% revenue CAGR in the last 5 years and a net profit margin of at least 20%. Then we included in the article the top 13 stocks with the highest net profit generated in the most recent fiscal year, ranked in ascending order. We also included the number of hedge funds that own each stock, as per Insider Monkey’s Q4 2024 database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
AppLovin Corporation (NASDAQ:APP)
Net Profit in the latest fiscal year: $1.58 billion
Revenue CAGR last 5 years: 39.75%
Number of Hedge Fund Holders: 95
AppLovin Corporation (NASDAQ:APP) is a technology platform company that provides AI-driven advertising solutions to help businesses reach and monetize their software applications. Its main products include AppDiscovery for user acquisition and MAX for in-app monetization. APP ranked first on our recent list of 12 Best Multibagger Stocks to Buy in 2025.
AppLovin Corporation (NASDAQ:APP) delivered strong financial results in Q4 2024, with total revenue increasing 44% YoY to $1.37 billion and adjusted EBITDA growing 78% to $848 million, achieving a 62% margin. The company made a significant breakthrough by successfully capturing holiday shopping advertising dollars and expanding beyond gaming into e-commerce and other advertising categories. The company announced plans to sell its Apps business for $900 million, consisting of $500 million in cash and a minority equity stake in the combined private company, as it transitions to focus purely on its advertising platform.
Looking ahead, AppLovin Corporation (NASDAQ:APP) is positioning itself to serve the entire global advertising economy, with potential access to over 10 million businesses worldwide that could use its platform profitably. The company’s priority for 2025 is developing automated tools and self-service capabilities to enable scaling of new business onboarding, while maintaining its focus on operational excellence, as evidenced by its $3 million run rate adjusted EBITDA per employee in the advertising business. The platform’s success isn’t limited to direct-to-consumer brands, as early pilots have shown positive outcomes across various advertiser categories, suggesting significant growth potential as they expand their advertiser base. The company’s strong growth momentum, as evidenced by a whopping 39.75% last 5-year revenue CAGR, secured APP’s place on our list of the most profitable growth stocks to buy.
Overall, APP ranks 10th on our list of most profitable blue chip stocks to buy now. While we acknowledge the potential of APP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than APP but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.