AppLovin Corporation (NASDAQ:APP) is a software company that operates in the digital advertising space. Its shares are down by 27% over the past year and by 49% year-to-date. AppLovin Corporation (NASDAQ:APP) has been one of the more interesting firms in today’s AI-driven era due to its ability to enable businesses to run advertisements in platforms such as video games. The firm has also caught Cramer’s attention several times. For instance, in January, he asserted that AppLovin Corporation (NASDAQ:APP) was a momentum stock and held off on recommending the firm. Since then, the shares are down by 40%. He reiterated his opinion on August 6th:
“AppLovin, another company. People say they never miss. You go over line by line by line, well you say, well okay, maybe Alphabet’s moving in. . .They’re just momentum stocks, that people think, you know what, aren’t so good.”
The day Cramer discussed AppLovin Corporation (NASDAQ:APP) was the morning after the firm had reported its second quarter earnings after market close on the previous day. On the 6th, the firm’s shares closed a stunning 19.7% lower. The results saw AppLovin Corporation (NASDAQ:APP) post $1.92 billion in revenue and $3.76 in earnings per share to miss analyst revenue estimates of $1.94 billion and meet them for the earnings. As part of his remarks made during the earnings call, AppLovin Corporation (NASDAQ:APP)’s CEO commented that the revenue miss was due to the firm expanding its advertising technology powered by AI into the eCommerce industry.
AppLovin Corporation (NASDAQ:APP)’s AI-powered advertising platform is also at the center of the debate between the bears and the bulls. The bulls point towards Q2 annual revenue growth of 53% and EBITDA margins ranging between 80% to 85%. Additionally, the bulls also believe that the post earnings share price movement has led to a healthier valuation. With AppLovin Corporation (NASDAQ:APP) now trading at a forward P/E ratio of 21.23, the bulls believe that the modest multiple does not reflect the firm’s AI potential.
However, the bears argue that the AXON model growth appears to be slowing as AppLovin Corporation (NASDAQ:APP) posted a modest 4% quarter-over-quarter revenue growth in Q2. They outline that if the slowdown persists, then the firm might lose out on gains made in its AI-driven market. Additionally, the bears are also wary about AppLovin Corporation (NASDAQ:APP) replicating its growth in the gaming market in other areas such as eCommerce.
During Q4 2025, 108 out of the 1,041 hedge funds part of Insider Monkey’s Q4 2025 database had bought a stake in AppLovin Corporation (NASDAQ:APP). This figure dropped to 91 out of 1,022 in Q1 2026 to indicate a potential chill in sentiment. During Q1, Tudor Investment Corp added a $7.2 million stake while Bridgewater Associates exited its investment.
While Insider Monkey acknowledges the risk and potential of APP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than APP that has 100x upside potential, check out our report about the cheapest AI stock.
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Disclosure: None.
