Shares of AppLovin (NASDAQ: APP)an online gaming and advertising company, soared higher this week after reporting third-quarter financial results that blew past Wall Street consensus estimates.
AppLovin shares are up 45% this week at the time of writing, contributing to the company’s staggering gains over the past year of more than 500%.
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AppLovin’s revenue rose 39% to $1.2 billion in the quarter, surpassing analysts’ consensus estimate of $1.13 billion. Likewise, diluted earnings per share of $1.25 easily surpassed Wall Street’s consensus estimate of $0.92 per share.
The biggest driver of AppLovin’s growth came from its artificial intelligence (AI)-powered advertising engine called Axon, which provides targeted advertising in gaming apps. Management said on AppLovin’s earnings call that a combination of self-learning and updates from the engineering team is driving Axon’s targeting capabilities and making big strides forward, noting that the company saw “one of those step changes, with meaningful growth driven by advancements to Axon in the quarter.
AppLovin also impressed investors by providing strong guidance. The company said fourth-quarter revenue will be between $1.24 billion and $1.26 billion, representing 31% growth at the midpoint.
AppLovin’s enormous appeal among investors stems in part from its ability to generate profits. Net income rose 300% to $434 million in the quarter and the adjusted profit margin is an impressive 78%.
With AppLovin seeing significant growth in revenue and earnings, and management issuing impressive guidance, it’s not surprising to see shares skyrocket this week.
More importantly, AppLovin’s profitability and its ability to capitalize on the ultra-popular AI trend provide investors with an attractive investment opportunity.
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