APP

Following the June 30, 2025 sale of its Apps business (for $400M cash plus ~20% of Tripledot's equity), AppLovin now operates as a single-segment, AI-powered advertising platform built around its Axon recommendation engine — Axon Ads Manager drives 'the vast majority of revenue,' supplemented by MAX, Adjust, and Wurl. The financials are exceptional and improving: FY2025 revenue of $5.48B (+70.0%), operating income of $4.15B (+117.3%), and diluted EPS of $9.75 (+115.2%), at a 75.8% operating margin and 60.8% net margin. Cash generation is the standout — $3.97B of operating cash flow (+89.2%) on negligible capex, funding $2.19B of buybacks and a cash balance that ballooned to $2.49B (+256.8%). This is a high-quality compounder, not a story stock.

On valuation, 48.2x trailing earnings is not cheap in absolute terms, but it is reasonable given the growth and margin profile: trailing PEG sits well below 1 against 115% EPS growth, and few businesses convert revenue to cash at AppLovin's rate. The balance sheet carries leverage — $3.51B of long-term debt (held essentially flat) against $2.13B of equity, a 2.40x liabilities/equity ratio — but the debt is comfortably serviced by cash flow, and the divestiture sharpened the model toward its highest-margin core. Note that the 156.2% ROE is flattered by an unusually small equity base (buybacks plus discontinued-ops accounting), so it overstates true returns on capital and should be read with caution rather than taken at face value.